BUSINESS NEWS
HEADLINES [click on headline to view story]: 

Consumer confidence index drops again in July

Microsoft confident of Thailand’s credentials as web service hub

Real estate center gets cabinet nod

Thai wine growers told to buck up before launch of FTA with Australia

R&D fund to advance local industry

Thai-Indian FTA comes into effect next month

Local car battery market still promising

Life insurance business looks bleak this year

Chantaburi Jewelry Cluster to be set up

Longan ice cream for export

Consumer confidence index drops again in July

The consumer confidence index in July shows it has dropped for seven consecutive months due mainly to the oil price increase and a spate of violence in the South.

Thanawat Polavichai, director of the University of Chamber of Commerce’s Economic and Business Forecasting Center, disclosed that a survey found the confidence index on the economy declined to 95.2 from 98 points in June. It is the third month the index dropped below 100. The confidence index on job opportunities edged down to 91.1 from 93.5 and that on future income to 108 from 110.5. The overall consumer confidence index stood at 98.3, which is below 100 for the first time in one year.

It is expected the index will be lower than 100 in the next three months since people are already aware of economic hardship. However, they remained confident of future income as consumption was not reduced. However, should the oil price hike and the southern unrest continue to go unabated, people will feel uncertain and may slow consumption in the next six months.

Negative factors that undermined confidence include higher fuel prices, downward revision of the economic growth estimate by the Bank of Thailand, continued drop in the Stock Exchange of Thailand’s index, weakening of the baht, concern on non-performing loans, and southern violence. Positive factors in July include a 29% increase in exports in July and the government’s policy on low interest rates to stimulate the economy. (TNA)


Microsoft confident of Thailand’s credentials as web service hub

Computer giant Microsoft expressed confidence in the future of Thailand as a global web services center, and pledged support for Thailand’s bid to become a world-class player on the software market.

Stressing Thailand’s potential in the burgeoning global software industry, Andrew McBean, Managing Director of Microsoft (Thailand), said that Microsoft was launching a ‘Global Web Services Hub’ program to back the development of Thai software on three fronts.

Under the scheme, Microsoft will back the sale of Thai-produced web services software on the global market, enable Thai developers to gain patent rights of their material, and create new markets for Thai software products.

Microsoft hopes that by the year 2009, the scheme, which has already been proposed to Prime Minister Thaksin Shinawatra and the Ministry of Information and Communications Technology, will have earned Thailand 180 billion baht in revenue. However, McBean noted that Thailand was currently home to a mere 500 web service developers, a situation which necessitated the urgent generation of more skilled personnel. (TNA)


Real estate center gets cabinet nod

The government has approved the establishment of a real estate information center to act as a barometer to warn of possible future economic crises. Finance Minister, Somkid Jatusripitak said it will collect all possible information on real estate from government and private agencies. The center will start operations on August 25 and will be run by the Government Housing Bank (GHB).

During the economic crisis in Thailand in the late 1990s, there was an acute shortage of information on the real estate market - both demand and supply for housing and commercial properties. The planned center will help gather, analyze and publicize the latest information on property trends so that the government can more effectively control the expansion of the real estate sector. The information from the new real estate center will also help the private sector when they draw up their business plans.

President of the GHB, Khan Prachuabmoh, said the center would report directly to the Finance Ministry. A committee composed of representatives from the property sector, financial institutions, and relevant government agencies will oversee the center’s work. (TNA)


Thai wine growers told to buck up before launch of FTA with Australia

A leading research center has called on Thailand’s wine producers to rush to upgrade the quality of their products to win greater international acceptance amid fears that the liberalization of trade between Thailand and Australia next year could see a rapid decline in the domestic market share of Thai wine.

In its report, the Kasikorn Research Center (KRC) warned that the enforcement of the Thai-Australian Free Trade Area (FTA) Agreement on 1 January 2005 would see an influx of Australian wine. Noting that Australian wine had already become the second most popular wine in Thailand after that from France, KRC called on Thai wine producers to upgrade the quality of their products as a matter of urgency.

Thailand’s future FTA deals with other countries including wine-growing nations such as the United States and New Zealand, could serve to compound the difficulties faced by Thai wine growers. By upgrading the taste and quality of Thai wine, Thai vineyards could simultaneously work to maintain their domestic market share, and win over new export channels opened up by the liberalization of trade, the report said. (TNA)


R&D fund to advance local industry

The Federation of Thai Industry has announced plans to set up a fund for research and development (R&D) to encourage more private investment into research. The fund aims to increase Thai manufacturers’ competitiveness, especially small and medium- sized enterprises (SMEs), and will allow them to conduct research on limited budgets.

The high cost of R&D has prevented many small companies from investing in product development. The fund will raise capital from the private sector, and also hopes to get a government subsidy. The FTI is negotiating a tax exemption for manufacturers who invest in the fund with the government. The fund will support R&D in various industries; however, the FTI expects to start with the fashion industry as it has a high development potential. (TNA)


Thai-Indian FTA comes into effect next month

Thailand and India are about to sign a bilateral free trade agreement (FTA) that will come into effect next month. Under the pact, Thailand’s food and agricultural exports to India are expected to double, according to Commerce Minister Watana Muangsook.

“India is a country with a huge population. Thai food and agricultural sectors should benefit from the FTA because these two kinds of goods are necessary, and consumed daily,” the commerce minister said.

Under the FTA, both countries are committed to reduce import tariffs on 82 items of products to zero percent within three years from the starting of the agreement on September 1. Among the 82 items of products included in the FTA, 11 are agriculture produce and the rest industrial materials.

A Thai delegation, led by Watana, will visit India later this month to sign the agreement on 23 August 23. This follows the cabinet’s recent approval of the deal.

The combined value of trade and investment between the two countries is expected to reach two billion US dollars this year - a 25 percent increase over last year. Trade between the two countries grew at an average of 30 percent between 2003 and 2004. Indian exports to Thailand grew by 16 percent, and this is expected to leap by 43 percent after the agreement comes into affect.

Meanwhile, Thai exports to India in the same period increased by 61 percent, and are expected to grow by more than 113 percent after the FTA is implemented.

Indians have a taste for Thai fruits like rambutans, longans and mangosteens, a Thai Chamber of Commerce committee member, Satit Segal revealed. He believes the value of Thai fruit exports to the subcontinent could increase by 500% under the agreement.

Meanwhile, the Board of Investment of Thailand has signed an agreement with the Confederation of Indian Industry to promote bilateral investment. A working plan for joint investment has already been drafted.

Delegates from each industry will meet later to discuss investment prospects and specific projects. Thai investors are interested in India’s auto part industry. India is regarded as the world’s largest potential automobile market.

New Delhi is interested in the high potential of Thailand’s computer software industry. Both India’s government and private sector believe Thailand has great potential in this area. Software could be produced much more cheaply in the future if it is manufactured locally. (TNA)


Local car battery market still promising

The local car battery market is expected to continue to grow in line with the government’s policy to promote Thailand as a “Detroit of Asia,” according to the Kasikorn Research Center (KRC).

The country’s leading think tank said the government is determined to make the local auto industry become one of strategic industries for the national development, and to promote the country as a regional auto production base, or the “Detroit of Asia.”

The auto industry development would contribute to an increase in car battery demand, and its market value in the country to around 4 billion baht. KRC said the local car battery is one of the key supporting industries that could accommodate and grow along with the auto industry. It could be developed into the export-oriented industry by counting on the auto industry base for sales of the product overseas in the form of auto-parts to enhance the country’s currency revenue.

KRC reported that the local car battery market had continued to expand in the same direction with a leapfrogging growth in total production and sales of vehicles in the original equipment manufacturing (OEM) and the replacement equipment manufacturing (REM) markets in the past few years. Given the continued demand for the product, KRC projected that the car battery market would grow by at least 12% this year, from that of last year. (TNA)


Life insurance business looks bleak this year

Thailand’s life insurance business looks unfavorable this year due to many negative factors, particularly the government’s issuance of saving bonds, worth 70 billion baht, according to an industry executive.

Somphot Kiatkraiwalsiri, the Senior Executive Vice President of ING Life Insurance Co, said the first-year insurance premium experienced negative growth of 10% in the first half of this year, as many life insurance firms reduced returns on insurance policies and fringe benefits of brokers. The companies need to reduce costs as much as possible since returns on investment had continued to drop, he noted. However, he believed the business would regain momentum in the second half of this year.

Somphot said the saving bonds, worth 70 billion baht, to be issued by the government soon were expected to draw great public attention since average interest rates are as high as 5%, compared with around 4% offered by insurance firms for returns on policy holding. So, the saving bonds should be considered a valuable alternative investment to the general public, he said.

“Investment in saving bonds must be made in a lump sum, while purchasers of insurance polices can gradually pay premiums. Should insurance policy holders pass away, beneficiaries will receive the full amount insured plus interest. It is like a hedge against life’s uncertainties with returns on interest,” he pointed out.

Somphot said life insurance companies need to differentiate their products in the remaining period of this year to satisfy customers’ needs if they want to gain more first-year premiums amid uncertainties. He conceded that the life insurance business is unlikely to enjoy growth of 20-25% for this year, as earlier targeted.(TNA)


Chantaburi Jewelry Cluster to be set up

In an attempt to make the eastern province of Chantaburi the center of jewelry production and trade in Thailand, and to become a world jewelry trade hub by 2006, the Thai Chamber of Commerce has given support to its branch office in the province to set up the Chantaburi Jewelry Cluster.

Dr. Ajva Taulanada, Chairman of The Thai Chamber of Commerce and the Thai Trade Council, said that directive measures had been given to the Chantaburi Chamber of Commerce and the Chantaburi Ornament and Jewelry Traders’ Association to establish the cluster in the province in order to strengthen local jewelry business operators, and to promote the industry worldwide.

The plan will be submitted to the provincial governor and Prime Minister Thaksin Shinawatra. Vichai Usrasakorn, who heads the Thai Chamber of Commerce’s committee on jewelry and ornaments, said a memorandum of understanding would be signed on August 24 , and would be submitted to the provincial governor on the day when the province will also launch the ‘Chantaburi: City of Jewelry’ Project.

Thailand’s exports of jewelry and ornaments are worth about 100 billion baht annually. Chantaburi’s earnings from jewelry trade account for 50% of the country’s total jewelry trade, or more than 7.2 billion baht per year, according to Dr. Ajva. (TNA)


Longan ice cream for export

Thailand is to study the feasibility of producing and exporting longan ice cream. The idea has been proposed to help the country’s farmers because of the oversupply of longans on the domestic market.

Under the proposed plan, dehydrated longans would be used as the main ingredient in the dessert. Longan ice cream would then be exported through Thai restaurants abroad, according to senior Agriculture and Cooperatives Ministry official Banpot Hongthong. There are more than 5,000 Thai restaurants around the world.

Thailand believes prospects for the export of longans remain good. Experts believe the Chinese demand for Thai longans is likely to increase. China is currently Thailand’s largest customer, but the government hopes to promote longan exports to Indonesia, Australia, Canada and Europe. (TNA)