Thai Corporates Discuss How To Beat The Fuel-Price Crisisff

Rather than focus on quick relief measures, the government should devise longer-range strategies to tackle oil price-related issues while leaving the private sector to adjust to the new energy environment, corporate leaders said earlier this week.

Most of them see the need for a smooth transition for their companies to cope with higher operating costs being driven by the uptrends in oil prices, interest rates and the baht. However, at the Stock Exchange of Thailand (SET) seminar “Exit from the Oil Crisis”, business leaders said those three factors are manageable and should not blunt Thailand’s competitiveness, because every country in the world is currently suffering from the same problems.

Boonkiet Chokwatana, president of ICC International Plc, which is under the Saha Group, said what the government should do now to ease oil impacts was “nothing”. “It has done quite well with the promotion of natural-gas consumption and alternative fuels. It should do nothing more while the private sector is adjusting to the new environment.”

All three factors are hurting Sahapat on all fronts, due to the group’s extensive size. “Everything is controllable, though. In spite the pressure, we’re trying to maintain our prices, through the introduction of fuel-saving technology and cost-control measures. We must perform several tasks at the same time, but we’ll survive.”

Saha Group has not yet been approached by transport companies requesting higher charges, but Boonkiet said the group was ready to help operators if asked.

Board of Trade chairman Pramon Sutivong said manufacturers had adjusted their production lines over the past two years, which could counteract the higher costs to some extent.

”Product prices could rise slightly, though. We’re conferring with our members, and in two or three weeks, a study should be ready on how to raise prices,” he told the audience.

Federation of Thai Industries chairman Santi Vilassakdanont said industrialists were riding out the storm calmly, as shown in last month's industrial confidence index, which will officially be released.

”All indexes are above 100, as industrialists realize that the high oil price has a global impact. Thailand’s competitiveness remains strong, as seen through orders for textiles, shoes, electronic products and food items,” he said. Domestic-oriented industrialists have also prepared for higher transportation costs, as freight hikes have been negotiated since last year.

Chartsiri Sophonpanich, president of Bangkok Bank and chairman of the Thai Bankers’ Association, reassured companies that interest rates should peak sometime in the next six months.

”Interest rates could be jacked up slightly during the period if inflation remains at 4-5 per cent this year, based on an oil price of US$60 [Bt2,300] a barrel,” he said.

However, if the oil price hovers around $70 for a long time, inflation could breach the target, and that could put greater pressure on interest rates.

Although concerned about the baht appreciation, Thiraphong Chansiri, president of Thai Union Frozen Products Plc (TUF), said businessmen should turn the crisis into an opportunity.

”Everyone is hurt by higher fuel bills, so it’s time they reviewed the entire production process and heir marketing strategies. TUF, a major frozen-food exporter that operates a number of energy-consuming freezers, has only recently raised the freezer temperature from -25 degrees Celsius to -20, which does not lower product quality, and we’ve also reduced the freezing period. Energy is only 6 per cent of total costs. What worries me more is raw materials, because fishermen must pay more for fuel. This is where we need to help. If upstream industry suffers, we will not be spared,” he said.

Sahaviriya Steel Industries Plc also boasts one of the few plants in the world that employ low-fuel technology. CEO Win Viriyapraphaikit said that to protect itself against oil-price spikes, the company had avoided shipping heavy steel by land.

”Right now, 80 per cent of our transport is by water, through our own pier.”

Now that the Bank of Thailand has revised its growth forecast for this year down 0.5 percentage point on oil impacts, the biggest sufferers must be developers.

Anant Asavabhokin, CEO of Land and Houses Plc (L&H), which witnessed a year-on-year sales drop in January, said he is more concerned with economic growth than he is with rate increases or oil prices. Even higher transport costs - which have forced L&H suppliers to ask for an average 5-per-cent increase in supply prices - bothers him less than does the gloomy GDP outlook.

”Our study shows that the correlation between interest rates and purchasing power is only 20 per cent. Mostly, people buy houses when they have confidence in the GDP, not because of low interest rates,” he said.

In this environment of high oil prices, Pramon and Kongkiat Opaswongkarn, CEO of Asia Plus Securities Plc, suggested the government look ahead to reducing medium- and long-term impacts, because oil prices may rise further. Pramon said the government needed to have a clear vision of where Thailand should be heading.

”Right now, half of the GDP comes from trade and services and the rest from manufacturing and agriculture. If the trade and services account increases, energy demand from the manufacturing sector should drop,” said Pramon.

Faced with a three-to-five year scenario of the oil price possibly climbing to $100 per barrel, the government should invest in more infrastructure, especially ports and railways, in order to reduce shipping via roads, he said.

Kongkiat said the government should set targets for cutting energy consumption, and big companies should be encouraged to invest in alternative fuel-producing businesses, in order to ensure we become weaned off of fossil fuels.

Source: The Nation