2011 Thailand flood could be more destructive than Asian financial crisis (video) *updated

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For the second consecutive weekend residents of Bangkok have been told to prepare for widespread flooding as an estimated 12 billion cubic meters (12 trillion liters / 3.17 trillion gallons) of water from months of rain in Thailand’s central and northern provinces rushes towards the Gulf of Thailand in what has come to be known as the 2011 Thailand flood crisis.

Industry contributes about 44% of Thailand GDP but employs only about 14% of the workforce
Industry contributes about 44% of Thailand GDP but employs only about 14% of the workforce. Photo: John Le Fevre

While the government of recently elected Prime Minister Yingluck Shinawatra has attempted to put on a brave face, the lack of ministerial experience, along with old political rivalries, has done little to ease the situation with the destruction left in the wake of the 2011 Thailand flood threatening to be more severe than the early stages of the 1997-98 Asian financial crisis.

When the Asian financial crisis hit Thailand in 1997 the country was still heavily reliant on its agriculture industry.

While agriculture remains the country’s largest employer and Thailand remains the world’s largest exporter of rice and rubber, and the second-largest exporter of sugar, agriculture today contributes only about 8 per cent to the country’s GDP.

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Industrial output now 44% of GDP

Today Thailand is just as well known as a manufacturing base for machinery, automobiles and automotive parts, electric appliances and electronic components, as it is for shrimp, canned fish, coconuts, soybeans, and tapioca.

Thousands of building projects in Thailand ground to a halt during the 1997-98 Asian fiancial crisis
Thousands of building projects in Thailand ground to a halt during the 1997-98 Asian financial crisis . photo: John Le Fevre

About 34 per cent of Thailand GDP now comes from the manufacturing sector, with industrial output as a whole contributing about 44 per cent, while only employing about 14 per cent of the workforce.

When the Asian financial crisis started in 1997 Thailand sent more than 600,000 workers back to their home countries, while there was a mass exodus of workers back to the provinces. Misguided IMF policies of the time resulted in a record number of bankruptcies.

There is clear evidence that the 2011 Thailand flood is having a similar affect on the country’s workforce again. Border crossings to Burma and Cambodia are reporting large numbers of people returning home.

Thailand’s Ministry of Labour (MOL) says more than 700,000 workers are now without employment, while more than 14,800 businesses, including those located in the Bang Kadi, Lad Krabang, Bangchan, Nava Nakorn, Rojana, Ban Wa Hi-Tech, and Bangpa-in industrial estates, affected by the 2011 Thailand flood.

It is estimated that more than eight million people are displaced or affected.

Manufacturing giants submerged

An inspection of the companies included in the seven industrial estates now under as much as three meters (about 10 feet) of water reads like a who’s who of the industrialised world, with brands such Toyota, Honda, Toshiba, Sanyo, Canon, Nikon, Panasonic, Western Digital, Seiko, Hoya, Nestle and ON Semiconductor just a few of those affected.

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Ayutthaya October 2011
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Last week Thailand’s Central Bank estimated losses from the 2011 Thailand flood could top Bt100 billion (US$3.232 bln).

Companies operating in five of the submerged industrial estates owed about Bt60 billion ($1.9 bln) to Thai banks, or about 0.75 per cent of all borrowings, it said.

Separately the Federation of Thai Industries (FTI) said the losses and damage in the Central Plains alone could be in the vicinity of Bt190 billion ($6.2 bln).

Insurance claims rolling in

Thailand’s Insurance Commission (TIC) said claims totalling Bt100 billion ($3.232 bln) have already been submitted, and said that losses from the 2011 Thailand flood could top Bt20 billion ($650 mln) for the Ayutthaya industrial estates alone.

According to the TIC the 820 businesses from six of the seven flooded industrial estates alone hold more than Bt376 billion ($12.154 bln) in insurance cover, with a further 48,000 smaller businesses in flood affected areas holding policies worth more than Bt56 billion ($1.8 bln).

Chantra Purnariksha, secretary general of the Thailand Insurance Commission said there was about Bt500 billion ($US16.162 bln) in policy coverage for areas so far affected by the 2011 Thailand flood and said Thai insurers carried a combined reserve of Bt1.14 trillion ($36.85 bln).

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With figures such as this being cited before factory owners have a chance to inspect the damage and ahead of  any inundation of Bangkok and it’s clear to see the cost to the Thai economy from the 2011 Thailand flood will be more devastating than the 1.4 per cent drop experienced in 1997.

Barclays Capital has cut its forecast for Thailand’s annual GDP growth by 21.6 percent, from 3.7 percent to 2.9 per cent, while Thailand economic analysts are predicting a 43 per cent drop for the 2011 year from 4.4 percent to 2.5 percent.

Bangkok surrounded by water

Bangkok governor Sukhumbhand Paribatra inspects 2011 Thailand flood preparations.
Bangkok governor Sukhumbhand Paribatra inspects 2011 Thailand flood preparations. Photo: Bangkok Governor FB page

For the past 10 days or so Bangkok Governor Sukhumbhand Paribatra has fought a relentless battle attempting to divert the 2011 Thailand flood water around the Thai capital.

Up until October 20 he had refused to open more than 200 sluice gates that regulate Bangkok’s 1,682 canals to allow the water to flow into the Gulf of Thailand, for fear of turning Bangkok into a modern day equivalent of Atlantis.

Although the capital has to date been spared, the actions have created a bottleneck slowing the draining of the central and northern provinces, resulting in an ever increasing mass of water building up.

40 days and 40 nights to drain the city of angels

After ordering the sluice gates be opened, Prime Minister Yingluck warned Bangkokians Saturday morning (October 22) that the 2011 Thailand flood could see the capital underwater for several weeks. Some parts of the country are expected to remain flood affected until the end of the year.

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Bangkok is hoping millions of sandbags will keep the 2011 Thailand flood out of the city.
Bangkok is hoping millions of sandbags will keep the 2011 Thailand flood out of the city. Photo: Bangkok governor FB page

According to Royal Irrigation Department (RID) spokesman Boonsanong Suchatpong, it will take about 40 days for the 2011 Thailand flood waters to drain into the Gulf of Thailand.

With the country’s major water catchment reservoirs either at or exceeding capacity — Bhumibhol, Sirikit, and Khaew Noi dams are reported to be at 99 per cent capacity, while Pasak dam is said to be at 138 per cent — and more rainfall expected later in the year, a lot of water remains to be drained.

Somkiat Prajamwong from the RID says at least 23 million cubic meters (23 bln liters / 6 bln gallons) of water needs to drain through Bangkok each day.

The 2011 Thailand flood has been described as the worst flood in Thailand in more than 50 years and the country’s food supply chain is already starting to buckle under the weight of heavy rain that began last July. Supermarket and convenience store well away from the 2011 Thailand flood affected areas are already showing signs of shortages across many product lines.

10% of rice paddy destroyed, supply chains buckle

When Thailand’s economy shank by 1.7 per cent  — before dropping a whopping 10.5 percent in 1998 — its agriculture base was largely unharmed. The fields were intact and crops still grew. People may have lost their jobs and returned to the provinces, but there was still ample supplies of food.

With a third of Thailand’s 76 provinces, about 1.6 million hectares (4 million acres) in the center, north, and northeast of the country affected by the 2011 Thailand flood, the agriculture industry is this time taking a battering, along with peoples ability to buy anything due to lack of employment.

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The 2011 Thailand flood is already seeing shortages of many goods
The 2011 Thailand flood is already seeing shortages of many goods. Photo: John Le Fevre

In addition, Thailand’s food processing and distribution systems are largely Bangkok centric, with the country’s extensive road network being the primary method by which goods are transported to Bangkok and/or industrial estates for processing before being distributed across the nation or exported.

According to government sources more than 10 per cent of the country’s rice paddy has been damaged by the 2011 Thailand flood, but no figures have been released yet on other affected agriculture industries.

Deputy prime minister and commerce minister, Kittirat Na-Ranong, has already expressed concern that the 2011 Thailand flood will see foreign investors withdraw. His prior confidence that more than 50 per cent of the industrial estates will resume operation within 45 days of the 2011 Thailand flood starting to recede now being viewed by more than some as being beyond optimistic.

Foreign investment in Thailand to take a beating

Meanwhile many of the foreign investors whose factories now lay under three or more meters of water are ramping up production in other plants around the world.

With financial events in Europe and North America seeing some people predicting another global financial contraction on the horizon, it is possible that by the time the 2011 Thailand flood drains out of Thailand some may conclude their capacity in other locations is sufficient for the present time.

Thailand economist Ammar Siamwalla feels yet another crisis in Thailand might be the straw that finally breaks the camel’s back for some foreign investors.

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In an interview published in the New York Times Mr Ammar said: “This is a disaster in slow motion. It has been accumulating, little by little, until it reaches Bangkok. It demonstrates a complete lack of infrastructure to handle the floods. Low-lying flood plains that have historically absorbed Thailand’s annual flooding have become an industrial region, with giant complexes and other construction blocking natural flows of water.

“With each new investment, the makings of a disaster took shape, and when this year’s historically heavy rains came, there was nowhere for the water to go. Foreign investment in Thailand will take a beating, I believe”, he added.

With a large portion of its manufacturing base and agriculture sector effectively destroyed, in addition to a novice government that to date has failed to take control of the situation, and the 2011 Thailand flood has all the makings of a perfect economic storm for the Thai people, far worse than 1997 Asian financial crisis.

 

Updated November 3, 2011: On November 3, 2011 Thailand’s Central Bank revised its estimate for 2011 GDP down as a result of the 2011 Thailand flood by 1.7 percentage points to 2.4 percent, 5 percent below the country’s GDP at the end of the first year of the 97-98 Asianfinancial crisis.

Bank of Thailand northern region office senior director Suphawadee Punasri, said the 2011 Thailand flood has so far cost the agriculture sector Bt10 billion ($325 million),

Phichit Phattarawimonporn, Bank of Thailand Northeastern Region Office senior director, said the 2011 Thailand flood has damaged 4.5 million rai (about 17,900 acre / 7,250 ha) of farmland, representing about 8.1 percent of the regions total plantation area, with 3.9 million rai (about 15,400 acre / 6,230 ha) of rice plantation flooded. It had the potential to reduce the rice harvest by up to 320,000 tons, or Bt4.1 billion ($133.18 million).

Mr Phattarawimonporn said foreign investors could relocate from the central region to the northeastern or other non flood-prone regions of Thailand, but noted that years of neglect of the Thai railway network, including the absence of a high-speed and / or double-track rail system, were major drawbacks.

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Feature video Anirut Srisawad

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John Le Fevre is an Australian national with more than 40 years experience as a journalist, photographer, videographer and editor.

He has spent extensive periods of time working in Africa and throughout Southeast Asia, with stints in the Middle East, the USA, and England.

He has covered major world events including Operation Desert Shield/ Storm, the 1991 pillage in Zaire, the 1994 Rwanda genocide, the 1999 East Timor independence unrest, the 2004 Asian tsunami, and the 2009, 2010, and 2014 Bangkok political protests.

In 1995 he was a Walkley Award finalist, the highest awards in Australian journalism, for his coverage of the 1995 Zaire (now Democratic Republic of Congo) Ebola outbreak.

Most recently he was the Thailand editor/ managing editor of AEC News Today . Prior to that he was the deputy editor and Thailand and Greater Mekong Sub-region editor for The Establishment Post, predecessor of Asean Today.

In the mid-80s and early 90s he owned JLF Promotions, the largest above and below the line marketing and PR firm servicing the high-technology industry in Australia. It was sold in 1995.

Opinions and views expressed on this site are those of the author’s only. Read more at About me

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