|
(Last updated: 26 Jul 2007)
Trends and opportunitiesThe market
Thailand has recovered strongly from the Asian financial crisis of 1997-1998 and is now one of the best performing economies in Asia. The improved performance has mostly been attributed to:
- A greater emphasis on promoting investment
- A more accommodating monetary policy from the central bank
- A healthy current account surplus
- A faster-than-expected improvement in the government's finances
International credit rating agencies have recently increased Thailand's sovereign debt rating to reflect the improved economic outlook. In 2004, real GDP growth was an estimated 6.1 per cent. A significant factor in the revival has been the recovery of private investment in residential and commercial buildings, which has been helped by improving business and low interest rates. The government has also pledged US$1.6 billion in 2005-2008 on new housing to accommodate 1.5 million slum-dwellers.
The soaring number of condominiums, office towers, factories, hospitals, shopping centres, hotels, high-rises and low-rises everywhere is adequate proof that the industry is looking very healthy.
The sudden return of investment in the Thai construction sector has led to under capacity with fears being voiced by some industry trade associations. Cranes are already in desperately short supply and the Professional Crane Association has called on the government to relax taxes and regulations on imported cranes. The revival of the construction industry has also produced a raft of regulatory changes aimed at improving quality in the industry and reducing the potential for corruption.
Overall industry trends
The International Monetary Fund, the Asian Development Bank and eight investment banks forecasted growth in 2006 at 5.5 per cent. The forecast is based on the assumption of a gradual slowdown in consumption, investment and net exports. Growing opportunities will be the results from the infrastructure mega projects, which the government has prioritised.
Residential and commercial construction project
In the residential sector, the Thailand Government is planning to build a total of 600,000 low-cost units in the next 10 years. So far, about 40,000 units have been built. In the commercial sector, a vast amount of private projects are still ongoing, for example, Central Food Retail Co. (CFR), the operator of Tops supermarket, plans to invest US$18.7 million to open new stores and renovate its existing facilities in 2006.
Opportunities
The best opportunities exist in the supply of building materials and equipment, and providing specialised construction and building services. Areas where Australia has particular capability and suitability for the Thai building and construction sector include:
- Steel and aluminium products
- Top market for sanitary ware
- Chemical products
- Intelligent building systems
- Concrete strengthening products
- Sealing products
- Fire protection products
- Baths and spas
- Energy management
- Waterproofing
- Valves and fittings
In August 2005, Thailand's Government approved a US$40 billion infrastructure programme that will boost economic growth. The country has launched an ambitious five-year scheme to improve infrastructure, especially transportation. The plan calls for extensions of Bangkok's subway and Skytrain lines, including a line that will connect to the new Suvarnabhumi International Airport, located about 25km east of the city.
Work is continuing on the new US$3 billion Suvarnabhumi Airport terminal. The launch of the new airport has been a major concern for authorities and airlines, which need to adjust their flight schedules to match the opening. Suvarnabhumi was originally planned to open on September 28, 2005 but many of the jobs have been delayed, particularly the installation of bomb scanners. The airport is now scheduled to open in September 2006.
Other projects include new railways, roads and bridges, low-income housing projects and water management systems.
Competitive environment
Italian-Thai Development (ITD), Ch Karnchang and Sino-Thai Engineering and Construction (STECON) are three of the strongest performing construction companies in Thailand. They are well placed to capitalise on increased infrastructure spending. These three companies topped the market performance of all 81 listed Asian construction companies in 2003 and many expect their outstanding performance to continue.
The Finance Ministry is considering introducing financial bonuses for contractors that complete government infrastructure projects ahead of schedule. The Controller-General's Office is currently reviewing proposals for how such a scheme would operate in practice. The government is also planning to establish a new agency responsible for regulating the construction industry.
|