Readbangkokpost Economics Business Blog http://www.readbangkokpost.com/business/ en Copyright 2008 Mon, 01 Dec 2008 17:54:17 +0600 http://www.sixapart.com/movabletype/?v=3.2 http://blogs.law.harvard.edu/tech/rss TDRI conference focuses on unemployment and fiscal spending cure (01-11-08) fiscalpolicycrisis

TDRI conference focuses on unemployment and fiscal spending solution

By Jon Fernquest

tdriAt its annual conference over the weekend, the Thai Development Research Institute (TDRI) offered a wide assortment of advice on economic policy (Download Thai language presentation materials).

Unemployment in the coming year and government spending (fiscal policy) to help the jobless (unemployed) was the major focus.

Inflation is expected to be one of the few areas where there is no problem next year in 2009.

Headline inflation is expected to be minus 0.6% year-on-year. There is even a danger of  deflation that often comes with deep economic recessions or depressions. Deflation would likely have a severe negative effect on investment.

Exports are likely to fall 12% next year, imports by 8%.  To offset the dependence of the economy on exports, domestic consumption and demand must be strengthened . This will be the focus of the NESDB's new national development plan.

(Photo on right of Dr Somkiat Tangkitvanich, a vide president and researcher with the Thailand Development Research (TDRI) in the library)

Thai Development Research Institute (TDRI) - Thailand's first public policy think tank with economics research a specialty (See website)
unemployment - the number of people without a job (See Wikipedia)
fiscal policy - government spending and taxation policy
inflation - the rate at which the general price level of goods and services in an economy is rising over time, resulting in a fall in the value of money (See Wikipedia)
headline inflation - the consumer price index (CPI), a measure of inflation that includes everything unlike core inflation which excludes the most volatile items like food and oil that move around a lot (Read paper and see Wikipedia)
deflation - when the overall price level in the economy decreases
NESDB, National Economic and Social Development Board (or "Sa-pa-pat") - Thai government planning agency for economic development, creates five year plans with an agenda of: 1. Alleviation of Poverty and Income Distribution problems, 2. Enhancing Thailand’s Competitiveness, 3. Promoting Social Capital Development, 4. Promoting Sustainable Development (See Wikipedia)

Unemployment

With recession comes reduced economic activity. Consumers spend less and companies produce less. As a result, companies lay off employees that they no longer need. As a general rule, unemployment rises during recessions.

Unemployment in Thailand normally follows a seasonal pattern, increasing in the first quarter and declining in the third quarter. With recession spreading throughout the global economy, the jobless problem in Thailand may well break out of this seasonal pattern and continue to get worse and worse next year.

Unemployment is projected to reach 800,000 in the first quarter alone. This includes existing jobless people, newly laid-off workers and new graduates entering the work force looking for work.

The composition of the unemployed will probably change from the last major downturn in 1997. Educated workers with at least a secondary school education working in the industrial sector in the automobile or high technology industries are likely to be affected this time around. Ten years ago during the crisis of 1997 most of the jobless came from the construction sector.

a recession - a period of reduced economic activity and negative economic growth
lay off employees - stop employing workers, so they now have no job
a season - a period during the year (rainy season, cool season, hot season)
a seasonal pattern - changes with the seasons of the year (for example, tourist arrivals)
projected - expected, forecast
composition of - the parts or members of
secondary school education - completed high school [Thai: Matayom]

Unemployment compensation

Of total unemployment of 800,000, there are projected to be 250,000 that have more than six months' work experience and thus are entitled to the government's unemployment compensation.

Many businesses will respond initially by cutting work hours as an alternative to layoffs. Work hours in the first quarter could average 48-49 per week, down from 50-52 in the first quarter of 2008.

To lessen the negative impact of the downturn on workers, the government could extend the eligibility for unemployment compensation to laid-off workers with eight months on the job and to older workers. It should also focus on skill training based on the private sector's needs.

unemployment compensation - money paid by the government to people who have lost their jobs to help them live and find a new job
entitled to -  meet the legal requirements needed to receive, so they must  be paid this money
extend the eligibility for - they have already received the money for a period of time, this period of time increased

Fiscal response to unemployment and reduced growth

Facing rising unemployment, the government needs to use government spending (fiscal policy) to help out the unemployed. Economist Ammar Siamwalla focused on the right mix of fiscal spending in his presentation.

Spending on large infrastructure projects is just too slow. Even the feasibility studies for these large projects take a long time to complete.

The government needs to find quick and productive ways to spend money, create jobs, and add value to the nation's economy. Government spending should focus on health care, schools, and the training of much needed skilled workers such as nurses. Government contribution of funds to the Social Security Fund for health benefits instead of employers and employees for health benefits would reduce this negative impact on employers.

Value-added taxes (VAT) could be reduced to stimulate consumption but this would also increase the government budget deficit and the willpower to reimpose such a tax in the future would likely be lacking.

fiscal policy - government spending and taxation policy
feasibility studies - studies on whether a project can be successful, done before starting the project
productive -  produces a lot without spending a lot of resources
productive ways to spend money - do a lot with a small amount of money
Social Security Fund - the government fund that employers and employees contribute to, that pays unemployment compensation and health benefits (each employee has a "Social Secutiry" card with the name of the hospital that they have been assigned on it
value-added taxes (VAT) - the tax paid on things you buy (a percentage of the price)
stimulate consumption - cause people to spend more money (rather than save)
a deficit - expenses and spending more than income or revenue
government budget deficit - when the government spends more money than it takes in with taxes
willpower to do Y - very strong determination to do something (will do for sure, no matter what)
reimpose a tax - start a tax again, after stopping it for a period of time

Extending easy credit to SMEs such as OTOP businesses may not be effective since SMEs have had a very high percentage of non-performing loans (NPLs). Easy credit when business is bad may just lead to even higher levels of NPLs. (Read previous article).

It is unclear whether reducing taxes will make the economic situation any better. Reducing taxes will certainly mean that government revenue is reduced and this will also create an even bigger government budget deficit.  The current 2009 government budget deficit is based on a 5% growth assumption and growth is now projected to be as low as 1.9% (or lower given the airport blockade) and 0.1% in the first quarter. This lower growth will also mean a bigger government budget deficit.

If corporate tax reductions are given, corporations may just hoard the cash in savings). Domestic consumption would then not increase.

based on a 5% growth assumption -
corporate tax reductions - decrease in the amount of tax that corporations must pay
a corporation - a company with a certain minimal capital registered with the government as a legal entity (often issueing publicly traded stock)

(Source: Bangkok Post, business, TDRI: Help for jobless a new priority: Ammar: Megaprojects no cure in short term, PARISTA YUTHAMANOP, link)


]]> http://www.readbangkokpost.com/business/macroeconomics/tdri_conference_focuses_on_une.php http://www.readbangkokpost.com/business/macroeconomics/tdri_conference_focuses_on_une.php Macroeconomics Mon, 01 Dec 2008 17:54:17 +0600 Economic impact of airport closure to hit Thailand in the pocketbook (28-11-08) airportclosure

Economic impact of airport closure
to hit Thailand in the pocketbook

By Jon Fernquest

airport blockadeThe rest of the world is falling quickly into deep recession (Read about the largest decline in consumption in the west since the 1950s in today's New York Times editorial).

The closure of Bangkok's most important international airport yesterday shut off Thailand's access point to the world for trade and tourism.

This is helping push Thailand even more quickly into recession.

The government has already fled north to Chiang Mai indefinitely (Read Article).

The police vow to use a soft non-violent approach to remove the PAD protesters that might take a long time (Read article).

PAD has lined up cars to use as makeshift bunkers covering the airport's entrances. Barbed wire and pickup trucks were used as primitive barriers elsewhere.

PAD has been occupying government house for months. They might be camped out at the airport for awhile too.

See photo on the right of the road into the airport blockaded with a fire engine and luggage carts.

hit in the pocketbook - people will lose money (or make less)
a recession - a period of reduced economic output, reduced wealth, reduced jobs
indefinitely - with no definite or known end
PAD - People’s Alliance for Democracy, the union of several groups protesting against the current government and which staged large protests against the Thaksin government as well พันธมิตรประชาชนเพื่อประชาธิปไตย
makeshift - temporary, made from whatever materials were available
bunkers - a place with strong walls to protect it against attack
covering the airport's entrances - protect from attack from the airport's entrances
barbed wire - strong wire with sharp points (used in fences to prevent entry)
a barrier - something that prevents people from entering a place
primitive barriers - barriers that are simple and old-fashioned in style
blockaded - goods and people prevented from entering or leaving a place

Impact on exports

The closure of Suvarnabhumi airport is causing 3 billion baht of damages to cargo transportation per day; 1.8 billion baht to importers and 1.2 billion to exporters.

The biggest impact so far has been on shipments of food and other agriculture products. If the closure continues for as much as a week production at as many as 30 to 50 SMEs is likely to stop. With lost production and revenues, lost jobs are sure to soon follow.

Electronics goods such as hard-disk drives and integrated circuits (IC) are shipped in and out of Thailand by plane. Shipping by plane takes about three days compared to more than a month by ship. Producers claim they will have to stop production if they cannot send cargo out within 1-2 days.

Cargo is being rerouted through airports in Malaysia and Singapore. Trucks are being used to deliver goods out of the country. This will increase shipping cost by 25 per cent or more.

cargo - goods being carried by a ship or plane
integrated circuits - small electronic computer parts on a chip
X rerouted through Y - X sent along a different route from normal, route Y

Impact on tourism

Around 80% of foreign visitors fly into the country so the impact on tourism will be great. Already there have been cancellations of accommodations and package tours (Read article on how German carriers have dealt with the problem).

The airport shutdown has had a huge impact on Thailand's MICE (meetings, incentives, conferences, exhibitions) industry affecting 31 events scheduled in the fourth quarter of the year with arrivals predicted to fall by 58% to 58,000 visitors. Six events were cancelled yesterday including the seventh CNBC Asia Business Leaders Awards, the 2008 IOF World Congress on Osteoporosis, Taiwan's Hotai Group and India's Epson Group. Three meetings were postponed indefinitely: the ninth Asia Groups 2 meeting 2008, Japan's Amway Group and Yum International Foods.

Thousands of people attending events were stranded yesterday including 200 VIP guests. Those needing to leave Thailand immediately were provided with transport to international airports that remain in operation such as Phuket and Chiang Mai for departure. Chartered flights from many countries to Phuket and Krabi are still continuing to arrive.

accomodations - hotel rooms
package tours  - a tour or holiday arranged by a travel company, arranges and pays for all hotels and transportation, makes decisions about where to go
carriers - ariline companies
MICE (meetings, incentives, conferences, exhibitions) industry -
stranded - unable to leave a place (due to bad weather or hoards of protesters, for example)
chartered flights - special flights not regularly scheduled, renting an airplane to send a group of people somewhere

Economic impact

Estimated losses in the MICE industry are around 11 billion baht. The  Thailand Convention and Exhibition Bureau (TCEB) has revised down its Mice revenue target from 77 billion baht to 52 billion this year. Damage to the entire tourism industry from the airport closures is estimated to be up to 200 billion baht. There are around 4,000 travel operators with 200,000 employees excluding those in the hotel sector. Many of these companies currently have no business activity at all.

Layoffs are likely in the tourism sectors due to the likely severe reductions in visitors during the next quarter. This could create severe ripple effects felt across several other industries since tourism creates millions of jobs in related fields.

revised down - estimated again at a lower level
revenue target - how much they estimate they will receive from sales this year

(Source #1: Bangkok Post, business, Airport closures to cost B134bn: Up to B215bn possible if seizures prolonged, PHUSADEE ARUNMAS NAREERAT WIRIYAPONG, link)

(Source #2: Bangkok Post, breaking news, Suvarnabhumi closure costing 3 bln baht per day , 28-11-08, link)

(Source #3: Bangkok Post, business, 28-11-08, Tourism industry foresees mass layoffs by first quarter, CHADAMAS CHINMANEEVONG CHATRUDEE THEPARAT, link)


]]> http://www.readbangkokpost.com/business/hotels_restaurants_and_tourism/economic_impact_of_airport_clo.php http://www.readbangkokpost.com/business/hotels_restaurants_and_tourism/economic_impact_of_airport_clo.php Hotels, Restaurants, and Tourism Fri, 28 Nov 2008 17:40:29 +0600 The Suvarnabhumi shutdown: Impact on tourism industry and promised government aid (27-11-08) tourismsectorhelp

The Suvarnabhumi shutdown:
Impact on tourism industry and promised government aid

  By Jon Fernquest
waiting forflight
With support flagging, the anti-Thaksin forces of PAD struck where they knew they could regain the initiative, blockading and forcing the shut-down of Bangkok's main international airport Suvarnabhumi.

The current prime minister, brother-in-law of Thaksin, on the way back from Peru was forced to land his plane in far-away rural Chiang Mai, home town and support base of Thaksin. 

Some say that Thaksin, now a convicted felon in Thailand, recently banned from his adopted second home of Great Britain, recently divorced from his wife, may be permanently out of the picture as far as Thai politics is concerned (Read historian Nidhi Eoseewong's editorial yesterday).

The PAD obviously doesn't think Thaksin is history yet.

With Thailand's main international airport shutdown and no one knowing when it will open again the negative impact on the tourism industry will likely be great.

Today's article reviews the impact and the measures the government is taking to help the tourism industry.

(Photo on right of tourist reading his book while waiting for delayed flight)

The full article on the economic impact of the airport blockade follows after this vocabulary:

support flagging - less and less people are helping them
PAD - People’s Alliance for Democracy, the union of several groups protesting against the current government and which staged large protests against the Thaksin government as well พันธมิตรประชาชนเพื่อประชาธิปไตย
the initiative - in a better position than your opponents in a contest
regain the initiative - go from a worse position to a better position than your opponent in a contest
Suvarnabhumi - Bangkok's new international airport, blockaded yesterday by PAD  (See Wikipedia)
blockading - preventing goods or people from entering or leaving a place
a convicted felon - a person found to have committed a crime and now facing punishment
adopted home - choose a place as a place to live
out of the picture - not important anymore, not a factor anymore
is history - won't play a role now or in the future

SUVARNABHUMI SHUTDOWN

Aid fund for tourism planned

Guarantees to cover 50% of banks' risks
POST REPORTERS
APICHIT JINAKUL
Thursday November 27, 2008 

Thousands of travellers were stranded at Suvarnabhumi Airport yesterday as PAD protesters shut down the site.

Government aid to tourism industry

The government will establish a new fund to assist tourist operators and exporters affected by the closure of Suvarnabhumi Airport by anti-government demonstrators.
 
Deputy Prime Minister Olarn Chaipravat said the fund would offer loan guarantees to cover up to 50% of the risks carried by local banks. The fund, which would operate with guarantees similar to those offered by the Small Business Credit Guarantee Corp, could begin operations as early as next month.

"We are debating the fund size now. The government will ensure that the new fund won't add to the public debt even though we will have to borrow funds to finance the programme," he said yesterday.

stranded - unable to leave a place (due to bad weather or hoards of protesters, for example)
loan guarantees - when others promise to be responsible for paying back a loan if the borrower cannot pay it back
cover up to 50% of the risks - will pay back 5o% of any money lost
Small Business Credit Guarantee Corp (SBCG) - a Thai government company for providing guarantees on small business loans
(Read previous article)
the public debt - government debt (from government spending more than tax revenues = government deficits)

Estimating the size of tourism industry losses

Weerasak Kohsurat, the Tourism and Sports minister, said the ministry had yet to fully evaluate the losses suffered by the industry.

But he said the damage would be protracted and could run well into 2009.

Kongkrit Hiranyakit, president of the Tourism Council of Thailand, said damages to the industry could top 100 billion baht with up to 100,000 direct and indirect job losses through mid-2009.

"This situation is worse than the [2004] tsunami. The country's image has been wiped out and it will be difficult to revive. Who will come to visit Thailand?" he asked.

On Tuesday night, almost 3,000 foreign tourists were stranded at Suvarnabhumi Airport without any help from the government.

One tourism expert said Thailand would definitely lose huge tourism revenues in this peak season. Normally, the number of foreign tourists from November to January averages 1.2 million to 1.5 million per month. They stay about nine days in Thailand and spend about 4,000 to 4,200 baht per day.

protracted - lasts for a long time
could run well into 2009 - could continue happening for a long time during 2009
direct job losses - without the business that tourism arrivals via the airport generate, many companies may fail and cut jobs
indirect job losses - reduction in tourism business may cause a slowdown in the overall economy
wiped out - destroyed
image - the picture of something that people have in their mind, what people think about something ภาพลักษณ์
damaged the country's image - created a negative picture in foreigners' minds about Thailand ทำลายภาพลักษณ์ของประเทศ
the country's image has been wiped out - destroy the positive picture in peoples' minds they have about Thailand
difficult to revive - difficult to bring back to life, return to the previous state

Impact on large conventions and Thailand's MICE business

Natawut Amornvivat, the president of Bangkok Thailand Convention and Exhibition Bureau (TCEB), said the CNBC Asian Business Leaders Awards were the first casualty of the airport blockade. The meeting, originally to be held today and tomorrow in Bangkok, has been taken off the calendar.

"The image of Thailand is being destroyed and many foreign delegates feel unsafe to come to Bangkok right now. The cancellation of the CNBC event will send a negative sign to the Mice industry here," Mr Natawut said.

Another event originally set to start today, the World Halal Programme, has also been cancelled. Anirut Smutkochorn, the president of the Thai-Islamic Trade and Industrial Association, said the one-day event had been scrapped due to the uncertainties.

MICE industry - the Meetings, Incentives, Conventions, and Exhibitions industry, part of the tourism industry (Source: Micepoint)
Thailand Convention and Exhibition Bureau (TCEB) - a government organization established in 2002 in charge of promoting tourism-related meetings and conventions in Thailand (See website)
CNBC Asian Business Leaders Awards (ABLA) - an award to business leaders made by the television station CNBC (See website)
the first casualty - the first injury, the first one to be harmed or damaged
a blockade - preventing goods or people from entering or leaving a place
the airport blockade - the PAD action to prevent people and goods from entering or leaving Thailand's main airport

Tourism bookings and travel advisories

Maiyarat Pheerayakoses, the president of the Thai Travel Agents Association, said bookings for package tours were expected to slow further from the current 60% sales rate. Normally, tours are 90% to 100% booked in November.

She said Thai Airways International and the State Railway of Thailand should offer discounted tickets to travellers to support the industry.

Jungkug Ahn, president of the Korean-Thai Chamber of Commerce, said there should be notices at government buildings and embassies to explain to foreigners about the protest at the international airport.

"Safety of tourists should be the top priority of the government, Thailand is safe for business people living here but for tourists I'm not sure because they normally travel around the city during the visit," he added.

The British Embassy in Bangkok issued a travel advisory for travellers from the UK to Thailand to re-check schedules with their carriers.

package tours - a tour or holiday arranged by a travel company, arranges and pays for all hotels and transportation, makes decisions about where to go
a booking - a reservation, making an arrangement now for the future use of a hotel room, restaurant table, or seat on airplan or bus  
bookings for package tours -  making an arrrangement now to go on a package tour in the future
issued a travel advisory - when the embassy of a foreign government makes an announcement to people of its country traveling in the country advising them on safety issues and other topics of importance
their carriers - the airline that they are flying on

(Source: Bangkok Post, Suvarnabhumi shutdown: Aid fund for tourism planned, POST REPORTERS, APICHIT JINAKUL, 27-11-08, link)



]]> http://www.readbangkokpost.com/business/hotels_restaurants_and_tourism/the_suvarnabhumi_shutdown_impa.php http://www.readbangkokpost.com/business/hotels_restaurants_and_tourism/the_suvarnabhumi_shutdown_impa.php Hotels, Restaurants, and Tourism Thu, 27 Nov 2008 14:15:15 +0600 Thailand's food industry differentiates into health-promoting, disease-preventing "functional foods" (26-11-08) functionalfoods

Thailand's food industry differentiates into
health-promoting, disease-preventing "functional foods"

By Jon Fernquest

food processorsAny company can claim their food product is healthy or disease preventing.

But can they prove it?

Labeling foods after they pass rigorous standards and tests is one way to prove it. 

Japan was the first country to promote this idea during the 1980s by setting up food standards and product labels for special health food products.

These food products were called "functional food" products or Foods for Specified Health Use (FOSHU).

Since the 1980s many countries, notably Canada and Sweden, have followed Japan's example and set up laws on food standards and labeling.

Thailand is the world's leading exporter of many agricultural commodities such as rice and rubber. The food processing industry is also an important part of Thailand's economy with firms Charoen Pokphand Foods (CPF) and Betagro Group being the leading companies operating in this sector. 

New functional food products are a good way for Thai food processing companies to differentiate and add value to their products. That's where Thai government promotion of this new business idea, as well as rigorous standards, comes into the picture.

(Photo on right of workers in a food processing plant)

rigorous - strict and thorough 
pass rigorous tests, pass rigorous standards - at or above the requirements or standard levels
food standards - an acceptable level of quality and safety for food
product labels - the labels on the outside of food products with some information required by law, also includes logos that certify health and food safety standards have been met
logo - a special design or way of writing the company's name put on all products and advertisements
functional food - health-promoting and disease-preventing food
Foods for Specified Health Use (FOSHU) - Japanese program of food standards and labeling during the 1980s (See essay on history)
food processing - the methods and techniques used to transform raw food ingredients into food (See Wikipedia)
Charoen Pokphand Foods (CPF) - Thailand's largest agribusiness firm with major overseas operations, major exporter of processed meat and frozen food products (See Wikipedia, Google Finance, and website)
Betagro Group - major Thai agribusiness firm and producer of processed meat products (See website)
agribusiness - a company with revenues from sales of agricultural products or sales to agricultural producers
differentiate, product differentiation - the process of making a product different from other similar products, to make it more attractive to a particular target market (See Wikipedia)
add value, value-added - the value added to a product at each production and distribution step
X comes into the picture - X becomes an important factor

Role of Thailand's National Innovation Agency (NIA) in food sector?

Next year Thailand's National Innovation Agency (NIA) will have a budget of 400 million baht "to help Thai companies apply knowledge management to achieve innovation."

"About 350 million baht will be spent to promote the development of bio-related businesses, focusing on products with high market potential such as food, as well as eco-industry and design.

"Another 50 million will be needed to develop technology, seek venture capital, assistance with intellectual property management and market access, with a target to help 99 companies expand.

"The state-run agency has supported 350 companies in the past five years but they are still small with only one million baht in capital. Therefore, the agency will encourage them to increase investment to 10-20 million baht each.

"This budget is part of a three-year outlay of 316 million baht that the agency has earmarked for the establishment of an innovation park as a focal point for business incubation."

National Innovation Agency (NIA) - government agency established in 2003 to improve national competitiveness and productivity through education, technology, business investment and financing (See website)
bio-related - related to biology: plants, animals, and food
venture capital - investing in small start-up companies in high-tech and risky industries with the goal of eventually having the company issue stock in an IPO when it is successful (See Wikipedia)
IPO - Initial Public Offering, a public offering, when a company issues stock to the public for the first time (See Wikipedia)
intellectual property - right to sell invetions, musical, literary, and artistic works and symbols, names, images, and designs used in commerce, including copyrights, trademarks, patents, and related rights (See Wikipedia)
market access - getting the product into places where it can be bought (and telling customers about it thought advertising and promotion)
three-year outlay of 316 million baht - using 316 baht over the period of three years for some purpose
earmarked for Y - reserved or set aside for purpose Y
a focal point - a concentration point, one central place to being together all activity in this area
business incubation - providing a special safe environment to help new vulnerable businesses develop and turn into full grown successful businesses

Food products of the future?

The NIA will organize a special food conference in Bangkok next year called  InnoAsia 2009: Food in the Future (Aug 20-22) with an expected 3,000 to 4,000 participants from 25 countries.

According to the NIA, natural products worldwide are worth US$513 billion a year with the growth projection of 25-30% annually for the next five years.

NIA-supported projects include NutraGABA rice, beauty drinks and Y-ZA, a fruit juice with lactobacillus.

NIA will help companies in the food sector with design and branding. Medical foods, organic foods, and novel foods are among  different categories of food that NIA is promoting.

Medical foods are intended for use solely under medical supervision to meet the nutritional requirements of specific conditions such as diabetes.

Organic foods include natural and organic beef and organic asparagus.

Novel foods are produced under the process resulting in a significant change in their composition or nutritional value or intended use, such as a fast-baking cake from rice powder.

growth projection - an future growth estimate, how much experts think the economy will grow
lactobacillus -a bacteria that can reduce inflammatory and cancer (See Wikipedia)
branding - creating and developing an identity or brand for a product, a brand is a collection of images and ideas surrounding the product in things such as an easily recognizable name, logo, slogan, and design scheme that convey the essence of a company, product or service (See Wikipedia)
nutrition - providing the materials necessary to your body so it can grow and be healthy, many common health problems can be prevented or alleviated with good nutrition (See Wikipedia)
nutritional requirements - the minimum amount of certain types of materials you need to eat when you have a health problem
diabetes - a deadly disease in which you have abnormally high blood sugar levels (See Wikipedia)
organic foods - grown without the use of pesticides or chemical fertilizers, free from contamination by human or industrial waste, and processed without radiation or food additives (See Wikipedia)
asparagus - a long green vegetable boiled and eaten (See Wikipedia)
composition - the way the parts are put together and arranged
nutritional value - the different materials in food that have health benefits
intended use - why people are using it, the purpose they are using it for, what they want to use it for

(Source: Bangkok Post, business, 26-11-08, B400m to sow Thai innovation: Bio-related product development pushed, CHATRUDEE THEPARAT, link)


]]> http://www.readbangkokpost.com/business/agriculture/thailands_food_industry_differ.php http://www.readbangkokpost.com/business/agriculture/thailands_food_industry_differ.php Agriculture Wed, 26 Nov 2008 13:20:55 +0600 Citigroup gets massive US government bailout: Victim or culprit? (25-11-08) citigroupbraddelong

Citigroup gets massive US government bailout:
Victim or culprit?

bailoutBy Jon Fernquest

The global financial crisis isn't over yet.

The US government bailed out Citigroup on Monday,

What exactly did Citigroup get in the bailout?

The first time around Citigroup received $25 billion from the $700 billion set aside by the US government.

In the latest bailout, Citigroup receives another $20 billion.

The US government has also agreed to guarantee $300 billion in risky assets on Citigroup's balance sheet (backstop).

1. Citigroup will identify $300-billion in troubled assets which will remain on its balance sheet
2. The first $37-$40-billion in losses on those assets will go to Citigroup
3. The next $5-billion in losses will go to the US Treasury
4. The next $10-billion in losses will go to the FDIC (US government deposit insurer)
5. Any more losses will go to the Fed (US central bank)

(Source: Paul Kedrosky via Economist's View).

The main complaints

The major complaint in both these bailouts seems to be that the US government (and taxpayers) are not demanding a big enough equity stake for their rescue money.

The US government is only getting an 8% return on its money when Warren Buffet got 10% for the rescue money he put into Goldman Sachs earlier this year.

The problem is, the more ownership (nationalization) the US government demands, the more they are diluting existing shareholders and thus making it more difficult for a bank to raise money on its own on capital markets.

Who is going to put money in a bank when the government could come along and take the bank and your money? This is what happened when Washington Mutual failed which may have set a dangerous precedent (Read critique of bank nationalization).

In the end, the US government may just have to take a 100% stake in many banks to clean up "toxic assets" from bank balance sheets. Nationalization is how Sweden ended up solving its banking crisis in the early 1990s (Read New York Times article).

an equity stake - being part owner
nationalization - when the government becomes the owner of a company
diluting existing shareholders - making the value of the stock shares they own worth less
on its own - individually, by itself, without help from others
set a precedent - it happened this time, so people will do it again in the future (follow a precedent)

The Citigroup bailout was the latest in a long series of bank bailouts, failures, forced sales and mergers this year:

1. March - Bear Stearns Bailout (See Wikipedia)
2. July - Indymac (See Wikipedia)
3. September - Fannie Mae Bailout (See Wikipedia)
4. September - Freddie Mac Bailout
5. September - Lehman Brothers Failure (turning point)
6. September - AIG Insurance Bailout I (Read article)
7. September - Washington Mutual (Read article)
8. October - Wachovia (See Wikipedia)
9. October - Major US bank bailout (Read article)
10. November - AIG Insurance Bailout II
11. November - Citigroup Bailout (Read Fed announcement)
12.  ????????????? Who's next? ????????????????

Who done it?

The first reaction is to pin the blame on someone and look for a culprit rather than a victim.

This is the point of most articles in the New York Times "The Reckoning" series of articles (See article index).

Former Clinton treasury secretary and Citigroup director Robert Rubin is taking a lot of the blame. Along with former Fed chairman Alan Greenspan, Rubin opposed the regulation of derivatives (CDSs, CDOs) , the complex "toxic assets" that no one quite knows how to remove from bank balance sheets (See articles on shadow banking sector and CDSs).

Rubins oft-repeated motto, ominous sounding nowadays but actually just commonsense, was: "You have to take more risk if you want to earn more."

Economist Brad De Long suggests that a thorough explanation might be a more useful than blaming people. We will step through his explanation below.

bail out - help someone out of difficult situation by giving them money (See glossary)
victim - someone who suffers as a result of another's actions
culprit - the person responsbie for something bad happening
merger - joining together, when two companies become one company
a turning point - a point in time when important changes take place
pin the blame on someone - show why someone is the cause of some bad event
a reckoning, day of reckoning - the day you have to face what you did wrong and get punished
taking the blame - when people blame you for a bad event happening
derivatives (CDSs, CDOs) - assets that take (derive) their value from some underlying asset or set of assets (See Wikipedia)
oft-repeated - often repeated, said many times, over and over again
a motto - a short phrase that gives a rule for behaviour
ominous sounding - worrying, makes you feel like an unpleasant event will happen soon
commonsense - one's natural ability to make good judgements, behaving in a practical way
a backstop - protection  

The New York Times article fails to explain why "$43 billion of optimistically overvalued assets eliminate $224 billion of value."

The reasons elaborated in greater detail by Brad De Long below are:

1. The banking business model is inherently levered and unstable
2. Unprecedented spike in risk premiums
3. Bad modelling of house prices
4. Bad modelling of tail risks
(Source: Felix Simon)

optimistically overvalued assets - thinking that the profit on an investment is great when it is little
elaborated in great detail - explaining with a lot of details
inherently - by its very nature, by definition of what it is
over-levered - borrowed too much money to purchase an asset
unprecedented - never happened before, this is the first time
a spike - sudden jump and fall
risk premiums - extra money that you pay someone to face a risky situation
tail risks - extremes in behaviour and bad events are actually more common than you think (See Wikipedia and Investopedia)

The business of banking

As Brad De Long points out, banks are by their very nature risky businesses.

Banks are financial intermediaries that deliver the savings of households to the businesses that need these funds.

Households as savers need short-term safe and liquid assets. Banks provide bank deposits to fill this need.

Businesses as investors need long-term funds for risky purchases of capital equipment (plant, equipment, infrastructure). These purchases are risky because a business plan may not succeed. The business may fail and then fail to pay back its loans.

Banks provides long-term loans to businesses so they can purchase this capital equipment.

As financial intermediaries the business of banks is to turn short-term liabilities (deposits) into long-term assets (loans).

The fact that a bank's assets (loans) have a longer duration (maturity) than the bank's liabilities (deposits) is one source of risk for banks (maturity mismatch). If all of a bank's depositors ask for their money back at the same time (bank run) then the bank would either fail or have to be saved by a bank with even greater assets (lender of last resort).

Another source of risk for banks is that the business loans that they make are much more risky than the deposits funding these loans. The bank is required to pay back deposits whenever depositors want their money back (on demand, demand deposits). Banks may not get their loan money back if the borrower's business fails (default risk). Loan officers who work for banks develop close relationships with borrowers and during this long relationship also develop detailed knowledge about the borrower's business operations. This helps to reduce default risk. 

During a financial crisis there is typically a sharp fall in the value of the long-duration and high-risk assets that banks specialize in, so as Brad De Long says:

"It's in the nature of a bank to get into trouble and be on (or over) the edge of failure in a financial crisis...A bank that has not lost massive amounts of value in the past year and a half is either extremely nimble or extremely lucky: even the nimble and lucky JPMorgan Chase has lost 60% of its shareholder value in the past year and a half. The question of how much duration and risk a bank should assume per dollar of capital is a knotty one -- if you match durations and assume no risk, then your stock value never crashes. But shareholders are paying you to be a bank, not to be a not-bank..."

a financial institution - a company that borrows money (liabilities) and loans money to other borrowers (assets), this includes banks, insurance companies, a credit union, or mutual fund company

Comparing a pre-crisis and a post-crisis balance sheet

Brad De Long then describes how the financial crisis has affected the balance sheet of a large bank like Citigroup:

"A bank like Citigroup has a lot of assets -- a lot of people have promised to pay it a lot of money in the future. Let's collapse all those dates in the future at which people have promised to pay Citi down to one point in time four years in the future, and let's collapse all the amounts promised in the pre-crisis situation in all their different configurations down to one number: $1,263 billion. Citigroup thus has assets: in four years people will pay it $1,263 billion in cash.

"Citigroup also has liabilities in the pre-crisis situation. It has borrowed--i.e., accepted deposits (that is what a deposit is: the bank has borrowed money from you, but they call it a deposit rather than a borrowing so that you will think that what you put in the bank is still there) and issued notes to the tune of $800 billion.

"So Citigroup in this pre-crisis situation has assets of $1,263 and liabilities of $800 billion and thus is worth $463 billion right? Wrong. The $800 billion is essentially due tomorrow -- if the depositors and creditors want to get it out rather than roll it over, they can do so. The assets are in the future and are uncertain. Future assets are worth less than current assets: this is the time discount on safe assets. Risky assets are worth less than safe assets: this is the risk discount.

"With a (safe) time premium of 4% per year and a risk premium of 2% per year, Citi's assets are worth 6% less on the open market today for each year they are in the future. Compound this over four years and you get a risk factor of 0.792. In this pre-crisis situation, Citi's assets could only be sold on the open market for $1,000 if they had to be sold immediately. But you still have a healthy bank: assets with a present value of $1,000; liabilities with a present value of $800; a net worth of $200 billion.

pre-crisis balance sheet

But things can go wrong:

1. You can learn that you were always mistaken about the value of your assets--that they were always really worth less than you thought they were.

2. You can learn bad news--that your assets used to be worth what you thought they were, but bad unexpected things have happened to your assets and they are worth less. (They are, after all, risky things to own: that's what "risky" means: bad things can happen and values can go down.)

3. The safe rate of time discount can go up because of a liquidity crunch: people suddenly value cash now more than cash later by a greater degree. This will push the discount factor down and make the present value of your assets less even if you have had no bad news of any kind about their long-run value.
 
4. The risk premium rate of time discount can go up because the market is no longer as tolerant of risk, or no longer as tolerant of your risks as it used to be. This will push the discount factor down and make the present value of your assets less even if you have had no bad news of any kind about their long-run value.

Post-crisis balance sheet

So now you have the post-crisis balance sheet of Citigroup:

post-crisis balance sheet

As best as I can guess, things (1), (2), and (4) have gone wrong:

Citi's (and everybody else's, it seems) risk models were wrong: assumed that the tails of distributions were much too thin--never mind what they were doing making calculations based on tail densities about which you inevitably have no information at all anyway). This seems to have cost Citi about $30 billion in impairing the future value of its assets.

1. We have gotten bad news about housing prices, independent of the erroneous distributional assumptions in the risk models. This seems to have cost Citi another $30 billion or so in impairing the future value of its assets.

2. Has been working for Citi, not against it: the Federal Reserve has pushed short- and medium-term safe interest rates down far to diminish the magnitude of the liquidity premium--the preference for cash now rather than cash later. This would have raised the value of Citi's assets but for...

3. ...the explosion of the risk premium. The risk premium on other investment banks' assets has gone from 2% to 6% or so. Citi's premium has gone up to 8% because it right now bears the additional risk that the government will step in and nationalize it, confiscating much of the shareholders' equity stake in the process (Read ).

Should Citi's management have planned for and guarded against this explosion in the risk premium? I certainly did not expect it -- I did not think we could see this big a rise in the risk premium outside of a real cousin of the Great Depression, and I thought that modern tools of macroeconomic management would keep such a thing from happening. I never expected to see the unemployment rate hit 15% in my lifetime. I still don't.

(Source: Brad De Long at Seeking Alpha via Bronte Capital)




]]> http://www.readbangkokpost.com/business/financial_markets/citigroup_gets_massive_us_gove.php http://www.readbangkokpost.com/business/financial_markets/citigroup_gets_massive_us_gove.php Financial Markets Tue, 25 Nov 2008 17:03:45 +0600 Thai auto industry impacted by global economic downturn (24-11-08) car[parts

Thai auto industry impacted by global economic downturn

By Jon Fernquest

car carrierLike a breaking wave, the global financial crisis is now spreading into the global real economy.

Both Toyota and General Motors announced production cuts in Thailand last week

With production cuts come job cuts.

Likely scenario: 1. reductions in overtime and hours worked by each employee together with 2. early retirements, to lessen the impact. Next, 3. more drastic  employee layoffs kick in. Temporary contracted staff go first, then across-the-board reductions in permanent staff.

Production cuts also travel up the supply chain of the automobile industry.

Not all production work and value-added to a product is done in-house by a company's own employees. Thai auto parts companies provide parts to Thai automobile manufacturers.

The sales of each automobile manufacturer depends on the kinds of automobiles that the manufacturer produces.

So far the market for passenger cars with customers mostly middle income earners have been less affected by the global economic crisis than the pickup truck market. Pickup truck sales have been hard hit because this sector relies on Thai farmers and foreign exports. So far, Toyota producing mostly pickup trucks has been affected worse by the crisis than Honda which produces mostly passenger cars and motorcycles (Read article on Thai auto export outlook next year). 

Read about the recent history of Thailand's automotive industry in an article included in Thai Capital after the 1997 Crisis (2008), by Pasuk Phongpaichit and Chris Baker, Chiang Mai: Silkworm Books (See book page).

Also read the article Sea of Unwanted Imports about Asian car exports accumulating at LA's harbour in the New York Times last week (Read article).

Today's article in full follows after the vocabulary:

a breaking wave - a wave at the beach, crashing down
financial crisis - when the financial sector of an economy experiences severe problems, no longer providing the capital and credit necessary for the economy to function properly
the real economy - companies that produce non-financial goods and services in an economy
production cuts - reducing amount of product produced in factories
job cuts - reduction in the number of employees in a company
scenario - the way a situation could develop in the future
overtime - additional work done by an employee beyond normal hours (usually paid more for this work, for example 1.5 times more, "time and a half")
employee layoffs - when employees no longer have a job (because no one is buying the company's product, not their fault)
fire an employee - when an employee no longer has a job because of their poor performance
permanent staff - staff that were hired by the company for the long-term, for their whole career
temporary contracted staff - staff hired for a short period of time to deal with extra work (reduced when work is no longer available)
across-the-board reductions -  when every department in a company faces reductions
supply chain - the series of companies supplying parts that are combined into more complex and expensive parts at each step
value-added - the amount of value, or portion of price of a product, at one stage of production in the supply chain
in-house - work done within the company
passenger cars - regular cars
pickup trucks - the small trucks used by farmers and other people to haul things
outsourced - work done outside of the company

Auto-parts firms brace for hit

Big customers may cut output sharply
VICHAYA PITSUWAN
Monday November 24, 2008 

Thailand's auto parts manufacturers are keeping a close eye on the health of their big carmaking customers as production cuts intensify in line with slowing demand worldwide.

Industry executives agree the sector will contract but the severity of the impact remains to be evaluated, while their ability to survive the crisis will depend on adaptability and the duration of poor business conditions.

keeping a close eye on - watching closely, looking at the details
sector will contract - the industry will produce less
brace, brace for hit - prepare for the negative effect of an event coming in the future
adaptability - able to change in order to survive in new business conditions
duration of poor business conditions - how long the recession and economic downturn lasts

Outlook for Denso Thailand

One of the country's top auto-parts players, Denso (Thailand), a vehicle air-conditioning and powertrain control component maker with 3,000 manufacturing employees, is already bracing for a severe contraction.

"More than 95% of our production is to serve vehicle and motorcycle assembly plants, while only 5% relies on replacement part sales to the repair services segment," said Denso director Thavorn Chalassathien.

Eighty percent of Denso's output is sold to Thailand-based automakers led by Toyota, Isuzu and Honda in that order, so any decisions they make to cut production will have major implications.

Denso - the Thai subsidiary of a large international auto parts manufacturer (See website)
powertrain - the part of a car that takes the energy generated from an engine and creates forward motion in the car
a component - a part
bracing for a severe contraction - preparing for very large reductions in the product produced by a company
replacement part - an auto part to replace an old failing part in a car
repair services segment - the auto repair industry
will have major implications - will have a major impact or effect

Toyota Motor Thailand (TMT) last week confirmed plans to make 40,000 units fewer than normal from December to April. It has also cut its 2009 production target from 500,000 units to 450,000 on expectations that exports will slow considerably. It has estimated it would produce 570,000 vehicles this year (Read Bangkok Post article).

As well, General Motors said last week that it would suspend production in December and January at its Rayong plant while keeping its 2,000 workers on at 75% pay (Read Bangkok Post article)

Mr Thavorn predicted Denso's revenue would drop by 10% in the year to come. However, he believes the company can manage by cutting overtime without the need to lay off workers.

Toyota - one of the world's two largest automakers, headquarted in Japan (See Wikipedia)
General Motors -  one of the world's two largest automakers, headquarted in the United States (See Wikipedia)
lay off workers - when workers no longer have a job (because no one is buying the company's product, not their fault)

Outlook for Thai Summit Mitsuba Electric Manufacturing  (TSMEC)

Chon Buri-based Thai Summit Mitsuba Electric Manufacturing Co (TSMEC), which employs 570 full-time workers making electrical starters and power window motors, forecasts a 4-5% decline in revenue next year from an estimated 3.4 billion baht this year.

Deputy general manager Sutat Phengphon said that more than 60% of TSMEC's output was for Honda passenger cars, so the company may see less impact than other parts makers.

Passenger cars have been one of the few bright spots in the local industry this year as drivers seek more fuel-efficient vehicles.

"We don't supply parts for Toyota, which announced serious production cuts, as Toyota here mostly produces pickup trucks for export," Mr Sutat said.

"With farm product prices tumbling and stricter rules on car [financing], farmers who are customers for trucks cannot buy more, which is reducing truck demand. But for passenger cars that serve middle-income earners, demand should be more sustainable."

Thai Summit Mitsuba Electric Manufacturing Co (TSMEC) - a joint venture between Thai Summit Auto Part Industry Co.,Ltd. (Thailand) and Mitsuba Corporation (Japan) located in Laemchabang Industrial Estate, Chonburi to manufacture automotive and motorcycle electrical components which was established for more than 12 years ago. Our products include starter motors, AC generators, wiper motors, power window motors, flasher relays, etc (See website)
electrical starters - the electric motor used to start cars and motorcycles
power window - windows that open and close by pushing a button (not rolling up and down by hand)
passenger cars - regular cars
pickup trucks - the small trucks used by farmers and other people to haul things
prices tumbling - prices falling quickly (like rocks falling or "tumbling" down a hill

In addition, he believes the company's other main market, motorcycle assemblers, will be less affected than carmakers. Half of the company's motorcycle parts go to Honda, which dominates the Thai market with a 67% share.

"Given Honda's strong loyalty among motorcyclists here, the suppliers for other brands with lower market share, such a Suzuki or Yamaha, will be more affected," he said.

Even if business becomes worse than expected, Mr Sutat said the company could respond by cutting overtime and would not shed jobs.

Thaveekij Japurajarernkul, the labour committee chairman of the Federation of Thai Industries (FTI), is less optimistic. He forecast that the auto-parts industry would be among the hardest hit in the current slowdown, with overall orders falling 30% next year.

"If demand falls by 30% as projected, employment cuts to keep businesses alive are highly possible, but this will depend on each company's survival skills," he said.

Mr Thaveekij said the current slump could be worse than during the 1997-98 crisis, when local producers were able to rely on export sales to offset the plunge in local demand. This time around, vehicle demand is falling all over the world.

motorcycle assemblers - companies that produce motorcycles (from parts produced by other companies, often in foreign countries)
Honda's strong loyalty among motorcyclists (brand loyalty) - Honda's customers have used teh company's products for a long time and are satisfied with them, so they continue to purchase Honda products 
market share - the percentage of a market that a company's product or service has
overtime - extra hours worked beyond normal hours (with extra pay)
cutting overtime - reducing extra hours worked by employees and the money they receive for these extra hourss
shed jobs - get rid of employees (because there is no more work to do)
Federation of Thai Industries (FTI) - an industry association in Thailand that has been operating since 1967
optimistic - feel that the future will be good
forecast - state what they expect to happen in the future
overall orders falling 30% - sales orders fell 30%, their dealers ordered 30% less
employment cuts - reducing the number of employees in the business, because there is less business
rely on export sales to offset the plunge in local demand -

(Source #1: Bangkok Post, business, Auto-parts firms brace for hit, VICHAYA PITSUWAN, 24-11-08, link)

(Source #2: Bangkok Post, business, 22-11-08, Toyota retains regular Thai staff, NAREERAT WIRIYAPONG SANTAN SANTIVIMOLNAT, link)

(Source #3: Bangkok Post, business, 20-1108, Two-month shutdown for GM, Rayong workers kept on but pay cut 25%, SANTAN SANTIVIMOLNAT and NAREERAT WIRIYAPONG and VICHAYA PITSUWAN, link)







]]> http://www.readbangkokpost.com/business/automobile_industry_and_transportation/thai_auto_industry_impacted_by.php http://www.readbangkokpost.com/business/automobile_industry_and_transportation/thai_auto_industry_impacted_by.php Automobile Industry and Transportation Mon, 24 Nov 2008 12:09:34 +0600 How rice supports far above market prices can damage Thailand's rice industry Economist Ammar Siamwalla on why we should worry (21-11-08) ammar

How rice supports far above market prices
can damage Thailand's rice industry
Economist Ammar Siamwalla on why we should worry

By Jon Fernquest
rice pile
A true rice price support system would protect farmers against the possibility of low prices for their rice during harvest season when they have to sell it.

Instead, nowadays with prices set far above market value, the government rice support system in Thailand has turned into a subsidy to the rice sector at the expense of taxpayers.

There is no guarantee that the rice being bought by the government belongs to poor farmers like many think. In fact, inflated prices in a time of falling prices encourages overproduction, so a lot of the rice being sold is surplus output that wouldn't usually be produced.

The government also has the burden of storing large amounts of rice and there are not enough warehouses and storage facilities.

The rice support programme not only provides ample opportunities to profit for corrupt politicians but also leads to a long-term deterioration in the quality of rice produced since studies show that the rice provided to the government in these programmes tends to be of the lowest quality.

rice price support system - a government programme to make sure that farners get a fair price for their crops
a subsidy - part of the cost paid by the government
encourages overproduction - makes people want to produce more than they should
surplus output - extra output, above what is normally produced or above what should have been produced
a burden - a difficult thing that must be done
deterioration - getting worse

Ammar slams 'corrupt' rice scheme

Risk management is what farmers need
PHUSADEE ARUNMAS
Friday November 21, 2008

Prominent economist Ammar Siamwalla has blasted the loss-ridden state rice pledging programme, urging the government to scrap the scheme he dubbed "the genesis of corruption".

"Thailand's rice policy still lacks direction and is moving nowhere," said Dr Ammar, an honorary economist with the Thailand Development Research Institute and a rice policy expert, at a seminar on rice policy at Chulalongkorn University.

"The rice-buying scheme should be scrapped, as it squanders the taxpayers' money and creates a burden on the state for keeping massive rice stocks, which leads to rampant corruption among politicians."

loss-ridden - has lots of losses
rice-pledging program - the government rice support system that guarantees prices to farmers for their rice 
scrap the scheme - get rid of the programme, stop using the programme
the genesis of corruption - the origins of corruption, where corruption begins
lacks direction - does not really have useful goals
moving nowhere - not achieving anything
Thailand Development Research Institute (TDRI) - Thailand's first and most famous public policy institute (See website)
squander - waste
a burden - a difficult thing that you must do
rampant corruption - lost of corruption

Dr Ammar urged the government to instead encourage farmers to sell their grain through futures contracts to reduce risks.

"Agriculture is naturally prone to high risk, the government should therefore encourage farmers to buy risk management tools whereby the government has set median prices at certain points. Once the rice price falls below the median price, the government will be held responsible for paying the difference," he said.

For instance, the government's median rice price was set at 8,000 baht per tonne. If the market price fell to 7,500 baht, the government would pay compensation to farmers at 500 baht per tonne.

If the market price was higher than the median price, Dr Ammar said farmers would be also allowed to opt to sell their grain in the market.

"This year, rice prices have moved up extraordinarily driven by the panic over a possible food shortage. But it's also the worst year for Thai rice, as the government has run the policy in a directionless and drunkard-like manner, dictated only by political benefits."

urged - requested them to do, begged them to do
futures contract - a contract to deliver a certain amount of a commodity on a date in the future, the price of the contract takes into account how peopel expect the price of the commodity to change between now and the delivery time (See Wikipedia)
prone to - this usually happens, have a tendency to 
risk management tools - things like futures contracts and insurance policies that help people protect themselves against risk
median prices - the middle price (when arranged from lowest to highest price)
paying the difference (between A and B)  - paying amount A - amount B
opt to - choose to
driven by panic - caused by people acting getting scared and firghtened
drunkard-like manner - like someone who drank too much beer, wine, or whisky
dictated by - caused by
dictated only by political benefits - what happens is determined only by the political gain that people make from it

According to Dr Ammar, the pledging scheme, which generally set prices higher than market rates, aiming primarily for political gain, would be harmful in the long run, as it addicts farmers and weakens their capability to improve rice quality.

He said rice that went to the government was mostly not grain owned by poor farmers but surplus output.

"According to studies, the quality of rice will be mainly determined by the proportion of rice trading by the government. Rice quality has significantly dropped over the last three or four years as the government turns out to be a giant buyer in the market," he said.

"Eventually, we're afraid Thai rice is likely to go for the lower market."

According to Dr Ammar, letting rice trade in line with the market mechanism would help stimulate the entire system, including farmers, to improve grain quality.

"Current farmers are not like their predecessors, as they are becoming more commercially oriented.

"Farmers are indebted, and are willing to be so because of the government's lending support which gives them more capacity for revolving their debts," he said.

addicts farmers - makes farmers so they can't stop doing it, can't control themselves
surplus output - output above the amount they normally produce (higher prices earlier this year caused them to increase production which led to a surplus)
rice trade in line with the market mechanism - letting supply and demand determine the price of rice
stimulate - make something grow and develop further, increase activity
stimulate the system to improve grain quality
predecessors - people who came before you in the same position
commercially oriented - doing it as a business to make money (not a hobby or a charity)
indebted - owe people money, borrowed money that hasn't been paid back
capacity for revolving their debts - delaying repaying the money you borrowed by borrowing once again

(Source: Bangkok Post, business, 21-11-08, Ammar slams 'corrupt' rice scheme, PHUSADEE ARUNMAS, link)


]]> http://www.readbangkokpost.com/business/agriculture/how_rice_supports_far_above_ma.php http://www.readbangkokpost.com/business/agriculture/how_rice_supports_far_above_ma.php Agriculture Fri, 21 Nov 2008 17:27:22 +0600 Thailand's reliance on fertiliser chemical imports and plans for Isan potash mines (20-11-08) fertilizer

Thailand's reliance on fertiliser chemical imports
and plans for Isan potash mines

By Jon Fernquest

throwingfertiliserThailand  is completely dependent on imports of the chemicals needed to make fertiliser.

These chemical imports amounted to 3.5 million tonnes last year.

This dependence on imported fertliser chemicals is a little strange because:

1. Thailand has unmined supplies of potash inside the country waiting to be exploited, and...

2. Thailand is the world's largest exporter of rice and other agricultural commodities which use fertiliser as an important input (See photo on right of farmer throwing fertiliser on crops).

fertiliser - food for plants, chemicals or natural materials such as cow manure (waste) put on plants to make them grow more successfully  (See Wikipedia)
potash - a potassium chemical used in glass, soap and fertiliser (See Wikipedia)
X dependent on Y (verb) - X needs Y to survive or succeed
a dependence on Y (noun) -  a need for Y
X amounted to Y - X had quantity Y
exploited - used, when an unused resource is used (See glossary)
a commodity - a uniform product bought in bulk (See glossary)
uniform - things that are the same
agricultural commodities - most crops grown by farmers (that are uniform and don't differ between farmers)
an input, an input into a production process - one of the things such as labour, raw materials, land, factory, machines, and electricity used to produce a good

Expensive fertiliser makes for expensive farming

Potash is one important chemical used in the manufacture of fertiliser.

Fertiliser production also relies on petrochemicals such as ammonia, a chemical derived from natural gas. The price of both petrochemicals and fertiliser rise and fall with world oil prices.

When oil and agricultural commodity prices soared to all-time highs earlier this year farmers received high prices for their crops but they also had to pay much higher prices for fertiliser which cut into their profits (Read Bangkok Post article).

ammonia - a gas with a strong odor used to produce some types of fertiliser (See Wikipedia)
derived from -  produced from, comes from 
natural gas - (See Wikipedia)
soared to all-time highs - increased suddenly to very high levels never reached in the past
cut into their profits - reduce profits

Volatile fertiliser chemical prices also causes problems for traders

Fertiliser prices, like oil prices, have been extremely volatile this year. Prices shot up during the early part of the year to record highs only to drop precipitously to current price levels. This price volatility has made it difficult for farmers to profit because they can't be sure the price at planting time is equal to the price at harvest time when they will sell their crops.

Price volatility this year has also made life very difficult for traders who specialise in importing fertiliser.

The current price of imported fertiliser stocks is much lower than the price that traders paid for them a couple of months ago. Traders normally stock fertiliser in September to prepare for the harvest season. During the run-up in commodity prices earlier this year, fertiliser prices shot up 200% but have now dropped more than half of that. Traders face losses of as much as one billion baht on the expensive inventories that they currently hold.

The option of hedging the risk of price volatility using commodity futures for potash, for instance, was apparently not available to these traders or there hasn't been enough volatility in the past to warrant hedging. Now there may be.

volatile - value moves up and down suddenly and unexpectedly by large amounts 
drop precipitously - a sudden and painful decrease (like falling from a cliff)
price volatility - when a price of a good is volatile
fertiliser stocks (noun) - large quantities of fertiliser stored for future use or sale
stock fertiliser (verb) - keep and store a large quantity of fertiliser for future use
a run-up in commodity prices - an increase in commodity prices over a period of time
shot up 200% - increase suddenly by 200%, jump by 200%
an option - a possible choice
the option was apparently not available - could not choose to do this, it seems
hedging risk - reducing a risk you face (by assuming risks in the opposite direction)
risk of price volatility - the possibility of losing money in business if a price changes suddenly by a large amount
a commodity - a uniform product bought in bulk (See glossary)
commodity futures - contracts to deliver an amount of a standard commodity at a certain in the future at a certain price (used to guarantee a price for a commodity in the future, which makes doing business more predictable and easier to do)
X warrants Y - situation X makes action Y necessary and appropriate

Delayed projects to build Potash mines

Attempts have been made for over a decade to build potash mines in the northeastern Isan area of Thailand. These projects have been delayed by protests and concerns about the impact of potash mining on the envirionment (Read United Nations report on environmental impact of potash mining).

The Udon Potash Project has estimated reserves of 100 million tonnes of potash from an underground mine to be built of 75,000 rai.  The project is still awaiting approval of its mining lease application submitted in 2003

Asia Pacific Potash Corp (APPC) holds the concession for the potash mining project and is now a 90% owned subsidiary of Italian-Thai Development, Thailand's largest construction company.

Many hope that a local source of Potash inside Thailand could provide guaranteed and cheaper supplies of fertiliser for Thailand's farmers. It is not immediately obvious that domestic potash supplies would make a big difference. After all, the Thai owners of potash mines would want to sell their produce at the going international potash price which should be the same as the cost of importing potash (less import duties). Potash mines would however, like any other business, create more jobs and economic wealth in Thailand which is always good.

impact on the environment - the negative effect on the environment, any damage it could do to the environment
reserves - a supply available for future use when needed
a lease - a legal agreement allowing the use of land, a building, a car, or equipment for a period of time in exchange for monthly rental payments
mining lease - a lease to use land for mining for a period of time
a concession - a right to operate a certain type of restricted business for a period of time given by the government (e.g. telecommunications)
a subsidiary - a smaller company part of a larger company
Italian-Thai Development - Thailand's largest construction company, projects include mass transit systems, airports, buildings, dams, tunnels, highways, expressways, bridges, industrial and power plants, ports, jetties and dredging works, pipelines and utility works, railways, telecommunications (See website and Google Finance)
guarantee - promise that something will happen (See glossary)
a guaranteed supply - a promise to provide a certain amount of a good to someone
not immediately obvious - a fact that needs to be explained (because most people will not know why the fact is true)
import duties - taxes on goods entering a country

(Source: Bangkok Post, business, 20-11-08, Fertiliser traders push for approval of potash mine, VICHAYA PITSUWAN, link)

]]> http://www.readbangkokpost.com/business/agriculture/thailands_reliance_on_fertilis.php http://www.readbangkokpost.com/business/agriculture/thailands_reliance_on_fertilis.php Agriculture Thu, 20 Nov 2008 13:46:23 +0600 Polyplex Thailand: producer of thin metalised PET film: What is it? Can it survive an economic downturn? (19-11-08) petfilm

Polyplex Thailand: producer of thin metalised PET film
What is it? Can it survive an economic downturn?

PET filmBy Jon Fernquest

Some important economic goods provide economic value but at the same time pass by us unnoticed everyday without catching our eye. We hardly even realise they exist.

Thin metalised plastic film made from PET (polyethylene terephthalate) is one of these goods (See photo on right).  

This plastic film has many uses including packaging, especially food packaging, in electrical work to provide insulation and moisture resistance, for audio and video tape, for films used in cameras, and in other industrial applications (See detailed list of uses).

Polyplex Thailand (PTL) is the Thai subsidiary of Polyplex Corporation (PCL) in India,  the world's fifth-largest manufacturer of thin metalised PET film.

Polyplex Thailand began producing PET film in 2003 at its plant located in Rayong province. Besides PET film, PET chips are also produced at the plant. Polyplex also started a new subsidiary in Turkey in 2004-2005 under the name Polyplex Europa (PE).(See expansion history at Indian website).

The company's largest markets for its product are the US and Japan.

economic goods - a physical object bought, sold, and owned such as a car, a house, or food, different than a service which is something  needed that a person does for you like a haircut (See Wikipedia)
catching our eye - we see it, we look at it
subsidiary -  a smaller company that is part of a larger company
Polyplex Corporation (PCL) - the main Indian company (See website)
Polyplex Thailand (PTL) - the Thai subsidiary of the Indian company (See website)
PET, BOPET - the chemical polyethylene terephthalate (See Wikipedia)
film, plastic film  - a very thin sheet of plastic used to cover things  
PET film - a thin polyester film "used for its high tensile strength, chemical and dimensional stability, transparency, reflective, gas and aroma barrier properties and electrical insulation" (See Wikipedia)
packaging - the container or covering for a product while it is waiting to be sold in stores
insulation - a layer of a material that keeps something warm
moisture resistance - to protect something from getting wet
chips - a small piece of something

Impact of global economic downturn on sales?

How will the global economic downturn impact our sales? This is the question that every business is itself asking these days. 

Most of Polyplex's sales are for packaging. Packaging is an essential part of daily consumption so the company expects the current economic downturn to have a limited impact on sales. Discretionary spending typically declines during economic downturns, but essential spending declines a lot less. 

Exports to the US are another bright spot for the company. Thailand faces lower anti-dumping import tariffs than other countries for exports to the US. This means that the company will ship exports to the US from the Thai factory rather than the Indian or Turkey factories. Over the last year US exports have experienced only a slight decline compared to one year ago (6,030 to 5,700 tonnes in the first half of fiscal 2009 ending Sept 30).

packaging - the container or covering for a product while it is waiting to be sold in stores
discretionary - considered case by case by people with authority to make decision
discretionary spending - spending that is up to people in authority (often considered non-essential and therefore cut)
dumping - sell large amounts of goods at far below their true value (often to gain market share and force other companies out of the market)
anti-dumping - laws against dumping
fiscal 2009 - the official accounting year that financial information is recorded and reported for in a company or organisation

Performance: Output, Sales, and Profit

Polyplex Thailand has undergone continual expansion in PET film production capacity. Currently plants are working at over 100% of production capacity: "production in Thailand during the first half of fiscal 2009 ending in September 2008 was 20,940 tonnes, achieved through using 107% of 19,500 tonnes of installed capacity in the country."
 
Sales volume has also risen. The company expects "sales volume in fiscal 2009 (ending March 31, 2009) to