The Value of Thailand’s Construction Industry Might Reduce In 2009

The value of Thailand's construction industry might reduce by 50% in 2009 i.e. approximately 320 billion baht from 650 billion baht in last year. This decrease is mainly because of a huge decline in both public and private investments

Experts expects that public investment in the construction industry might reduce to 27.2% i.e. 160 billion baht this year, which was around 220 billion baht in 2008. They also expect that private sector might have to experience its worst situation as investment in that sector might go down by 64.4% i.e. 160 billion baht, which was 450 billion baht in 2008.

As the figures of Commerce Ministry reveal that approximately 2,904 construction and property companies were closed in 2008. Out of these 2,904 approximately 600 were construction companies.

The Thailand contractors association considers that the business of building design firms will also witness a decline of approximately 70% as the construction of many projects are postponed till June 2010 because of global economic recession. Also because of this fact many workers will loose their job in 2009. The association believes that approximately 1.6 million workers will be jobless in 2009.

Earlier in 2008 the construction industry was badly affected by the price hike of raw materials required for construction. The price of raw materials decreased in the final quarter of 2008. This decrease in price has caused trouble to many construction firms which have purchased a lot of raw material instead of price hike.

The association has further requested the government to support projects by investing on them. This will also help to support the financial system as well as construction industry. The projects could be anything like road construction, water reservoirs, schools and hospitals.

Crisis and Prospect

Construction outline this time initiates right at the beginning of 2009. In order to take out various conclusions about what is going to take place in the construction industry in the first quarter of 2009, let's start on by reviewing the entire performance and health of the industry in 2009.

In the first half of 2008, long-drawn-out political uncertainty was daunting investor's assurance and government policies in the construction industry. No fresh mega-projects were launched. Cement consumption growth was less 6%, compared with 2007. In the second half of 2008, the US financial crisis deteriorated the global economy, which influenced the development rate of domestic cement consumption and the volume of exported cement decreased 20% year on year.

In addition, the number of allowed land allotments all over the country was reduced 25% in the initial nine months of 2008, and at the end of 2008 the residential market was oversupplied to the air of approximately 300,000 units.

Until now in 2009, the global crisis has been affecting the Thai financial system even harder. The Bank of Thailand is foretelling gross domestic product development of 0.5-2%.

The spectacular recession in the economy and low buyer assurance in upcoming income will straightforwardly affect buying-power and demand for fresh property. It is also predictable that most banks and financial institutes will lift up limitations on the accessibility of credit in 2009; as a result there will be trouble in financing fresh construction projects.

Since residential estates have a significant oversupply waiting to be sold in 2009, a lot of real-estate investors have postponed fresh investments. The Kasikorn Research Centre expects housing completions in 2009 in the greater Bangkok area will drop 14.8% from 2008.

In order to carry on in this environment, developers have to get used to their business policies to match customer demand. Focused marketing may require to be changed to mass marketing so as to cover the residential segment.

Among the horrible troubles affecting the construction industry, let us take a glance at the Chinese word wei-ji, which means "crisis". If the two parts of the word are divided, wei means "danger" and ji means "prospect". This reveals that no matter how complicated the situation, no matter how risky the condition, a wonderful prospect lies at the heart of every calamity.