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 Partners Put on Hold Deals with Thai Firms

By WALAILAK KEERATIPIPATPONG - Bangkok Post Nov 27, 2008

Concerning Instability, foreigners seek more favourable climate.

Unrest in the capital has worsened the economy and halted investment plans of many agricultural companies including Thailand-s leading rubber exporter, Thai Hua Rubber Co.

Its joint investment plan with Seagift, China-s leading tyremaker, to set up an 80-million-baht plant to make rubber compound has been put off and their further co-investment for a five-billion-baht tyre-manufacturing plant in Thailand has also been shelved.

Seagift executives informed the Thai side that they would resume talks (over the investments) once local politics became clearer, according to Luckchai Kittipol, president of Thai Hua Rubber Plc.

He said that the Chinese partner had visited Thailand early this year and had expressed concern about the Thai politics. They decided to freeze the project to make about 25,000 tonnes of rubber compound, a mixture of rubber and chemical additives used in the tyre industry, for exports to China.

As there is no investment in primary product or rubber compound, the venture for making two million tyres a year is consequently put on hold, he said.

According to Mr Luckchai, the company will not find other partners but will wait for better political and economic circumstances.

"In my view, the political impasse today is beyond my expectation and I think rampant protests in Bangkok these days have worsened the economy critically," Mr Luckchai said.

However, he said that these risk factors would not hurt Thai Hua-s business much this year and the company is expected to generate about 25 billion baht by the end of the year, up 20% over last year and higher than the 22-billion-baht target.

He attributed the better performance to high rubber prices during the first nine months this year in line with oil prices.

Rapidly falling fuel prices and a slowdown in the automobile industry around the world have dealt a blow to the rubber industry. Natural rubber futures prices dropped sharply to 53.60 baht a kilogramme (FOB at Bangkok), from the peak of 110.20 baht at end of June.

But he said the downturn just started last month and local rubber operators had earlier performed well most of the year. "What worries me most is the outlook next year, as the global recession could lead to a drop of at least 20% in the company-s sales revenue unless the economy improves," Mr Luckchai added.

Besides Thai Hua Rubber, a major seafood producer and exporter is also feeling the pinch from the recession.

Pacific Fish Processing Co (PFP) has decided to delay its investment in a joint venture to build a 300-million-baht seafood processing plant in Indonesia.

According to the company-s managing director Thawee Piyapatana, the Indonesian counterpart has kept mum over the project, indicating they might want a postponement.

Early this year, PFP announced to set up a seafood plant in the region in order to secure supplies of raw materials and solve a labour shortage.

Mr Thawee expects flat growth for PFP this year, with sales revenue of 2.8 billion baht from an earlier target of three billion baht, of which 1.8 billion baht would be exports.

Sales of its finished products would decline to 13,000 tonnes this year from 15,000 tonnes last year, he added.