Eastern Seaboard Business Report May 2016

Eastern Seaboard Business Report May 2016 – Prepared by Mark Bowling, Chairman BCCT Eastern Seaboard 

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Carsten Mueller-Deiters, head of purchasing for BMW Group Thailand, said his company's international purchasing office would open on June 1 at All Seasons Place on Wireless Road in Bangkok. The new unit is part of a development plan meant to increase completely built-up (CBU) exports this year and next, aiming to ship 10,000 cars annually, mainly to China. "The group's manufacturing in Rayong is expected to assemble 16,000 BMW cars this year and 20,000 next year for domestic sales and exports," Mr Mueller-Deiters said. "The new international purchasing office will increase sourcing of auto parts in the near future, compared with the value of 4 billion baht last year with 8,900 cars made." He said 1.2 billion baht of the total value last year was for exports to BMW's operations worldwide. The group runs the assembly operation of BMW, Mini and BMW Motorrad at Rayong's Amata City Industrial Estate under BMW Manufacturing (Thailand), making 20,000 cars and 10,000 motorcycles a year.

Real demand from blue-collar workers at industrial estates has helped revitalise the housing markets in Chon Buri, Rayong and Chachoengsao following bearish conditions a year ago. Piya Prayong, president of value business of SET-listed developer Pruksa Real Estate Plc, says the single house and town house markets in Chon Buri for units priced between 1.5-2 million baht fared very well in the first quarter of this year. "A majority of homebuyers in this segment were people working on industrial estates," he says. "These people represent real demand as they are first-time homebuyers who wanted to own their own homes. Their income was quite stable, which helped them to secure mortgages easily." The Bangkok-based developer entered the Chon Buri housing market four years ago, undertaking a total of six projects to date. This year it plans to launch three new projects in Chon Buri and will expand to Rayong, as the province will be the site of new industrial estates, which will create future housing demand. Market research by Pruksa has revealed that the value of the housing markets in Chon Buri and Rayong in the first quarter totalled 15 billion baht, rising 9% over the same period last year. In Chon Buri, the largest growth was in the town house segment, which increased 60% to 2.9 billion baht in the first quarter this year, followed by condos, which rose 12% to 7.9 billion baht, and single houses, up 4% to 2.4 billion baht. MAI listed developer J.S.P. Property Plc. also is expanding to Chon Buri, with plans to develop a largescale project worth 15 billion baht in Bang Saray, Sattahip on a 161-rai site. The project will be undertaken as a joint venture with Chinese contractor Zhongtian Construction Group. J.S.P. is also looking for two plots sized 50 rai each in Si Racha and Pattaya, Chon Buri, to develop low-rise projects, including town houses priced 1.5-2 million baht and single houses priced 2.5-3 million baht a unit.

PTT Global Chemical Plc (PTTGC), Thailand's largest producer of petrochemicals, is upbeat about earnings from its newly expanded facilities in Thailand and France. The company expects the increased capacity will result in $20 million in earnings before interest, tax and depreciation amortisation (Ebitda) for the full-year operation. President and chief executive Supattanapong Punmeechaow said the expansion would help increase capacity by 7% from the current 8.8 million tonnes per year. Three projects are in Rayong's Map Ta Phut, including a second aromatics project worth $29 million that will help increase aromatics production from 2.26 to 2.42 million tonnes a year. PTTGC is planning to expand capacity at its olefins factory in Map Ta Phut by another 761,000 tonnes, comprising 500,000 tonnes of ethylene and 261,000 tonnes of propylene. The project will take its capacity to more than 10 million tonnes. The project is at the design stage and is th

British Chamber of Commerce Thailand, 7 Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 085 2828 120 Email: mwbowling@savills.co.th www.bccthai.com

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still awaiting investment privileges from the Board of Investment. Construction is expected to start in 2018 and operation is due to start in 2020.

As a token of its long-term commitment to Thailand, Chinese-Thai joint venture SAIC Motor-CP Co recently announced the construction of a second assembly facility at Hemaraj Eastern Seaboard Industrial Estate 2 in Chon Buri province. According to Chen Zhixin, president of the Chinese carmaker Shanghai Automotive Industry Corporation (SAIC Motor), the 700,000-square-metre facility will handle MG vehicle production processes such as body assembly, vehicle assembly and painting under one roof. "Thailand is set to be a production hub for right-hand-drive vehicles and SAIC Motor aims to make 300,000 units a year in the very near future," said SAIC Motor chairman Chen Hong. SAIC Motor-CP bought 438 rai of the new land plot for an undisclosed sum from SETlisted Hemaraj Land and Development Plc last November. The investment cost of the new plant is estimated at 30-40 billion baht. The carmaker's 9-billion-baht first factory, with total production capacity of 50,000 units, was built in Rayong's Hemaraj Eastern Seaboard Industrial Estate and began operations in June 2014. The company launched the 1.8-litre MG6 saloon that same month and sold 300 units of the model last year…

Premier Inn, Britain's largest and fastest-growing budget hotel chain, has expanded its awardwinning brand into Thailand with its first property in Pattaya. "Pattaya remains a top holiday destination and we're confident our new hotel will set a benchmark in the hospitality sector for Pattaya, becoming the preferred choice for value-conscious travellers," said Ratnesh Verma, president and managing director of Premier Inn International. Premier Inn Pattaya is a 164-room hotel located a 10-minute walk from Pattaya beach and 15 minutes from Walking Street.

The State Railway of Thailand has approved high-speed trains from Bangkok to Hua Hin in Prachuap Khiri Khan and to Rayong, costing altogether 247 billion baht. Construction is expected to start next year. SRT chairman Sarawut Benjakul said the SRT board on Tuesday approved the Bangkok-Hua Hin link worth 94.6 billion baht and the eastern Bangkok-Rayong line estimated at 152 billion baht. The projects would be proposed to the public-private partnership policy (PPP) committee chaired by Deputy Prime Minister Somkid Jatusripitak and the cabinet next month.

Contractors would receive 25-year concessions to operate the trains, he said. Officials earlier estimated the construction would take more than three years.

Meanwhile in Pattaya… A plan to turn the route between Soi Khao Talo and Soi Nong Krabok oneway with no U-turns to relieve traffic congestion has been halted after a week, as it actually made traffic worse. Nongprue traffic inspector Pol. Maj. Natakan Prathumthree told reporters on May 19 that the test was unsuccessful and, instead, cops will be posted at busy intersections during the morning and afternoon rush hours to expedite traffic flow until new signals are installed.

A Cambodian construction worker was killed and a compatriot injured when a concrete beam broke and fell on them at a Jomtien Beach building site. Police did not provide any information on how the upper-story beam broke and crashed down on the workers. Pattaya Mayor Itthiphol Kunplome was said to be investigating.

More than 100 Thai and international models will walk a “sexy beach” when Pattaya International Fashion Week returns June 17-19. Organized by the Association of Modelling Industry and Agencies of Thailand, the Tourism Authority of Thailand and city hall, the region’s largest fashion show will feature events at Royal Garden Plaza and Central Festival Pattaya Beach. The theme of this year’s catwalk event will be “sexy beach”.

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British Chamber of Commerce Thailand, 7 Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 085 2828 120 Email: mwbowling@savills.co.th www.bccthai.com

The following news items reproduced with kind permission of S.A.T.C.C • CEA Project Logistics and Fagioli Italy are aligning focus, resources and efforts to expand thier combined market presence and reach in South East Asia.

• Hotels in Rayong province are struggling as the economic slowdown and lower oil prices hit spending by companies at nearby industrial estates. Many big companies in Rayong related to oil refining have cut their budgets for meetings, overtime and hotel accommodation for staff. Chairat Trirattanajarasporn, vice-president for regional business at the Tourism Council of Thailand, said the number of meetings and incentives tourists in Rayong had fallen by 50% this year, with spending down by over 10% on average. Rayong had 13,000 hotel rooms last year with an occupancy rate of 55-60%. Mr Chairat hopes the average occupancy rate in Rayong this year will be similar. The Tourism Authority of Thailand (TAT) said about 90% of tourist arrivals to Rayong are Thais and the rest are international tourists.

The agency is working to woo more foreign travellers, seeing opportunities from European travellers who are looking for new destinations.

• The country’s southern coastline and islands are home to some of the world’s most prized white sand beaches and scuba diving sites, and the booming tourism industry props up Thailand’s sagging economy. But warming waters and ever-growing swarms of visitors have damaged coral reefs and ecosystems. The National Parks department has now indefinitely closed at least 10 diving spots after a survey found bleaching on up to 80 per cent of some reefs. “The coral reefs are affected by unaware tourists – when they go diving they may touch or step on the reef. Closing those spots will help the reefs recover naturally,” said National Parks Office director Reungsak Theekasuk. The diving sites lie off beaches stretching from Rayong province in the east down to Satun in the far south.

• Thailand remains a prime destination for foreign investors thanks to its central geographical location in Southeast Asia and good connectivity to Cambodia, Laos, Myanmar and Malaysia, says property consultant Knight Frank Thailand. The company expects to see a slow recovery in industrial land sales and demand for factory space given the state of the economy based on recent economic data showing signs of improvement. Executive director Marcus Burtenshaw said he expected to see continued growth this year, specifically from new investment in the electronics, auto parts, food and renewable energy sectors. While Japanese investment remains subdued, Knight Frank is starting to see increased activity from European and Chinese firms. ccording to its research, the supply of serviced industrial land plots (SILP) was 151,194 rai at the end of 2015, increasing by 4,033 rai or 2.7% from 2014. On average, SILP supply has been increasing by 2-8% yearly since 2011. Industrial land sales rose to 3,549 rai last year, an increase of 1,273 rai or 55.9% from 2014 when political strife hit sales. Foreign investors were increasingly cautious due to the political uncertainty. Industrial estates in Bangkok, Samut Prakan and Bang Pakong boast the highest average selling price at 10.7 million baht per rai. This is followed by industrial estates in the Eastern Seaboard zone at 4.86 million baht per rai, and those in the northern zone (Pathum Thani-Ayutthaya) at 3.98 million baht per rai. On average, industrial land prices increased between zero and 4.4%. The Northern zone recorded the highest growth in 2015 of around 4.4%, followed by the Eastern Seaboard with growth of 3.3%. From 2012-13, industrial land in Suvarnabhumi-Bang Pakong and the Eastern Seaboard region increased by 10% because it was unaffected by the 2011 floods; it also became highly sought by manufacturers and developers. Some industrial estates increased their asking prices by up to 25%. Chon Buri includes the largest share of 30% of ready-built factories because it is home to many large industrial estates. It is also a key production hub for Thailand's massive automotive industry. Samut Prakan has the th

British Chamber of Commerce Thailand, 7 Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 085 2828 120 Email: mwbowling@savills.co.th www.bccthai.com

second-largest share at 21% thanks to its convenient location at a halfway point between Laem Chabang port and Bangkok. The Eastern Seaboard commands the largest supply share in the rental factory market due to its proximity to Laem Chabang port and several industrial estates. The ready-built factory occupancy rate was 73% at the end of 2015, a drop of 4.2% from 2014. This was mostly due to an increase in the rental factory supply since 2012 while demand growth has been consistently and relatively weaker.

Demand for rental factory space at the end of 2015 was 2,002,988 sq m, an increase of almost 10,890 sq m from the previous year. In 2015, the Suvarnabhumi–Bang Pakong zone, encompassing Bang Pakong, Samut Prakan, eastern Bangkok and Chachoengsao, enjoyed the highest occupancy rate of 90.3%, followed by the Eastern Seaboard at 73.9%. The occupancy rates of rental factories were lowest at 60.7% in Pathum Thani and Ayutthaya. On average, the ready-built factory rental rate increased by 1.4% to 207 baht per sq m per month. Only the rate in Pathum Thani–Ayutthaya did not grow; in fact, the trend was to stay the same due to the lowest occupancy rate. The Eastern Seaboard commanded the highest rental rate of 227 baht per sq m per month owing to the fact that most factories are located inside industrial estates.

The asking rental rate was the highest in Chon Buri and Chachoengsao provinces at 250 baht per sq m per month. The second highest was in Samut Prakan and Rayong at 230 baht. The highest rate in Ayutthaya was 220 baht per sq m per month.

• Padaeng Industry’s shareholders last month made a crucial decision: they approved the company’s new strategy to create sustainable revenues and profit from green business after decades of cashing in on zinc mining. Managing director Francis Vanbellen admitted the decision is probably one of the most important milestones in the lifetime of the company. It emerged after a study that portrays a dismal future after the depletion of its only Mae Sot zinc mine this year. This meets with continued low global zinc prices and the shrinking Thai industrial demand. After the Mae Sot mine closure this year, the Rayong plant will cease operations by the end of 2016.

• ROBERT BOSCH Automotive Technologies says it has devised a new investment plan that reflects the company’s view that Thailand is strategically well placed in the Asia-Pacific region. The company last week kicked off the construction of the first ever fuel-injector factory in Thailand. Located at the Hemaraj Eastern Seaboard Industrial Estate, this "smart factory" will service OEM vehicle manufacturers with a production capacity of a million units per annum. It is scheduled for completion this year. It will apply Bosch's proprietary injection technology and also feature electronically controlled material flow, automated end-of-line testing and parts calibration. Bosch's latest direct-injection technologies are widely used by automotive OEMs. This project is supported by the Board of Investment. Other Bosch automotive components including brake systems, diesel systems, wiper systems and engine cooling fans are manufactured in the Amata City Industrial Estate in Rayong province.

• Donasonic is a firm that specialises in making machinery that can transform household waste into energy before selling it to companies all over the globe. Since forming in 2011, the company has grown year on year and now has more than 50 waste processing machines in operation across the world. The company employs more than 25 people at their bases in Doncaster, Shenzen in China, Hungary and Pattaya in Thailand and the workforce speaks 12 languages between them. But their biggest market is in Thailand, where Donasonic has been tasked by private companies in the country to come up with better ways of processing millions of tonnes of waste. The company also has machinery in a plastics separation plant in Rayong, Thailand, which processes 200 tonnes of plastic per day. It has recently signed large contracts for helping out in Bangkok.

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British Chamber of Commerce Thailand, 7 Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 085 2828 120 Email: mwbowling@savills.co.th www.bccthai.com

• Reuters reports that, everywhere you look on Thailand's Amata industrial estate in Rayong you see signs in Chinese. It's a similar story just along the coast in the tourist resort of Pattaya, where Mandarin is increasingly visible alongside English and Russian. As China's economy slows, its investors are looking abroad for growth and Thailand, home to one of the world's largest ethnic Chinese minorities and a gateway to Southeast Asia's 600 million consumers, is a hot investment destination in everything from industry to condominiums. "Thailand is usually the first stop for Chinese tourists and investors," said Xu Gen Luo, who runs the Thai-Chinese Rayong Industrial Zone, about 200 km (120 miles) south east of Bangkok. Dozens of new Chinese-owned solar, rubber and industrial manufacturing plants have opened in the zone since 2012. "Thailand's investment environment, especially its investment promotion policies, are among the best worldwide," he said, adding that labor costs were higher in China. Xu expects the number of Chinese firms at his park - jointly developed by China's Holley Group and Thai industrial estate developer Amata - to increase to about 100 this year, from 75 currently, and to 500 in the next five years. In March, China's Trina Solar, the world's No. 1 solar panel maker, opened a manufacturing facility there. As the expatriate Chinese community grows and more Chinese look for holiday homes in Thailand, real estate investment is on the rise. Bundit Sirithunyhong runs the Suttangrak Group, which has just joined with Chinese firms to develop housing projects worth 5 billion baht ($140 million) to sell as time-shares to Chinese buyers. "I think they are not just investing in real estate, but starting to use Thailand as a base for business in Southeast Asia," he said. "Here they can stay and work as their second homes. It's a step further in business expansion."

• The Riviera Group brought to a conclusion the signing of a 920 million baht construction loan for The Riviera, Wongamat Beach with SCB. With the Pattaya property market being stagnant and tourism also experiencing a difficult set-back period, an SCB spokesperson noted that The Riviera’s 920m baht loan was an indication that SCB still saw the Pattaya market as positive, but was clearly determined much more these days than in previous times by the projects’ uniqueness and the developers’ ability to adapt to challenging times. The Riviera, Wongamat Beach is a 3.6B Thai Baht project with a completion date of late 2017.

• Regional officials and teachers from Pattaya’s public schools reviewed the steps necessary to bring the city’s educational system up to international standards at a conference at the Eastern National Indoor Sports Stadium. Mayor Itthiphol Kunplome told the conference that the city already is moving forward on a five-year educational-development plan to bring city schools up to world standard by promoting use of technology in teaching, learning, and multimedia curriculums, as well as systematic management and an aggressive English-language learning program. Also, it was vital that any world-class program should stress thinking, innovating, communicating and creating “global citizens”. Students must have basic knowledge of science, mathematics, economics and technology. Moreover, students must have grades accepted by international schools so they can attend universities either in Thailand or abroad. In addition to being able to communicate in two or more languages, students must become self-thinkers, reasoning at a high-level and showing creativity and the ability to solve complex problems. School management must include four facets of international standards, including theory of knowledge, extended essays, creativity, action, and service; and language learning.

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British Chamber of Commerce Thailand, 7 Floor 208 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand Tel: 085 2828 120 Email: mwbowling@savills.co.th www.bccthai.com