May 27 (Bloomberg) -- Sony Corp. and Panasonic Corp. are among companies advising workers against traveling to Thailand as evidence mounts that political turmoil in the country is undermining business activity there.
European hotel operator Accor SA has seen the hotel business in Bangkok plunge about 30 percent this year amid the unrest in the country’s capital, Michael Issenberg, chairman of the company’s Asia-Pacific unit, said in a May 22 interview in Sydney. Representatives at Sony, Panasonic and Hitachi Ltd. said their companies have cautioned employees about Thailand.
Almost three years after Thailand’s worst floods in half a century roiled the Southeast Asian production hub, makers of cars to electronics are bracing for further disruptions. A military junta took over the government last week, the nation’s 12th coup since 1932, after seven months of political unrest that’s taken a toll on the economy, which shrank 0.6 percent last quarter.
“Some companies will withhold investment in the kingdom because of the decreasing domestic sales,” said Jakkrit Lerksomboonsiri, a Bangkok-based analyst at researcher IHS Automotive. “The recovery pace may be slow until the next election, which we expect by next year.”
Thai coup leader Prayuth Chan-Ocha said yesterday he’ll keep the night-time curfew in force after he was officially endorsed as the nation’s leader by royal command. After taking control of the country on May 22, the military enforced a curfew from 10 p.m. to 5 a.m., discouraging tourists who were already wary about visiting the capital because of political violence that has killed dozens since November.
Prolonged unrest has pushed Honda Motor Co., Japan’s third-largest automaker, to delay building its third plant in Thailand by six months. Its plant in Ayuthaya, about 80 kilometers (50 miles) north of Bangkok, is using about 60 percent of production capacity after months of political tensions, spokesman Kosuke Kachi said.
Automakers may be particularly vulnerable because Thailand is Southeast Asia’s largest auto-manufacturing hub, larger than Indonesia. IHS Automotive will probably reduce its estimate for vehicle output in Thailand from the 2.09 million units it estimated before the coup, Lerksomboonsiri said.
Aside from manufacturing, tourism has been hit by months of unrest, as opponents of ex-Prime Minister Yingluck Shinawatra mounted public protests and legal challenges that succeeded in removing her from office. Thailand will probably have the slowest growth among its major Southeast Asian peers this year, according to Bloomberg surveys.
Panasonic, which has 27 units in Thailand including 13 manufacturing companies, has ensured that factories with night shifts don’t overlap with the military’s curfew, spokeswoman Chieko Gyobu said. Nissan Motor Co., Japan’s second-largest automaker, is operating factories only on day shifts, spokeswoman Yuriko Masuda said by phone.
Honda and Toyota Motor Corp. continue to operate night shifts after getting approval from the military.
While Sony is cautioning workers about travel, the Japanese electronics maker’s plant in Chonburi that makes cameras and lenses has been unaffected, George Boyd, a company spokesman, said by phone. Takao Katagiri, Nissan’s Japan and Asia chief, said a new plant in Thailand will begin operating next month according to plan.
Thailand’s established supplier network and its position as an export hub will also cushion the fallout, according to IHS Automotive. The nation shipped 361,313 vehicles this year through April, up 1.5 percent from a year earlier, while exports climbed almost 10 percent last year.
“Not only does Thailand have a strong supply chain, supplier network and cost-effectiveness, it also has a free trade agreement with Australia,” Lerksomboonsiri said.
Still, political uncertainty persists in Thailand. The coup leader has yet to provide details of his politic reform agenda nor has he given a timeline for new elections.
“The coup d’etat is credit negative, underscores Thailand’s perilous politics and will not restore investor confidence or ease downward pressure on the economy,” Steffen Dyck, a Moody’s Investors Service analyst, wrote yesterday in a report. “Even if the political turmoil subsides, there is no assurance that the military government can remove uncertainty from the investment environment.”
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