Thailand is under water. It has been so for months. The ongoing calamity makes Ondoy seem like a drizzle by comparison. It has claimed more than 500 lives and shut down close to 900 factories in various industrial areas, bringing the cost of damages to an estimated $5 billion. The world will no doubt see a drop in the production of hard drives, Thailand being the second-largest producer of these storage devices.
But I think you will agree that the skies won't come crashing down if people don't get to buy another hard drive in the next few months. What worries everyone is the effect of the flooding on the automotive business. Thailand, remember, is the main manufacturing hub of the car industry in the region. The Detroit of Southeast Asia, it is called.
While only Honda saw its manufacturing facility in the province of Ayutthaya literally submerged, the other carmakers with factories in the swamped kingdom also had to halt production activities as their parts suppliers had been deluged themselves. Observers say Filipino consumers will only truly feel the ripple effect of the Thailand flooding come December, when inventories start running out. Somebody with connections inside a Honda dealership in northern Metro Manila told me over the weekend that said dealer was down to its last 30 units--and that no new supplies are expected to arrive anytime soon.
Indeed, the damage inflicted on the car industry by the Japan earthquake and tsunami in March is nothing compared to the grave repercussions of the natural catastrophe in Thailand. Especially since most automakers had put all of their eggs in one basket in the region. So now Filipino industry players can't help but rue the fact that this wide-scale setback could have been averted had car companies put up their manufacturing facilities in the Philippines instead.
"If we produced our best-selling cars here instead of importing them from Thailand, we wouldn't have this problem," said one executive. "Santa Rosa would have been a perfect place to operate a manufacturing plant because it never floods there."
Of course, such a sentiment is unfair because it happens to have the benefit of hindsight. If Santa Rosa were the industry's manufacturing hub in Southeast Asia, and Taal Volcano decided one day to spew molten rocks, well...
Even so, it's a thought worth entertaining.
While several carmakers do have assembly plants here--Ford, Toyota, Isuzu, Honda and Nissan in Santa Rosa, and Mitsubishi in Cainta--their production output is piddling vis-à-vis the overall total in Thailand. What we produce here is just enough for local consumption, almost just a token gesture to show that the industry is investing and creating jobs in the country.
We've long accepted that the reason the car industry's regional manufacturing hub is located in Thailand and not in the Philippines, is because there exists a wide disparity in the market sizes. While we hit a record high of 168,000 units last year, Thailand sold a total of 800,000 brand-new vehicles in the same period. No contest. End of story, right?
Probably. But that is only one side of the coin. The flip side is the oft-neglected fact that the Philippines is simply not conducive to business. We are not attractive to foreign investors, period. This is verified by the World Bank's Doing Business annual report, which aims to measure the ease (or difficulty) of starting, operating and growing a business in a particular country.
In the latest report benchmarked to June this year, 183 economies were included. The higher the ranking of a country, the easier it is to do business there. First on the list is Singapore, followed by Hong Kong, New Zealand, the United States and Denmark. At the very bottom is the Republic of Chad, apparently the seventh-poorest country in the world.
The rankings are determined by 10 factors, including "starting a business," "dealing with construction permits," "getting electricity," "registering property," "getting credit," "protecting investors," "paying taxes," "trading across borders," "enforcing contracts," and "resolving insolvency." Read the factors again and it's almost a given the Philippines will place poorly on the list.
Out of 183 countries, we're ranked 136th overall, worse than the likes of Sudan (135th), Nigeria (133rd), Swaziland (124th), Ethiopia (111th), Pakistan (105th) and Vietnam (98th). We're terribly bad in the area of "starting a business," in which we're ranked 158th. When it comes to "protecting investors" and "dealing with construction permits," we're just as unreliable at 133rd and 102nd, respectively.
Thailand? They're way up there in 17th place overall. Their rank in "starting a business" is just 78th, but they're impressively entrenched in 13th and 14th as far as "protecting investors" and "dealing with construction permits" are concerned. If you were at the helm of a car company, which country would you pick for your manufacturing base if you had to choose between the Philippines and Thailand?
The problem with our country is that almost everyone is on the take--from barangay councilors to mayors all the way up to governors and congressmen. A multinational company has yet to lay down the cornerstone of its building, and already it's coughing up dough to extortionists left and right. Heck, even broadcast journalists who profess to work for public service get in on the act, too, harassing carmakers and asking for brand-new vehicles in exchange for their "silence" on bogus consumer complaints.
Word has it that the Philippine Automotive Competitiveness Council--a coalition of car companies lobbying the government on issues affecting the industry--is set to make a clamor for the Aquino administration to take advantage of the current situation in Thailand and convince automakers to set up manufacturing facilities in the country. Frankly, I don't know how they propose to make this happen.
A country under water is still far more attractive than one mired in corruption.