OBG talks to Plew Trivisvavet, President and CEO, CH. Karnchang (CK)

Interview: Plew Trivisvavet

How have the floods hurt the construction sector?

PLEW TRVISVAVET: At the time of the floods in 2011, most of our major construction projects were in the nascent stage of development, so the recent floods only delayed them by some two to three months. In the wider sector, the complete rehabilitation of sites differs between companies; the floods generally caused logistical issues for suppliers, staff and subcontractors. There will also probably be upward pressure on material costs because of competition for resources. If the projects were public-private partnerships, delays could be covered by amendments to government contracts; if not insurance should partially cover the project’s operating costs.

The government has stepped in to plan mega projects to reconstruct heavily damaged areas and ensure infrastructure can withstand future floods. Several projects have been proposed for infrastructure rehabilitation and flood prevention systems, such as flood-ways, water tunnels and the dikes at major industrial estates that were flooded. We believe such efforts will be very positive for the construction industry as a whole.

How will the construction sector evolve in 2012?

PLEW: Some large construction companies like ours will promote their operations while pursuing complimentary infrastructure investments to reduce the risks of a low cycle in their business. This will provide financial strength and enable projects to be managed by the principles of effective cost management, timeliness and high-quality work. Companies have to continually update their technology standards and develop a strong organisational capacity, which is paramount to ensuring that companies grow and remain competitive.

What are the barriers to entering the sector?

PLEW: We expect to see more entrants into the market, as there are no great barriers to entrance. Foreign contractors may have more advanced technology, but nowadays these can be acquired or easily transferred. Most Thai companies have the engineering knowhow and management strength to compete with firms in Japan, the US and Europe. Local companies can also easily enter (some 10,000 companies are in the market already), but competing with larger firms is difficult. With small and medium-sized enterprises (SMEs) there are sometimes issues adhering to the safety and regulatory standards that larger firms must meet, but this is normal. SMEs can also access finance from the local banks, once they prove their reliability and ability to deliver work according to their contract.

How volatile are the sector’s operating costs?

PLEW: Normally, we have established relationships with suppliers to ensure the price of materials is advantageous to both parties. Along with other larger companies in the sector, CK has partnered with research universities to find ways to increase efficiency standards and the exchange of knowledge. One efficiency trend has been the use of pre-cast methods for infrastructure projects. Estimated savings from this technique will vary between projects and depend on the quality of the company’s engineering department. The expected reduction in corporate tax from 30% to 23% will also help big companies contain costs, thereby increasing the number of projects they can take on. For listed companies it will increase shareholder dividends.

What will be the impact of increased regional integration through developments within ASEAN?

PLEW: The move towards the ASEAN economic community (AEC) and the liberalisation of the sector should increase competition and opportunities . AEC will open more markets and encourage every contractor, including CK, to become more competitive and take advantage of newly-created opportunities. New markets that Thai contractors are looking towards include Vietnam, Laos and Myanmar. There is also a definite trend towards clean and renewable energy in regional projects. As we pursue growth and development, we must also strive to balance social, environmental and population needs.