Minutes after the government announced plans to seal the hundreds of construction camp sites around Bangkok, hordes of workers started to empty out of them and head back home.
Kilometres of traffic jams were seen along the Mitraphap highway, which leads to the northeast of Thailand. Meanwhile, a rights group reported that companies were abandoning their foreign migrant workers on the side of the road. (Read more here)
The mismanagement by the administration of Prime Minister Prayut Chan-ocha continues, with critics pointing to its poor management of vaccine procurement, its inability to manage the economic situation, and rising infection levels.
The missteps of the Prayut administration is likely to have a long-term impact on the economy, including the real-estate sector, which was already facing the worst crisis in decades before Friday’s announcement on camp sites.
The latest announcement will have a major impact on the short- to medium-term growth of the real-estate and the construction sector, according to industry insiders and analysts.
“My own firm’s construction work has dropped by as much as 50 per cent due to the economic situation,” said a chief executive of one of the largest developers in Thailand, who declined to be named.
His company, which focuses on high-rise buildings across the metropolis, was lucky to still have some work. According to the source, there were other developers who had to stop work completely.
“There are some developers whose projects have been put on hold and as a construction contractor, we have been feeling the pain for a while due to the economic conditions,” said an owner of a listed construction firm who asked not to be named.
The construction firm, which has close to 8,000 construction workers, said that it had until recently been operating under the “bubble & seal” model, whereby it would seal the construction camp sites where Covid-19 virus were discovered but allow the workers to go to work and return to their camp sites after their work.
“We were caring for these people who were infected or camp-quarantined because we did not want to spread the virus but now with the total ban it could be more difficult to control the situation inside the camps,” the construction contractor company owner said.
Out of the nearly 8,000 construction contractors, about 200 have so far been diagnosed with the virus and taken to hospitals.
The Thai Contractors Association was still assessing the total impact of the latest order and newest wave of the pandemic. It has declined to make predictions of what the future holds because the current 30-day stoppage, as announced by Prayut, could just be the beginning. The lockdown could continue.
“There is nothing to say that this one-month will not be extended if the virus cannot be controlled,” said another contractor. “Even after they open up, how much time will it take to get the workers back to work?”
Blessing in disguise for property developers
The move by the government to put a halt to the construction across Bangkok is likely to be a blessing in disguise for the property developers who have been having a tough time selling their projects amid continued rise in unemployment and/or reduction in salaries.
“Better in the long run,” said Srettha Thavisin, chief executive officer of Sansiri Plc (SIRI), one of the largest high-end condominium developer in the country, when asked if the moves by the Prayut government would impact his company’s earnings outlook.
“If [this lockdown] helps the overall situation and allows the country to reopen in 120 days then this is better in the long run,” he told Thai Enquirer.
Brokers were of similar view, that real-estate firms would stand to benefit as this move by the government would be beneficial to the property developers who have been looking for excuses to delay their projects as they are unable to sell the units.
Vikas Kwatra, Managing Director, Foreign Institutions, Krungsri Securities said that this move by the government would benefit the property developers but the impact on the government spending via infrastructure spending is also likely to be impacted which could have a negative impact on the economic recovery.
Government spending via infrastructure projects such as the construction of mass transits, expressways, roadways etc. play a vital role in the economic ecosystem.
“Government restrictions on construction sites may hurt construction company stocks, in the short term…and quite possibly the impact will be more in terms of sentiment than material earnings decline,” Kwatra of Krungsri Securities said in a note to his clients this morning.
“And while bubbles do prevent the spread of infections within factories, it is hard to predict any real impact on the pace of factory output as the “bubble” still allows factory operations to go on. A few contractors may delay small projects which will delay revenue.”
He added that cash strapped contractors like Italian-Thai Development Plc (ITD) may face some cash flow issue in the short term. Sentiment may hurt stocks like CP All Plc (CPALL), Airports of Thailand Plc (AOT), Bangkok Expressway and Metro Plc (BEM) and other consumer/retail sector companies.