Is it Time to Move Bangkok

The flooding in Bangkok shows little sign of getting better, and its impact on Thailand’s economy and the global supply chain of many computer and automotive components has yet to be fully tallied.

Japanese companies in particular have made enormous investments in Thailand and have been particularly hard hit by the flooding, but all computer disk drive makers and many car manufacturers have been affected.

People are stranded throughout Bangkok, the government’s messages are still confusing and hard to understand, and the divisions in Thai political society have prevented the type of unity in the political system that should be necessary at such a time of crisis.

In addition, diseases carried by the fetid water are beginning to be a problem in Bangkok and the outlying suburbs. Many foreign investors will now rethink their decisions to place so much of their supply chain in Thailand.

But even more worrying, these floods, which are the worst in Thailand in 50 years, could be a harbinger of the future.

In an excellent story by Agence France Presse, reporters in Bangkok examine why the Thai capital is likely, in years to come, to face similar if not worse floods.

Such floods could repeatedly devastate Thailand’s manufacturing base and threaten the millions of people in the capital, which dominates Thailand as the country’s political, cultural, and economic epicenter.

Urbanization in the city’s outlying areas has reduced regions of vegetation that absorbed water in the past; overbuilding in the city core has done the same.

The capital, built on swamp, is still sinking every year, and with global temperatures rising and weather patterns changing, Thailand is likely to face a longer, more intense rainy season for years to come which would in turn make the city harder to drain and would more consistently overflow the Chao Praya River.

The OECD has classified Thailand’s capital as one of the ten most endangered cities in the world, according to the AFP report. “In 50 years…most of Bangkok will be below sea level,” Anond Snidvongs, an expert on water management, told AFP.

One solution that some Thai environmental experts have begun to suggest: Move the whole capital to land that's higher, more secure from flooding, and easier to protect with dikes.

Some think that, over time, this is the only solution and that  even with continued groundwater pumping, better dikes, and more effective flood management concentrated in one government agency  Bangkok is still too insecure to survive global climate change.

And the Thais have moved their capital before – from the city of Ayuthaya to Bangkok. But that was in 1782.

Japan offers help to firms hit by Thai floods

TOKYO (Reuters) - Japan offered on Tuesday extra loans, insurance and a baht cash line to help Japanese companies in flood-ravaged Thailand, signalling growing concerns over the disaster's impact on the world's third biggest economy.

Thai officials have said it could take as long as six weeks for water to recede after the nation's worst flooding in half a century and a further 45 days for industrial parks to reopen, and the prospect of a prolonged production paralysis is raising alarm in Tokyo.

"Thailand is the centre of Japan's supply chain, especially in the ASEAN region," Economics Minister Motohisa Furukawa told reporters, referring to Southeast Asia's economic and political bloc. "We need to keep in mind the impact on Japanese firms and closely watch the impact on the Japanese economy."

The Bank of Japan said it was discussing a scheme with its Thai counterpart that would allow Thai central bank to lend baht funds using Japanese government bonds as collateral.

In addition, the trade ministry said government-owned Japan Finance Corporation would offer loans to Japanese parent companies of firms operating in Thailand, while Japan's export credit agency would reinsure insurers providing cover to Japanese firms affected by the floods.

About 1,800 Japanese manufacturers operate in Thailand and several of them, including Toyota Motor Corp, Canon Inc, Pioneer and Sony Corp, have suffered flood damage to plants or supply snags.

Canon, the world's biggest maker of digital cameras, cut its annual profit forecast below market expectations on Tuesday, citing damage to its camera parts suppliers in Thailand and a closure of an inkjet printer plant there.

On Monday, Toyota said it would trim production at its Japanese vehicle assembly factories this week due to a shortage of Thai-made parts as the floods disrupted supply.

A senior Bank of Japan official briefing reporters on the plan said so far Japanese banks and companies were not facing funding strains in Thailand but that the central bank was closely monitoring conditions there.

Thailand's central bank has said the floods could shave more than 1 percentage point off this year's economic growth. No official estimates are available for Japan, but the floods are seen denting production in the months ahead, right when it has largely recovered from a slump caused by the devastating March earthquake and tsunami.

CRITICAL TIME

"The impact is large enough to push down Japan's industrial production by 1 percentage point for the next two to three months. Once the floods recede, production will bounce back," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co in Tokyo.

About 450 Japanese businesses are located in the seven flood-hit industrial parks and some others are dependent on items produced there, a trade ministry official said.

Japan's manufacturers have largely successfully restored production and supply networks damaged by the March 11 disaster, but now have to cope with faltering global growth, market jitters over Europe's debt crisis and a buoyant yen.

The yen spiked to an all-time high against the dollar of 75.78 yen last Friday, and is trading well above levels that major exporters have used in their earnings forecasts.

That has fanned concerns that the currency's strength -- largely driven by nervous investors seeking highly liquid and relatively safe assets such as Japanese government bonds -- will stunt Japan's recovery from its post-quake slump.

The BOJ is expected to trim its growth forecasts for this and next fiscal year when it meets on Thursday, but still predict a gradual moderate recovery and keep its policy on hold.

Finance Minister Jun Azumi repeated that he was ready to take firm steps -- seen as a coded reference to market intervention -- if the yen's gains become excessive.

The baht funding line would add to an array of measures the Japanese government has proposed in recent weeks to help the nation's exporters cope with the yen's impact, including subsidies for companies that plan to expand domestic production rather than move it abroad.