A pause to refresh

NANDOR VON DER LUECHE

By VICHAYA PITSUWAN

As chairman of one of the most powerful representative groups of foreign investors in Thailand, Nandor von der Lueche sees the current crisis as an opportunity for companies and the country to readjust and adapt themselves for sustainable growth in the future.

The Joint Foreign Chambers of Commerce in Thailand (JFCCT) groups 30 foreign business chambers and associations, representing about 9,000 companies that employ more than two million people.

"The JFCCT's role is not to protect the stakes of foreign businesses in Thailand, but rather we look at ways to improve the welfare of all stakeholders in the country,'' he said.

Mr von der Lueche has been in Thailand for more than 20 years and is currently managing director of Metropolitan Jewelry Manufacturing (MJM), a manufacturer of gold and diamond jewellery for middle- and upper-end customer groups.

"Personally, the current global economic slowdown will affect my company's performance as more than 60% of our products are exported to the US and Europe,'' he said. "Less spending in these markets has posed a threat to my business.

"The jewellery industry is never an investment - it is linked to the market of buyers whose emotion is the determining factor of jewellery purchases.''

Mr von der Lueche explained that with less spending in the market, the industry faced an oversupply and fiercer competition meant shrinking margins.

"So it is definite that the industry will see a decline, but the crisis offers the opportunity to improve manufacturing skills and techniques for us,'' he said.

On the global and local factors that have been influencing the direction of the economy, Mr von der Lueche said the boom and bust of commodity prices and high volatility of crude prices had created two forces.

First was higher demand for commodities and fuel consumption, triggered by massive construction projects in China ahead of the Beijing Olympics. The other force was heavy speculation in these markets, he pointed out.

"These speculative activities pushed up fuel and commodity prices, which in turn led to high inflation across the world. The current collapse of prices is the correction of this greed,'' he said.

"I believe that a lot of corrections and structural problems are due to be revealed.

"Greed was allowed in the market to the extent that we now need state intervention to correct this and bail out the situation to build up public confidence. Market forces are no longer able to correct this greed.''

However, Mr von der Lueche noted that there were some strange developments that he found hard to explain.

"It is difficult to understand what's happening. While the collapses of the US and European economies should weaken both the euro and the dollar, the dollar appears to be strengthening against the euro,'' he said.

"Another situation is that the Australian dollar has weakened by more than 30%, one of the worst in its history, but the economy is still going strong.''

If the direction of the world economy is hard to predict, equally challenging are the local factors, especially the political direction, which Mr von der Lueche said would have a severe impact on the Thai economy now that exports could no longer be counted on to prop up the economy.

"Domestic consumption should play a bigger role in sustaining the country's economic survival,'' he said.

Mr von der Lueche noted that the stakeholders in Thailand had agreed that the current political situation had entered an uncharted territory.

"Coups and governments changing hands.... We have seen a lot of these in the past, but never before have we seen members of society so divided.

"For its part, the JFCCT doesn't interfere with politics but the current political situation causes instability and the inability to predict future probability, the two important factors for businesses,'' Mr von der Lueche said.

He drew an analogy between foreign direct investment (FDI) and an individual seeking a safe haven for his savings.

"People would put their money in a bank that they have confidence in, with its stability and good predictability. So would an investor consider investing in a country where demonstrators are clashing with police? I think that fact is negative news for investors,'' he said.

"We already have external pressure to deal with and we don't need to have a double crisis such as what we're having now. We have to stay cool and calm and think about what's happening, be alert and be flexible to adjust,'' he said.

"While I think the improvement of external factors will help out the local economy, what's more important is the improvement of the internal [factors], something we can manage if we want to.''

The JFCCT chairman offers three strategies to manage the crisis.

First, he suggested that long-term strategies should be established without the distraction of short-term greed.

"Thinking about the long term will make business growth more sustainable and improve stakeholders' benefits. This applies to an individual company and to the big picture of the economy,'' he said.

Second, he thinks a company should use the downturn as an opportunity to improve its efficiency in information technology.

"Improving communication means an organisation is able to execute information faster and better and hence improve its performance without cutting the headcount,'' he suggested.

Third, he points out that more competition in any industry will improve the competitiveness of all players. Allowing foreign professionals to enter the local market can help improve overall competitiveness and this is the way to build an economy, he concluded.