Thailand Floods Update Impact Forecasting — November 2011

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Overview

The historic flood event in Thailand has continued into its fourth month, as the death toll was upwardly revised to at least 567. The floods, which first became prevalent in northern sections of the country, were spawned by the start of the typical monsoon season. The arrival of the remnants of Tropical Storm Nock-ten in late- July accelerated the severity of the rainfall (and floods) across the north, northeast and central portions of Thailand. As the calendar turned to August and September, a vigorous and on-going mon- soon season brought continued elevated rainfall totals to central and northern sections as flash floods, river flooding and landslides became more prevalent. An active tropical season in the Northwest Pacific Basin also added to the heightened floods and rainfall totals, with the remnants of no fewer than five systems reaching Thailand.

Source: U.S. Marines As the rains continued, and excess rainwater drained into the Chao Phraya River and its tributaries (including the Chi and Tha Chin rivers), the river swelled and burst its banks while flowing southward. The floods eventually covered an area from Chiang Mai Province in the north to Ayutthaya Province in the central plains (just north of Bangkok). It should be noted that floods from a bloated Mekong River in extreme northeastern Thailand also enhanced the swelling of the Chao Phraya and its tributaries. In early and mid-October, the rain and floods were again reinforced by the arrival of the remnants of Typhoon Nalgae. In October, the floods reached their peak as rainfall totals approximately 40 percent above the annual average filled dams north of Bangkok to capacity, which prompted government officials to release more than 9 billion cubic meters (317 billion cubic feet) of water down a river basin the size of the U.S. state of Florida. Since the start of November, the floods have begun to slowly recede.

Bangkok

According to the Department of Disaster Relief and Mitigation, 12 districts in Bangkok remain impacted by floodwaters (down from a peak of 32 dis- tricts at more than 470 locations) in northern, western and eastern sections of the city. In the affected areas, floodwaters remain at a minimum depth of 80 centimeters (2.62 feet). Thailand’s Prime Minister stated on Novem- ber 15th that floods in western Bangkok may persist until after the start of the new year due to high tides in the Gulf of Thailand enhancing water levels on the west bank of the Chao Phraya River. In total, more than 2 mil- lion residents (20 percent of the city’s population) were given mandatory evacuation notices during the event after their homes sustained various lev- els of effects. However, central Bangkok has remained unaffected and dry.

The transportation infrastructure continued to be impacted as well, with several main roads closed due to sections being submerged. The Bangkok Source: U.S. Marines Transit System skytrain and Mass Rapid Transit underground trains were not forced to suspend service, though multiple train stations (Phahon Yothin and Chatuchak) reported up to 50 centimeters (1.64 feet) of water.

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Outside of Bangkok

To the north of Bangkok in many central and northern provinces, floodwaters continued to recede as initial assessments began in some of the hardest-hit locations. The Department of Disaster Relief and Mitigation noted that 22 of Thailand’s 77 provinces were still affected by floods, down from a peak of 64 provinces. Map provided in Appendix B shows the maximum flood extent as of 15th November 2011.

Source: U.S. Marines

Economic Impact Update(s)

As of this writing, the government confirmed economic damages from the floods already at THB346 billion (USD11.2 billion). According to the University of the Thai Chamber of Commerce, the final overall economic losses from the event may reach as high as THB700 billion to 1 trillion (USD23 to 33 billion). The agency cited that as many as 300,000 people across the country would lose their jobs due to business disruption, and another 700,000 would temporarily lose employment. Economists from the Bank of Thailand reported that the country’s 2011 GDP would sink from an initial 4.4 percent growth to just 2.6 percent. The econom- ic forecast also indicated that a slowdown would continue into the first quarter of 2012, and that it may not be until April for exports to return to normal.

As initial assessments begin across Thailand, some specific economic losses have started to be released by the government. The Office of Agricultural Economics reported that total damages to the agriculture sec- tor would be at least THB72 billion (USD2.33 billion) after at least 1.6 million hectares (3.95 million acres) of cultivated land were damaged. The Department of Highways reported total damages of at least THB13 billion (USD422 million) to both rural roads and national highways. The governor of the Tourism Authority of Thailand projected that impacts from a loss of upwards of 300,000 tourists during the peak season in the fourth quarter would reach at least THB25 billion (USD825 million).

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According to Thailand’s Office of Insurance Commission (OIC), at least 9 million people from 3.01 million households have been affected by the floods since their inception in late July. More than 651 districts from 63 separate provinces have sustained various levels of inundation. The OIC has begun assessing insured losses, which have preliminarily been estimated by the agency between THB149 billion to THB216 billion (USD4.8 billion to USD7 billion). The specific flood loss estimates from the OIC indicate that the household sector had sustained at least THB11 to 16 billion (USD0.35 to 0.51 billion) from the floods, while the indus- trial sector has seen THB138 to 200 billion (USD4.46 to 6.47 billion) in insured losses.

The above estimates clarify an incorrect media report that was released last week which suggested insured losses of THB600 billion (USD19.5 billion).

Various insurers in the region indicated that the majority of the losses would be centered on seven flood-affected industrial estates (Saha Rattana Na- korn, Rojana, Hi-Tech, Factory Land, Bang Pa-in, Nava Nakorn and Bangkadi). Two additional industrial parks near Bangkok (Bang Chan and Lat Krabang) also sustained temporary shutdowns due to water inunda- tion. Appendix A provides estimates of timing of ini- tial water inundation in selected industrial estates and Appendix C shows the maximum flood extent along with the locations of these selected industrial estates.

The OIC indicated that due to a low number of staff and assessors in relation to the substantive nature of the flood damage, regulations may be eased to allow Source: U.S. Marines technicians to enter factories and make some repairs prior to assessment in order to minimize losses to machinery.

Several of the factories have already begun to slowly resume production, though reports suggested that full production would not resume until December at the earliest. Some of the companies who have partly resumed productivity included Toyota Motor Company, Nissan Motor Company, Mazda Motor Corporation and Bangchak Petroleum.

Various reports from Thailand suggest that a minimum of 750,000 residential properties (including 150,000 in the greater Bangkok metropolitan region) have been affected by the floods, with as many as 3.3 million total structures being impacted nationwide. Despite the widespread nature of the damage, Thailand’s Gen- eral Insurance Agency (GIA) notes that only a fraction of the properties – less than 1 percent – are covered by flood insurance.

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Government Response

The ongoing floods in Thailand have made it challenging for insurance companies to renew insurance poli- cies of those affected by the floods. Usually, renewals in the general insurance business are to be completed by 31st December. But insurers and reinsurers are averse to taking on further risk at the current premiums.

The Secretary General of the OIC stated that the agency had discussed this matter with Thai insurers and suggested extending the period of customer’s policy renewal by three months to the end of March 2012. From the client’s perspective, they wish to have risk coverage even during this grace period. The OIC noted that they had allowed both the clients and the insurers to negotiate for sub-limit insurance coverage in order to have risk coverage at prices which are acceptable to both parties.

Thailand’s Finance Ministry plans to initiate discussions with foreign insurers, whose participation in flood- damage re/insurance is critical to foreign investors’ confidence in the country. The Finance Secretary has scheduled meetings in Japan and London with foreign insurers in hopes of earning back confidence by un- veiling a water management plan. The government plans to invest an initial THB15 billion (USD486 million) for rehabilitation of flood-hit industrial estates.

The Finance Ministry has also asked the Bank of Thailand to bear the cost of exchange-rate risk, which is about 3 percent annually, for yen-denominated loans from the Japan Bank for International Cooperation (JBIC). In an effort to restore investor confidence, the Thai cabinet in October approved THB325 billion (USD10.5 billion) in soft loans for flood-affected business operators together with various privileges. Financial assistance will arrive in three segments: THB65 billion (USD2.1 billion) for large businesses, THB170 billion (USD5.5 billion) for medium businesses and THB90 billion (USD2.9 billion) for small businesses, including individual vendors.

The Japanese ambassador to Thailand stated that the JBIC is ready to extend soft loans to local commercial banks. However, the specific details on the budget and timing have yet to be determined.

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Appendix A: Timing of Flood Inundation in Thai Industrial Estates

The timing as to when exactly floodwaters first entered various industrial estates continues to be investi- gated and is under review as conflicting reports remain on the precise timing of arrival. However, informa- tion has started to emerge and the table below provides a preliminary and rough timeline on the dates in which floodwaters first entered selected industrial estates. The impact on specific individual risks within each industrial estate is currently unknown and will vary depending on the topography and floodwater defenses of each building within the industrial park. This should be verified on a case-by-case basis.

Estimated Time of Industrial Estate Province Initial Water Inundation Saha Rattana Nakorn Ayutthaya 4th October 2011 Rojana Ayutthaya 10th October 2011 Hi-Tech Ayutthaya 13th October 2011 Bang Pa-In Ayutthaya 14th October 2011 Navanakorn Pathum Thani 17th October 2011 Bang Kadi Pathum Thani 20th October 2011 Factory Land (Wang Noi) Ayutthaya 15th October 2011

Table 1: Estimated timing of initial water inundation at selected industrial estates

Chao Phraya River Basin: Previous Historical Flood Occurrences

The lower Chao Phraya River Basin has endured repeated floods throughout history, which has prompted residents living along its banks to adapt their lifestyle to these recurring events. In terms of discharge, the worst floods seen in recent history were documented in 1831, 1942, 1983, 1995, 1996, and 2006. The combination of rapid urbanization, increased agricultural cultivation in the surrounding areas and a decrease in the level of flood retention has all contributed to the enhancement of these floods.

The Chao Phraya River begins at the confluence of the Ping and Nan rivers at Nakhon Sawan in Nakhon Sawan Province before flowing southward for 372 kilometers (231 miles) through Bangkok and emptying into the Gulf of Thailand. At the city of Chainat, the river splits, where the main flow continues southward while the start of the Tha Chin River starts to flow parallel to the main river and exit in the Gulf of Thailand about 35 kilometers (22 miles) west of Bangkok. In the low alluvial plain, which begins below the Chainat Dam, many small canals (also known as ‘khlongs’) split off from the main Chao Phraya River. These khlongs are used for the irrigation of the region’s rice paddies.

Some notable cities located along the Chao Phraya include: Nakhon Sawan, Uthai Thani, Chainat, Singburi, Ang Thong, Ayutthaya, Pathum Thani, Nonthaburi, Bangkok, and Samut Pra.

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Appendix B: Thailand Maximum Flood Extent (as of 15th November 2011)

Data Source: GISTDA, Thailand

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Appendix C: Maximum Flood Extents Map showing Selected Industrial Estates (as of 15th November 2011)

Data Source: GISTDA, Thailand

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Contact Information

Sastry Dhara Telephone: +65.6645.0137 Email: [email protected]

Steve Bowen Telephone: +1.312.381.5883 Email: [email protected]

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