October 29, 2012: In 2011, Thailand experienced its worst flooding in years, leaving more than 800 people dead and causing severe damage across northern and central regions of the country. The floods, lasting a few months, severely damaged and disrupted manufacturing operations in Thailand. Flooding also forced seven huge industrial estates in central regions to close, causing damage to the industrial sector in the billions of U.S. dollars. It is interesting to note that prior to 2011, none of the industrial parks in Thailand had been flooded over the past 40 years. During the last major flood in 1995, the dykes in the industrial parks kept floodwaters out. In last year’s flooding, however, heavy machinery was reportedly not brought in to raise the height of dykes for fear of damaging them and instead sandbags were used, which ultimately gave way to the floodwaters.
Damage and disruption to the manufacturing sector was massive after defenses protecting several industrial estates were breached. The Labour Ministry said that more than 14,000 businesses nationwide had to close because of the floods. Factories in the provinces of Ayutthaya and Pathum Thani were particularly badly hit. Reports said around 1,300 factories across central Thailand were affected by the floods, disrupting manufacturing supply chains inside and outside of Thailand. Many of these industrial estates housed both local and international factories and businesses, with large numbers manufacturing electronic components and car parts.
The production of cars, electronics and other goods was suspended for months as hundreds of factories were under water. Disruption to supply chains also halted operations, causing a knock on effect on global manufacturing. The disruption to operations lasted several months and had an impact on production similar to that caused by the Tohoku earthquake in March 2011. Thailand plays a critical role in the global supply chain and companies needed to organize alternative production facilities or supply routes for parts.
The intention of this report is to provide an in-depth review of the meteorological and man-made factors, including the concentration of risks in industrial parks that contributed to the scope and cost of the flood event. The report also reviews how Guy Carpenter can assist clients in measuring the potential for future losses resulting from floods in Thailand.
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