According to the Bank of Thailand, the country's manufacturing production index grew by 1.4% year-on-year in the first half of 2001. Over the first nine months, the figure slipped to 1.1%, from 4.2% in the same period of 2000.

Manufacturing industries used only 53.3% of their total production capacity in the first nine months due to weaker consumer buying power and slower growth in exports.

The Industrial Economics Office forecast that 2001's total manufacturing output would be about the same as in 1997, the year the financial crisis started.

Between January and October, Thailand's export receipts were $54.78 billion, down by 5.06% year-on-year.

Exports of industrial goods fell by 4% to $26.59 billion in the period, with an overall contraction of 6% projected for the year.

Industrial goods represented 80% of total exports and accounted for 33% of the country's gross domestic product.

The expansion of manufacturing was hampered by the slowdown of the world economy, particularly in the United States and Japan, causing Thailand's major trading partners to reduce imports. Domestic demand remained low together with volatile oil prices. All these problems increased production costs and dented consumer sentiment.

The electronics and textile industries were hit hard. Electronics companies have been running at between 30% and 40% of their capacity, a level that barely keeps them afloat, compared with almost 100% a few years ago.

Given shrinking export demand and diminishing consumer spending and confidence, the country's export and manufacturing production would remain weak in 2002, said Yuthana Hemungkorn, the chairman of the Electronics and Computer Employers' Association.

However, although electronics firms faced a 20% downturn in sales in Thailand in 2001, 30% growth for the industry was forecast for the second half of 2002. The exception to the worsening trend in 2001 was Delta.

Textile and garment makers saw a contraction. Textile exports in the first 10 months of 2001 were worth $3.1 billion, down 8% from the same period the year before. The textile industry employs 843,200 people, representing 2.5% of the workforce.

The vehicle industry and other luxury segments including jewellery, gem and alcoholic drink producers, notably breweries, were not affected dramatically.

In 2001, vehicle sales in the domestic market were expected to reach 290,000 units and exports 180,000. The local auto industry was using 48% to 50% of its annual production capacity of one million units, said Ninnart Chaithirapinyo, chairman of the Automobile Industry Club of the Federation of Thai Industries (FTI).

"We expect to reach full capacity between 2004 and 2005," he said.

However, he said that the auto-parts industry had been hit hard in 2001 as carmakers were increasingly turning to use lower-priced parts from China.

China was likely to become Thailand's arch-rival in auto-parts manufacturing within the next few years, he said.

On the brighter side, the food and beverage industry, particularly the production and export of frozen shrimps and chicken, grew by 8.5% to $4.29 billion in 2001.

Thailand's trade position has been helped by a slowdown in the rising cost of imports. Imports were worth $52.29 billion in the first 10 months of 2001, up by 1.98% from the same period the year before.

The Industrial Economics Office said the industrial manufacturing index would decline slightly next year because major industries were still struggling to increase use of their capacity.

However, industrialists appear positive about the country's economic recovery in the second half of 2002 largely because of an anticipated gradual improvement in consumption spurred by low interest rates.

About 60% of executives who attended an October seminar, which was organised by economic and industrial ministries, believed export receipts would remain stable or improve.

They expected an upturn in the electrical appliance, food, pulp and paper, publishing, packaging, rubber and agricultural machinery industries. But the jewellery and gem industries, which rely on exports to the US, could be hampered by the downturn in the American economy.

About 70% of the seminar participants expected the industrial employment level to be about the same as in 2001, while 20% anticipated an upturn in the vehicle, electrical appliance, pulp and paper, and packaging industries.

The global economic downturn has made consumers cautious about buying appliances such as television sets, while wine production is an emerging local industry, including fruit varieties.

Foreign and local analysts said that government help was needed to accelerate the pace of recovery.

"Restoring consumer confidence, propping up consumer spending, building up the country's competitive capabilities and encouraging foreign direct investment are keys," said a local analyst.

Thai manufacturers needed to improve their administration, financial management and production systems to lower costs and increase quality to compete with other exporting countries.

Thailand was ranked 38th out of 49 countries in a survey of competitiveness in 2001, carried out by by the Switzerland-based International Institute for Management Development (IMD).

Thailand slipped from 35th out of 47 countries in 2000.

The survey highlighted the lack of efficiency in various state and private business sectors.

China was seen as the focus of globalisation, attracting capital and companies at an increasing rate.

"Given its inexhaustible supply of cheap labour and surprisingly swift ascent up the technological food chain and automotive industries, China is rewriting industrial economies of scale," said a foreign analyst.