Known as the “granary of Southeast Asia,” Thailand enjoys unique climatic and geographical conditions. Unlike many nations in the region, it is rarely hit hard by typhoons or earthquakes. In 2011, however, it suffered a once-in-a-century flood that took several months to recede.

During the rainy season, water collects on Bangkok’s streets.

Thailand has a classic tropical monsoon climate. Every year a cool season (November–February) precedes a hot season (March–May), which gives way to a rainy season (June–October). Typically, before the rainy season arrives, local governments dredge water channels to prevent flooding. Nevertheless, floods are natural disasters familiar to Thai people.

The 2011 flooding was so widespread and so long in duration partly as a result of the Thai elections that year. In the five years following the political crisis of 2006, when Prime Minister Thak­sin Shi­na­wa­tra was forced into exile by a military­ coup, repeated instances of political violence involving “red shirt” or “yellow shirt” demonstrators set back the Thai travel industry. Busy with elections in 2011, seen as crucial to Thailand’s political and economic future, localities neglected routine maintenance such as dredging drainage channels.

The whole world is facing dramatic climate change. In 2011 the rainy season in Thailand arrived two months early with heavy rainfall, but local reservoir managers, aiming to meet the following year’s anticipated demand for irrigation water, failed to release water early as a means of flood prevention. Eventually, the heavy rains brought the rivers and reservoirs in northern Thailand to the point of no return in late August.

“There was a domino effect: the rains first filled up 16 northern provincial reservoirs, which overflowed to form floodwaters that toppled everything in their path,” says Norman Chang, president of the Thai-Taiwan Business Association.

A senior figure in Taiwanese business circles in Thailand, Wang Wen-shan arrived in 1987. He is the president of steel supplier Chiao Pao Metal.

The uncontained flooding created a slow-motion tsunami that rolled gradually southward to central Thailand.

The world’s most important manufacturing location for computer hard drives is the ancient city of Ayut­thaya, just 80 kilometers from Bangkok. Located in a basin, it succumbed to the waters early. Countless Buddhist statues and other ancient relics were submerged. The flood reached as high as four meters in the city’s Ro­jana Industrial Park. Some 200 manufacturers, including Honda, Nikon and Cannon, had to close their factories there.

Among Taiwanese firms, hard drive maker Min Aik Technology and beverage producer Ichi­tan were hit hard. The former wasn’t able to remove its warehoused goods, clean-room facilities or production equipment from the first floor of its factory. Its losses totaled NT$1.1 billion. Ichi­tan, meanwhile, had just completed building a NT$3.5 billion facility, which was inundated before it could produce a single item.

Another seriously affected area was Thon­buri on the west bank of the ­Chao ­Phraya River. On higher ground, that area should have been safer, but the Thai government, in order to protect Bangkok, the nation’s economic and political heart, had built floodgates to release water to the north and southwest of the capital, unavoidably sacrificing some areas on the periphery of the city, including Thon­buri. According to the Tai­pei Economic and Cultural Office in Thailand, at least 100 of the mostly small and medium-sized Taiwanese firms in the area were affected.

“When the floodgates opened, the area was covered by 1.6 meters of water,” recalls ­Chuang ­Chien-mo, president of the Taiwanese firm Bangkok Starch Industrial in Thon­buri. ­Chuang says his company was caught completely off guard. Lacking sandbags to adequately protect the factory, they made do with sacks of rice and starch. “One-hundred-kilo bags of rice block water rather well,” he notes wrily.

When touring these factories a year after the disaster, one sees much evidence of flood-prevention measures still in place: Many factories have raised their front gates, or have installed bridges or long flood barrier walls. Norman Chang even had the doors raised to the bathrooms of his company’s Bang­poo Industrial Park factory.

“Water will get in any opening,” he explains. “You’ve got to prudently take anti-flooding measures, because once water enters, you’re done for.”

Pencom, founded by Taiwanese businessman Patrick Tsai, sells its stationery throughout Thailand, as well as elsewhere in Southeast Asia.

Costs to Taiwanese businesses—whether from flooded factories, delays caused by damage to suppliers, loss of power or water, or lost production due to transportation infrastructure damage—totaled several billion NT dollars.

But perhaps because they hail from a place where typhoons are common, Taiwanese businesses in Thailand took the disaster in stride and offered assistance to those who were hit harder. The Thai-Taiwan Business Association canvased its members for a total of NT$10 million in relief aid. Moreover, the ROC government contributed more than US$200,000 through its representative office, and provided six tons of water, drugs and rations valued at about US$800,000.

Bearing out the maxim that what doesn’t kill you makes you stronger, quite a few Taiwanese businesses showed remarkable skills of adaptation amid the crisis and even discovered business opportunities.

Taiwan Hon ­Chuan, which is Thailand’s largest plastic beverage container manufacturer, is located in the Na­va­na­korn Industrial Promotion Zone in Pa­thum Thani Province north of Bangkok. Na­va­na­korn was one of seven industrial parks that suffered serious damage. Lai Sen­yuan, the company’s Southeast Asia general manager, explains that its factory was flooded in the middle of October and that the waters didn’t recede until the middle of December. They peaked at two meters. The skeleton crew of 20 that volunteered to stay on could only do their best to protect the equipment; it was impossible to actually produce anything.

Nevertheless, Taiwan Hon ­Chuan was still able to keep its promises to its customers. “From our factories in Taiwan, mainland China, Malaysia, and Indonesia, we were able to send urgent shipments of products for our Thai clients—although we had to bear the extra tariff duties,” says a smiling Wu Yi­qun, general manager of the company’s operations in Thailand. “Our customers were all extremely surprised that we, unlike our competitors, were able to meet their orders.”

Although the minimum wage in Thailand has been steadily rising, Taiwanese businesspeople praise both the good skills and compliant attitudes of local workers. The photo shows a stationery plant owned by Taiwanese businessman Patrick Tsai.

Its response during the flood earned the company an extremely valuable reputation for reliability, and business has been growing ever since. Today its monthly gross exceeds NT$200 million, with yearly income expected to increase by 70–80%. The rate of growth has been nothing short of astonishing.

What’s more, quite a few Taiwanese companies have benefited from the economic revitalization measures adopted by the Thai government in 2012, including reduction of the corporate income tax rate from 30% to 23% (and to 20% in 2013), the policy to provide a tablet computer to every schoolchild, the 100,000-baht reduction in taxes on the sale of locally made cars for first-time car purchasers, and the no-interest loans available to first-time home purchasers (for homes under 30 million baht).

Chiao Pao Metal, which supplies steel to the Thai auto industry, is one such company. It first opened in Thailand in 1987 and now has annual revenues there of about 1 billion baht. Wang Wen-shan, the company’s president, explains that their Thai operation anticipated sales of 1.7 million vehicles in 2011. Production was reduced to 1.4 million as a result of the flooding, but only 700,000 vehicles actually sold. In 2012, on the other hand, 1.1 million vehicles had already sold by the end of September, and production for the year as a whole is expected to reach 2.3 million, increases that demonstrate the impact of the government subsidies.

The only government policy that has not been received well by Taiwanese and other foreign businesses is the minimum-wage hike: To meet Prime Minister Ying­luck Shi­na­wa­tra’s campaign promises, on April 1 2012 the minimum daily wage was increased to 300 baht (an increase of about 40%) in seven provinces near Bangkok. In 2013 the hike is expected to go into effect nationwide.

Norman Chang of the Thai-Taiwan Business Association points out that the minimum-wage hike raised costs for his company to the tune of about 1.5–2 million baht per month. If the policy is indeed expanded in the future, he fears that it will only worsen already serious labor shortages.

“Nowadays Thai youth, like those in more advanced economies, are less willing to live tough lives cooped up in factories,” he notes with worry. “In the past, because salaries were relatively high in Bangkok-area industrial parks, jobs there were in high demand, but if the minimum wage is raised nationwide, then what incentives will workers have to leave their homes and come to the Bangkok area, where living expenses are higher?”

Because the Thai labor shortage is estimated at 200,000 workers, many Taiwanese firms in Thailand are hoping to employ lower-wage laborers from Myanmar and Cambodia, but legal restrictions have prevented them from doing so.

“The Thailand Board of Investment [BOI] has stipulated that if foreign companies enjoying BOI incentives (such as tax-free status obtained through meeting various investment targets) wish to hire foreign laborers, they must invest at least 10 billion baht, and provide jobs for at least 10,000 workers for at least 20 years. With such strict requirements, in all of Thailand probably only Toyota qualifies.”

The Thai-Taiwan Business Association is currently negotiating with the Thai government in the hope that restrictions on foreign labor can be loosened.

To help Taiwanese businesses overcome the labor shortage, the Tai­pei Economic and Cultural Office has been actively negotiating to employ the descendants of old ROC soldiers who were cut off in northern Thailand at the end of the Chinese civil war. The hope is that they can become a major asset for Taiwanese firms in Thailand. “The impact is very limited right now, but so long as channels of communication are established, Taiwanese firms in Thailand will be able to hire some high-quality bilingual workers, and will also provide a greater diversity of career opportunities for northern Thailand, which has weaker economic circumstances,” says ROC representative in Thailand Henry M. J. Chen.

The ASEAN Economic Community, which is modeled on the EU and aims to eliminate tariffs and reduce barriers to trade, hopes to achieve regional economic integration by 2015. Thailand, which has both a key geographic location within ASEAN and one of its strongest economies, is already serving an essential role as a stepping stone for Taiwanese businesses’ attack on global markets.