Thailand's Export Growth Forecast Slashed

[Jai Dee]

Export growth forecast slashed

Lowest industrial confidence in 4 years as demand slows: survey

The Finance Ministry has revised downwards its forecast for growth in the volume of exports this year, mainly because of the strong baht.

The new target is 6.5 per cent, compared with the original expectation of 8.1 per cent.

The slashed target was announced on the same day Federation of Thai Industries (FTI) chairman Santi Vilassakdanont said he expected Thailand's export growth rate in the second half of the year to be lower than in the first half. He said this would be the result of continuing fluctuations in the US-dollar/baht exchange rate and uncertainties arising from the US sub-prime-mortgage crisis.

"Export growth will probably fall in the second half if the baht is still fluctuating," he said. "If the sub-prime crisis is not as bad as some experts forecast, then the baht may become stronger, due to an inflow of foreign investment into the stock exchange."

The baht appreciated yesterday to 34.36 to the dollar, from 34.50 at the market's close on Wednesday. The Bank of Thailand believes the baht strengthened following injections into the market to ease the sub-prime lending problems.

Despite the lowered export target, the Finance Ministry is maintaining its economic growth forecast of 4 per cent for this year. Fiscal Policy Office director-general Pannee Sathavaro-dom explained that despite slowing exports, public spending would shore up economic growth.

The moves confirm bad news for the second half of the year, underscoring last month's export figures, which showed annualised growth of only 5.89 per cent, against 18.6 per cent in the first half of the year.

The government's economic steering committee will meet today to discuss last month's unexpected drop in export growth. At the meeting, the Private Joint Committee - which includes the FTI - will submit several proposals for weakening the baht further, particularly by encouraging Thai companies to invest abroad.

Due to declining demand, a survey of industrialists last month has also revealed the lowest level of confidence in four years. Fewer orders, lower sales and lower production capacity sent the Industrial Confidence Index tumbling to 72.7 points, from 80.9 points in June.

"July confidence is usually the lowest in any year, because it is the rainy season, which pulls down domestic consumption," said FTI vice chairman Adisak Rohitasune. "However, the level is the lowest in four years, due to the economic slowdown and the strong baht."

The low confidence is exacerbated by the fact that manufacturers cannot raise product prices to cover higher production costs, he said.

The survey, covering 471 respondents from 35 industrial groups, showed the strong baht is the main concern of export-oriented manufacturers, while those serving domestic markets are worried about political instability and slowing consumption.

Santi said high first-half export growth resulted from advance orders taken last year. Since then, most operators have sought short-term rather than long-term orders, in a bid to handle the rising baht.

"Unless they receive more long-term orders from abroad to secure their exports, it will be difficult to expand growth like in the first half," he said.

However, orders normally rise in the final quarter of the year, and this year should be no exception, he said.

At today's meeting, the economic steering committee will propose the establishment of a fund to manage capital flows, so as to stabilise the baht.

Santi said exporters would be satisfied if the baht weakened to 35 to the dollar. This level will also encourage more local operators to expand into exporting.

Another proposal is to waive corporate taxes on gains from foreign investment, in order to encourage Thai companies to invest outside the Kingdom.

"This kind of tax privilege may be added as one of the Board of Investment's conditions," Santi said.

However, the qualifications and industries of the companies eligible for the exemption must be seriously discussed, he said. The industries to be promoted should include construction, food and textiles.

Another proposal is a special fund to provide soft loans to companies, in order to help reduce investment risks.

Yet another is the establishment of industrial estates in border provinces like Tak and Ranong in a bid to prevent labourers from migrating to Bangkok.

The estates will help small- and medium-sized enterprises that have weak potential for exporting to benefit from cheaper labour costs and expand their markets into neighbouring countries, Santi said.

Source: The Nation - 24 August 2007

[TAWP]

Current choice for [us] involved in exports to some extent: You either sell at baht-fixed price at loose customers to a rapidly increased cost-overall for your customers (freight-charges alone are handled in baht and are complained about as it is) or you sell at dollar-fixed price and start to see your profit deminish or walk into a loss on some products.

I'm not saying I'm waiting for a currency-crash, but atleast a restoration to the previous level would be nice...unless you are importing things ofcourse.

Edited August 24, 2007 by TAWP

[Martin]

Of far greater importance to most Thais is the fact that we have good rains and the worries about a partial failure of the rice crop have receded.

[lazeeboy]

Of far greater importance to most Thais is the fact that we have good rains and the worries about a partial failure of the rice crop have receded.

better to make a few baht ,as to non at all...........

[Mid]

better to make a few baht ,as to non at all...........

nothing to do with making money ,

it's about eating next year ...............................................

[A_Traveller]

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

[VegasVic]

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Thanks A_Traveller! I have seen this article discussed on another thread here on TV, it is just one more sign of the devestating effect that the strong baht has had on the Thai economy.

[puipuitom]

Current choice for [us] involved in exports to some extent: You either sell at baht-fixed price at loose customers to a rapidly increased cost-overall for your customers (freight-charges alone are handled in baht and are complained about as it is) or you sell at dollar-fixed price and start to see your profit deminish or walk into a loss on some products.

I'm not saying I'm waiting for a currency-crash, but atleast a restoration to the previous level would be nice...unless you are importing things ofcourse.

Of course start to get the onshore forex, so get payments in in US$ of Euro. Forex vs Euro: 47 + /- 1 THB, so quite stable, and EUROeconomy is the biggest in the world, NOT the US$

I buy in THB but transfer in Euro, in a rather open calculation, at a forex everybody can see at Internet. No discussion with my suppliers, not with my customers, as everybody can see all. seefreight increase: everybody faces the same, so what is the fuzz ?

However, MY experience is, the Thais have to face a real competition for the first time in 50 years: China (and 10 years from now: Vietnam)

Ask a Thai if he/she has ... lychee/mango/papaya/longan 15 oz or in jar, and you will hear: ho have only 20 OZ. A Chinese will say: of course we can make for you.

Ask a Thai to make a label and you have to make a downpayment first, then 1-3 months it is ready and you have to tell EVERY step once a time, never two, as the Thais will oversee step 2. A Chinese: Thursday label idea, Friday first alteration, Saturday few times e-mail corr, and Monday evening ready. The second Chinese supplier believed he could do better and quicker. I refused the other's label, and I got as answer: you cannot see my label properly seen your software. I saw Chinese nr 1 label, mine is better, so I will use my own. Not good, I will send Chinese people to change label in Netherlands !

Can you imagine a Thai having such an own initiative and trust in his own skills ? I not in my experience since 1976. Follow falang. Shall I start to walk with my left foot or my right foot, BOZZ ??

[Johpa]

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Thanks A_Traveller! I have seen this article discussed on another thread here on TV, it is just one more sign of the devestating effect that the strong baht has had on the Thai economy.

My guess this particular story has more to do with monopolies, money laundering, and corruption than a strengthening Baht.