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Posted

Dong devaluation a blow for Thai rice firms

By Business Reporters

The Nation, Agence France-Presse

Published on November 27, 2009

But views differ on overall effect on exporters

This week's devaluation of the dong will affect Thai rice exports, particularly to the Philippines, as it strengthens the competitiveness of Vietnamese exporters.

Manila normally prefers to import rice from Vietnam rather than Thailand due to its lower cost. The 5.5-per-cent devaluation of the dong will now enable Vietnamese exporters to quote even lower prices of goods, at the expense of the Kingdom.

However, opinions were mixed yesterday on the overall impact of Vietnam's move.

Some exporters predicted the devaluation would hit Thai exports this quarter, while Finance Minister Korn Chatikavanij said Thai trade was unlikely to be affected by Vietnam's decision to devalue and to hike interest rates.

Vietnam's central bank made the moves on Wednesday in a bid to ease pressure on the dong and to calm inflation, which has risen at the fastest pace in six months this month.

"Vietnam's decision to devalue the dong will not affect exports or other currencies in the region," Korn told reporters. "Thailand has no plan to hike its interest rate any time soon."

The minister said the premium quality of Thailand's rice insulated it from competition with Vietnam.

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said firms would face more difficulty competing with Vietnamese exports due to the wider price gap between Thai and Vietnamese rice.

"The price of Vietnamese rice is much lower than Thai rice due to the weaker dong. The depreciation will cause export difficulties for Thai rice," said Chookiat, adding that Thailand will definitely lose its export market in the Philippines, which already generally favours cheaper rice from Vietnam.

Five-per-cent Vietnamese white rice is quoted at US$480-$500 (Bt15,909-Bt16,572) a tonne, while Thai rice is quoted at $560. Following the weaker baht, Vietnam rice should drop to $460-470 a tonne, assuring Vietnam of winning the Philippines' bidding for 600,000 tonnes of rice next month, according to the association.

Phongsak Assakul, vice president of the association, expressed concern that the currency move would slow the recovery in Thai export growth this quarter, due to tougher competition from Vietnam.

"Vietnam has chosen a suitable time to weaken its currency during a recovery in global economic growth. Purchasing orders will go its way because of lower prices," he said.

Phongsak suggested the Bank of Thailand should control the baht to ensure competitiveness, as the weaker dong would affect Thai export growth. The government may not have to announce a weaker unit, but it should ensure the baht is not too strong compared with other currencies.

Dej Pathanasethpong, president of the Thai Garment Manufacturers Association, said Vietnamese businesses would not necessarily cut export prices following the dong's depreciation.

Early this week, he visited Vietnam and met executives of a garment firm in Hanoi. They told him the company had no need to reduce export prices. Vietnamese exporters compete with China and therefore want competitive prices, but they do not need to be reduced further.

He said garment exporters, particularly in Thailand, should not merely focus on trying to match the price of Chinese goods. Chinese garments control 35 per cent of world trade, so firms should be competitive in terms of quality as well as price.

"At the same manufacturing standard and for the same goods, we don't have to offer the cheapest price but take care that our prices are not higher than China's," Dej said.

The currency devaluation in Vietnam will lead to business conflict among Vietnamese exporters because of price-cutting, he added.

Thanavath Phonvichai, director of the University of the Thai Chamber of Commerce's Economic and Business Forecasting Centre, said the weaker dong should not have a major impact on Thai export competitiveness.

"Although Vietnam is one of our major export rivals, it should not affect the growth of Thai exports, as most export products of Vietnam are commodities, while Thai products have better innovation," he said.

Thailand and Vietnam focus on different markets. If the currencies of other Asian countries like Malaysia and Indonesia have not weakened, Vietnam's move should not cause difficulty for Thai exports overall, he added.

However, Thanavath predicted that the baht was likely to appreciate by 3-5 per cent against the US dollar next year. If the government can create baht stability and assure it moves in line with other neighbouring countries' currencies, then it should not affect export competitiveness next year, he said.

Santi Vilassakdanont, chairman of the Federation of Thai Industries, said the dong's depreciation would affect some Thai sectors, such as rice and textiles, as they have to compete with much lower Vietnamese costs.

"The government must find measures to support exporters. If other countries, apart from Vietnam, weaken their currencies, Thai exporters will not be able to compete and the country's economic recovery will be delayed," he said.

Kan Trakulhoon, president and CEO of Siam Cement Group, said regional currencies, including the baht, were tending to appreciate against the weaker US dollar.

However, he believes the Bank of Thailand will be able to find measures to stabilise the baht and maintain the country's competitiveness.

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-- The Nation 2009/11/27

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Posted

Thai rice production is one of the most inefficient in the world, using buffaloes, hand planting and ancient machines in small villages to clean the rice.

Instead of moaning about currencies they should mechanize the process, and educate the poor so that instead of a couple of periods of heavy work inter spaced with long periods of watching the rice grow they could work in a more productive environment.

Thaksin started along this line....

Posted
Thai rice production is one of the most inefficient in the world, using buffaloes, hand planting and ancient machines in small villages to clean the rice.

Instead of moaning about currencies they should mechanize the process, and educate the poor so that instead of a couple of periods of heavy work inter spaced with long periods of watching the rice grow they could work in a more productive environment.

Thaksin started along this line....

Growing rice here in Thailand may be inefficient, but the use of arcane methods and tools makes production quite reliable. There isn't much that can go wrong or interfere with its cultivation. Reliance from the outside world (other than petrol) is minimal; no heavy machinery to maintain, no large-scale union conflicts, ect... Besides, buffaloes are really cute, too.

Posted
Thai rice production is one of the most inefficient in the world, using buffaloes, hand planting and ancient machines in small villages to clean the rice.

Instead of moaning about currencies they should mechanize the process, and educate the poor so that instead of a couple of periods of heavy work inter spaced with long periods of watching the rice grow they could work in a more productive environment.

Thaksin started along this line....

Growing rice here in Thailand may be inefficient, but the use of arcane methods and tools makes production quite reliable. There isn't much that can go wrong or interfere with its cultivation. Reliance from the outside world (other than petrol) is minimal; no heavy machinery to maintain, no large-scale union conflicts, ect... Besides, buffaloes are really cute, too.

What you are describing sounds like subsistence farming. Sure, it's reliable, if the goal is for each generation of farmers to pass thier poverty on to the next generation.

Posted
Thai rice production is one of the most inefficient in the world, using buffaloes, hand planting and ancient machines in small villages to clean the rice.

Instead of moaning about currencies they should mechanize the process, and educate the poor so that instead of a couple of periods of heavy work inter spaced with long periods of watching the rice grow they could work in a more productive environment.

Thaksin started along this line....

You've obviously never seen rice production in Viet Nam.

The minister said the premium quality of Thailand's rice insulated it from competition with Vietnam.

This, I think, is the key. Vietnamese rice is totally different to Thai rice and is very similar to that grown in the Philippines which, apart from the price, is a big reason it is preferred there.

Anyway I thought all the rice farms were being bought up by the Arabs to supply the Middle East with rice. :)

Posted
Instead of moaning about currencies they should mechanize the process, and educate the poor so that instead of a couple of periods of heavy work inter spaced with long periods of watching the rice grow they could work in a more productive environment.

That would create a lot of unemployed and therefore dangerous people (at least that's what the ruling elite thinks)

Posted
Anyway I thought all the rice farms were being bought up by the Arabs to supply the Middle East with rice. :)
And you have better keep thinking that way.

Doubting Thai freedom of press and trustworthyness might be considered lese majeste.

Posted

I don't know where some of you guys live but I've never seen a Buffalo working a field here. I've only seen Iron buffalo's for the last 13 years and the last two years a big change to Small & medium size Tractors. Last week a combined harvester was working all day until about 9pm in the fields in front of our place. Not seen or heard much of the familiar Lao Khao induced 'sounds' of people returning from the traditional harvest either this year. Things are changing fast.

Posted
I don't know where some of you guys live but I've never seen a Buffalo working a field here. I've only seen Iron buffalo's for the last 13 years and the last two years a big change to Small & medium size Tractors. Last week a combined harvester was working all day until about 9pm in the fields in front of our place. Not seen or heard much of the familiar Lao Khao induced 'sounds' of people returning from the traditional harvest either this year. Things are changing fast.

well, that's optimistic.

This year out in the paddies I saw a few real buffalo and a couple of "iron buffalo" (good term) churning up the mud, which was then laboriously planted with rice by hand. The local village "rice polishing machine" was in motion a few times, I guess that the previous season's rice was being polished for sale.

Haven't seen any combined harvesters yet.

The whole thing strikes me as being extremely inefficient.

Posted

Thanks. Optimism (if I can spell it) is not something I'm well known for. :)

having no real knowledge of real world economics I only make observations.

things do seem to be changing fast in my kneck of the woods. More efficient ? We'll I couldn't say.

That machine must have deprived a couple of hundred locals of a few hundred baht for sure. Again, just an observation.

Posted
Thanks. Optimism (if I can spell it) is not something I'm well known for. :)

having no real knowledge of real world economics I only make observations.

things do seem to be changing fast in my kneck of the woods. More efficient ? We'll I couldn't say.

That machine must have deprived a couple of hundred locals of a few hundred baht for sure. Again, just an observation.

Spelling is good (but neck does not have a "k", that is reserved for knee, and don't ask my why, seems utterly stupid to me) , my philosophy is that if today is a really bad one, then tomorrow just has to be better.... Although I guess if we talk about the USD and all the dam_n debt being loaded onto the tax payers in the UK and US, then the outlook does look a little bleak. But I'm out of that mess, the weather is good, the food is good, lots of nice girls around and my motorbike is just waiting for the key to be turned....

The "machine" is very primitive, but I don't think that it has taken any THBs from the locals, I would guess that there has always been the "local village rice cleaner".

  • 4 weeks later...
Posted

would any one know of the actual straight of the paddock price when selling to the local rice growers bank or assosciation up in the issan areas (i know this would fluctuate due to grade ). thanks . Heard through the local grapevine it could be 11 bht / kg of the paddock

Posted
Good news for me as I have to buy Dong with US$.

And I've heard that the Dong wil devalue further next year.

Just remember that in Vietnam there are TWO rates! I assume you are buying in Nam (or Cambodia, the only two places I know of to buy it). Since you will buy in Vietnam, just remember that you should buy it from small jewelry shops or mom-and-pop money changers. Do not buy it from banks or the more "official" money changers -- they will give you the "advertised" rate of about 18400 per dollar. Even at the airport you will get about this or they may give you a little more to entice you if they are desperate (Vietnamese rarely give a foreigner a break or good deal). If you buy from the small shops you'll get the real STREET rate which is about 19400 or 19500. The same is true if you have to sell dong, first banks won't sell you dollars so make sure that whatever dong you buy it may not be put back into dollars, unless you go to the black market shops but again you will pay about 19600 per dollar, even though the official rate is like 18400 or so. Therefore, exchange wisely in Vietnam. There are a few money changers in the main Dist 1 area of Le Loi and Nguyen Hue, also on other side of Dist 1 on Cao Thang street just off Pham Ngu Lao. Shop around! The Viets love to take advantage of you.

Posted

^Just changed a load of $$ to Dong using a gold shop and saved US$2,000 on the government rate!

At that exchange it makes sense to fly to VN every time I want to transfer funds rather than use internet banking!!

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