Private Sector Urges Thai Govt To Leave Exchange Rate Alone

[webfact]

Private Sector Urges Govt to Leave Exchange Rate Alone

BANGKOK: -- The private sector is warning the government not to issue any statement which could mislead the money market or draw in foreign speculators.

Instead, businesses are asking the government to leave the exchange rate to the central bank.

Vice President of the Federation of Thai Industries Tanit Sorat has commented on the recent remark made by Deputy Prime Minister Kittirat Na Ranong, who is also the finance minister, on the exchange rate, saying that the government should not make any statement which could draw in foreign currency speculators.

Tanit said the government should consider its policies carefully.

He pointed out that even though Kittirat's suggestion for a weaker baht to boost export may benefit some businesses, it may also have a negative impact on others.

Tanit is urging the government to cautiously weigh pros and cons to balance the revenue from export and import.

At the same time, President of TISCO Securities Paiboon Nalinthrangkun, who is the head of the Federation of Thai Capital Market Organizations, advised the government to leave the issue of the exchange rate to the market mechanism with some oversight from the Bank of Thailand.

He claimed that the exchange rate should not be excessively interfered with or it would destabilize. Paiboon also stated the exchange rate is difficult to control.

It has been calculated that from the beginning of this year, 295 billion and 79 billion baht in foreign capital have already entered the Thai bond and stock markets respectively.

The baht has appreciated by 2.57 percent from 31.54 baht per US dollar to 30.73 baht, which is deemed by businesses to be suitable for both export and import.

-- Tan Network 2012-03-30

[swifty5x5]

Hear Hear.

[geriatrickid]

The article is very misleading. This is one trade association, and one with a very specific vested interest at that. There are over 100 trade associations in Thailand, each with a specific interest.

Thai business industry groups need to get on the same page because the largest and most powerful component, the exporters want action. The FTI is a matchmaking service for Thai companies looking for foreign business partners. it does not represent the private sector. Therefore it is misleading to present one group as representative of the private sector.

Ranging from the Thai Frozen Food Association to the Thai Handicrafts Manufacturers and Exporters Association, there are over 100 trade associations operating in Thailand. The associations vary greatly in size, industry and nature but usually have the common purpose in promoting the interests of the specific industrial enterprise, producer or service provider they represent.

I am not arguing whether or not it is good to devalue the baht, just that IMHO this news article is biased so as to misrepresent private sector opinion.

[Pib]

Let's do a test: only give farangs a higher exchange rate, say 35 baht to 1 USD and let's see if it hurts the economy.

I volunteer to help do this test using my own dollars and I will provide a monthly report to the govt as to if it has had a negative effect on my household economy. Any other test volunteers?

[MEL1]

Private Sector Urges Govt to Leave Exchange Rate Alone

What's the difference between the private sector and the Govn't?

Those that don't own the Private Sector are not in the Govn't.... and they won't make big profits.

mel.

[volk666]

Federation of Thai Industries is probably the biggest outfit there, certainly one of the loudest.

Cheaper baht will affect everybody, not just exporters.

One of the main worries is that there are foreign funds they that can bet against government intervention in currency market and win. Also with rising oil prices making it even more expensive to import will drive inflation even higher, long before income from rising exports will trickle down to common men.

There's also a question of imports - what if flood damaged companies need to import machinery? They already have rising labor cost, all they need is higher import bills to top it up.

[IsaanUSA]

Federation of Thai Industries is probably the biggest outfit there, certainly one of the loudest.

Cheaper baht will affect everybody, not just exporters.

One of the main worries is that there are foreign funds they that can bet against government intervention in currency market and win. Also with rising oil prices making it even more expensive to import will drive inflation even higher, long before income from rising exports will trickle down to common men.

There's also a question of imports - what if flood damaged companies need to import machinery? They already have rising labor cost, all they need is higher import bills to top it up.

So what is your stance on the issue raised in this thread? Do you want the government to meddle with the exchange rate, or do you want the central bank to make adjustments?

[geriatrickid]

Federation of Thai Industries is probably the biggest outfit there, certainly one of the loudest.

Cheaper baht will affect everybody, not just exporters.

One of the main worries is that there are foreign funds they that can bet against government intervention in currency market and win. Also with rising oil prices making it even more expensive to import will drive inflation even higher, long before income from rising exports will trickle down to common men.

There's also a question of imports - what if flood damaged companies need to import machinery? They already have rising labor cost, all they need is higher import bills to top it up.

I disagree. FIT is not really a trade group representative. It seeks out "partners" and investors for Thai companies. As well, it speaks alot making pronouncements (remember how off base they were with the petroleum tax issue in January?) but the members of FIT rely on their own trade group associations to advocate on their behalf.

In respect to the large manufacturing groups, many if not most are already proiding compensation in excess of the minimum wage requirements. (The labour shortage forced that.)

In respect to the import of industrial machinery, the government has incentives and tax waivers that benefit manufacturers' purchase of equipment. In the case of large industrial estates, large scale purchases are not going to be hurt by a 5-10% devaluation.

Edited March 30, 2012 by geriatrickid

[MEL1]

Federation of Thai Industries is probably the biggest outfit there, certainly one of the loudest.

Cheaper baht will affect everybody, not just exporters.

One of the main worries is that there are foreign funds they that can bet against government intervention in currency market and win. Also with rising oil prices making it even more expensive to import will drive inflation even higher, long before income from rising exports will trickle down to common men.

There's also a question of imports - what if flood damaged companies need to import machinery? They already have rising labor cost, all they need is higher import bills to top it up.

So what is your stance on the issue raised in this thread? Do you want the government to meddle with the exchange rate, or do you want the central bank to make adjustments?

Just who is/are the central bank, without Govn't interference?

-mel.

[volk666]

My stance is that the position of Finance Minister wasn't designed to mess with exchange rate and so Kittirat should mind his own business.

I don't remember how off base FTI was regarding fuel taxes back in January.

In the case of large industrial estates, large scale purchases are not going to be hurt by a 5-10% devaluation.

What is large industrial estates? Normally it would mean something like Amata and they are not buying any machinery, they develop sites for companies to build their factories, GeriatricKid must be talking about something else.

I just thought of another reason to replace the existing machinery - rising labor costs. That would mean that not only labor suddenly becoming expensive, but the robots aren't getting any cheaper, too. I don't have any numbers to back it up, though, but, generally speaking, all machinery in Thailand is imported and tax waivers already in place aren't going to mitigate losses from newly introduced exchange rate. They need new tax breaks for that.

I love how it is all about large companies being taken care of and protected. Tens of millions of Thais work for no name SME's but who cares, it's all about large businesses with this government, isn't it? They got their priorities right, taking care of their own, but what about bulk of the poor? Are they good only as cannon fodder for Rajprasong? No one remembers them once they got in power, god, those reds don't even remember themselves.

You can count on "yellows" to oppose amnesty plan. Red opposing amnesty for Abhisit, Suthept, Sonthi the Coupmaker and even Prem - no way, it's all good, the survivors don't care about their lost brothers anymore. Those corpses were good once for parading around the capital but now they are of no use, it's all a scramble to keep that 300 baht paying job now, all other red "brothers" can rot in poverty for the rest of their lives.

Rant over.

[volk666]

Next time victims of 2010 want to stage the demonstration they should go to PTP building and target the government, not Abhisit et al.

[hellodolly]

Well I get a comfortable amount of money every month.

If they devalue the baht I will receive enough to live in opulence.

Really didn't come here to live that way especially as it will hurt the majority of Thais.

[surangw]

the gov. sets the rate, not the world market?

[ralphlsasser]

the gov. sets the rate, not the world market?

They will tell you the world market does, but like everything in Thailand, it has to be taken with a grain of salt. After the 5th of the month the exchange rate starts to climb. In the last few days of the month, around the time retirement fund start coming in, it drops to where it started from at the beginning of the month. They say the market does it. That is utter BS. The government does.

[geriatrickid]

My stance is that the position of Finance Minister wasn't designed to mess with exchange rate and so Kittirat should mind his own business.

I don't remember how off base FTI was regarding fuel taxes back in January.

In the case of large industrial estates, large scale purchases are not going to be hurt by a 5-10% devaluation.

What is large industrial estates? Normally it would mean something like Amata and they are not buying any machinery, they develop sites for companies to build their factories, GeriatricKid must be talking about something else.

I just thought of another reason to replace the existing machinery - rising labor costs. That would mean that not only labor suddenly becoming expensive, but the robots aren't getting any cheaper, too. I don't have any numbers to back it up, though, but, generally speaking, all machinery in Thailand is imported and tax waivers already in place aren't going to mitigate losses from newly introduced exchange rate. They need new tax breaks for that.

I love how it is all about large companies being taken care of and protected. Tens of millions of Thais work for no name SME's but who cares, it's all about large businesses with this government, isn't it? They got their priorities right, taking care of their own, but what about bulk of the poor? Are they good only as cannon fodder for Rajprasong? No one remembers them once they got in power, god, those reds don't even remember themselves.

You can count on "yellows" to oppose amnesty plan. Red opposing amnesty for Abhisit, Suthept, Sonthi the Coupmaker and even Prem - no way, it's all good, the survivors don't care about their lost brothers anymore. Those corpses were good once for parading around the capital but now they are of no use, it's all a scramble to keep that 300 baht paying job now, all other red "brothers" can rot in poverty for the rest of their lives.

Rant over.

One of the biggest myths circulated is the importance of small business. Yes, they employ alot of people, but these are not the businesses that drive the economy, nor generate government revenues in Thailand. The smaller companies tend to be service industry focused and do not purchase expensive imported machinery or equipment. They typically do not provide the higher wages or the health benefit packages. Almost all of Thailand's business tax revenues are generated by the large industries or multinational enterprises. who do you think is going to be more compliant in filing service related taxes? Centara resorts or a flophouse in Pattaya? KFC or the somtam moto lady? The farang working IT out of his house in Koh samui or Accensure and its Bangkok office? Who will pay their monthly tax instalments promptly?Toyota and Honda or Jip the small retailer?

Thailand has special incentives and tax policies for new industrial plants. As well, any additional equipment costs are accounted for when profits are taxed. Operating costs are deducted from revenues. Again, a 5-10% increase in costs is not going to cause damage to mid or large companies. The small companies are typically service industries and they are not purchasing expensive imported equipment. There will be some specialty smaller firms that might suffer, but their hardship will be offset by the gain from others.

Yes, the big companies need to d encouraged as they are the ones generating the much needed tax revenues and FX that allow Thailand to provide social services. Now just imagine if the government improved income tax and small business tax collection compliance.

[geriatrickid]

Norway has one of the better economic positions at this time (thanks to its oil). I liked this comment;

Norway's Central Bank can't be held accountable for industrial competitiveness and exchange rates when setting monetary policy. - Governor Oeysten Olsen Feb. 11, 2011

Although a country's central bank is responsible for the execution of monetary policy, the elected government most certainly has a right and a responsibility to provide its position. Monetary policy is a part of an elected government's mandate to set economic policy. One cannot argue against whether or not the finance minister should be providing guidance, as he has that right. and obligation.

On the other hand, should the finance minister be sticking his nose into the matter is another issue. If the finance minister has received counsel from competent economic advisers, yes. If not, he must yield to the central bank governor.

[whybother]

One of the biggest myths circulated is the importance of small business. Yes, they employ alot of people, but these are not the businesses that drive the economy, nor generate government revenues in Thailand. The smaller companies tend to be service industry focused and do not purchase expensive imported machinery or equipment. They typically do not provide the higher wages or the health benefit packages. Almost all of Thailand's business tax revenues are generated by the large industries or multinational enterprises. who do you think is going to be more compliant in filing service related taxes? Centara resorts or a flophouse in Pattaya? KFC or the somtam moto lady? The farang working IT out of his house in Koh samui or Accensure and its Bangkok office? Who will pay their monthly tax instalments promptly?Toyota and Honda or Jip the small retailer?

Thailand has special incentives and tax policies for new industrial plants. As well, any additional equipment costs are accounted for when profits are taxed. Operating costs are deducted from revenues. Again, a 5-10% increase in costs is not going to cause damage to mid or large companies. The small companies are typically service industries and they are not purchasing expensive imported equipment. There will be some specialty smaller firms that might suffer, but their hardship will be offset by the gain from others.

Yes, the big companies need to d encouraged as they are the ones generating the much needed tax revenues and FX that allow Thailand to provide social services. Now just imagine if the government improved income tax and small business tax collection compliance.

You're comparing the largest multi-nationals to the smallest of businesses. There are plenty of medium and large businesses in between. The large multi-nationals get a lot of incentives and rebates to locate to particular countries and locations, and they are also very good at minimizing the taxes that they should pay. It's the local suppliers and service companies that don't get the rebates and incentives and can't hide their income to avoid tax that end up giving the government more revenue.

[animatic]

External purchases would go up. likely oil being the 900 lb gorilla.

But exporters will sell more stuff and export is a high percentage of national income.

I have seen the baht as artificially low for some time, partly to offset oil price rises.

To have it moderate to the 35-38 range would strike a balance to the market,

and it's historic levels prior to the world recession. You can only offset oil so long

before it catches up with the balance sheet.

But really, what does a kilo of sugar cost in any regional country,

if the value is on par, if not manipulated by subsidies, then it is relational.

[volk666]

Why what they do in Norway should be an example for Thailand? Did Norway politicians ever screw up the exchange rate like Thais did in 1997? Does Norway feel cautious about huge money inflows in their currency that they can't control and can't fight against every if they wanted?

The more Thailand artificially tries to move its currency the more foreign funds will invest in this play in anticipation of inevitable swing back. They can easily put a lot more money than Bank of Thailand and force it to abandon baht intervention, force currency to move where it belongs, then they can reap their 10% benefits (assuming Kittirat wants to devalue baht by 10%).

Keeping the baht artificially cheap requires funds to fight off market forces, Kittirat feels that Bank of Thailand has enough and he is willing to invest those funds into currency support. It's a very risky move and it's not his money to play with. He hasn't produced any income for the government or the country yet, only mounting liabilities, so he wants to play with someone else's money even when it's outside of his legal sphere of influence and against the overwhelming chorus of protests. This is not going to end well.

There are hundreds of affected companies in flooded industrial estates, they all import machinery and only few of them are the size of Honda or Nestle or Toshiba. If they need to replace their damaged machinery they will need to import it and they are not going to like the sudden 10% increase in import bills. The move, if it happens, might too late to affect them, though, it's just one of the possible negative outcomes from baht devaluation.

It looks like Kittirat cannot manage the economy as it is, he wants to make it into something else first, then he would know what to do. All agencies predict 4-5% growth this year but that's not enough for him, he wants it to go into overdrive with 7-10% growth but no one really wants to stress themselves that much, Kittirat's hyperactivity is not that contagious and people are more concerned with managing risks and downsides than with going for wild, unrestricted growth instead.

In fact most of the social problems in the country result from unbalanced growth of the past thirty-forty years and now this "red" government wants to solve them by growing even faster.

Let them have it, let them have higher wages for Bangkokians and higher prices for everyone else. That would do magic to inequality and fair income distribution. Let them all pay for new school uniforms in exchange for tablets for one in ten children. Democrat support base will survive through PTP growth just fine but they seem to worry about PTP support base even more.

[geriatrickid]

LOL @ above.

Maybe you should read this.....

[h90]

The article is very misleading. This is one trade association, and one with a very specific vested interest at that. There are over 100 trade associations in Thailand, each with a specific interest.

Thai business industry groups need to get on the same page because the largest and most powerful component, the exporters want action. The FTI is a matchmaking service for Thai companies looking for foreign business partners. it does not represent the private sector. Therefore it is misleading to present one group as representative of the private sector.

Ranging from the Thai Frozen Food Association to the Thai Handicrafts Manufacturers and Exporters Association, there are over 100 trade associations operating in Thailand. The associations vary greatly in size, industry and nature but usually have the common purpose in promoting the interests of the specific industrial enterprise, producer or service provider they represent.

I am not arguing whether or not it is good to devalue the baht, just that IMHO this news article is biased so as to misrepresent private sector opinion.

I think most exporters want that the government is not playing with the exchange rate. I as exporter would, of course like a weaker Baht. But I don't want this government to play around with the exchange rate.

Increase minimum salary and devalue the Baht=Decrease everyones salary....