webfact Posted April 27, 2015 Share Posted April 27, 2015 ANALYSISStrong baht aside, export sector needs structural changes, economists warnACHARA DEBOONMETHE NATIONLabour work at Klong Toey port at the period of Thailand's export dropped.BANGKOK: -- THE RELATIVE strength of the baht is just one of the reasons for weakening demand for Thai export products. Other factors are more important, such as a static export structure and lack of improvement in infrastructure, economists say.Kobsidthi Silpachai, head of markets and economic research at Kasikornbank's capital markets business division, said the lack of water-infrastructure projects to prevent another flood disaster like the one in 2011 was an underlying reason for the dismal export performance of the past few years.He noted that there had been little progress on the projects included in the previous elected government's Bt350-billion water-management project. Overseas interests were not given the assurance needed to put more foreign direct investment (FDI) to work in Thailand but rather have gone into other markets such as Indonesia and Vietnam."We estimate that one unit of FDI will equate to 21 export units in the future. So, unless present or future governments can market and execute water-infrastructure projects to ensure foreign investors that no floods like [those of] 2011 occur again, they are more likely to invest money elsewhere, and Thailand will incur a large opportunity cost of lost export upside," he said in an e-mailed interview.According to the World Bank, FDI into Thailand dropped sharply in 2011 from US$9.1 billion in the previous year to $3.87 billion. It picked up to $10.69 billion in 2012 and $12.65 billion in 2013. The figures are high but are only a tiny fraction of FDI into Singapore, which was $55 billion, $50 billion, $61 billion and $64 billion between 2010 and 2013. During those four years, FDI into Indonesia reached $15.3 billion, $20.5 billion, $21.2 billion and $23.3 billion, respectively.Nalin Chutchotitham, HSBC Thailand economist, attributed Thailand's weak export performance to the product mix. The country's top five exports are electronics and electrical appliances; automobiles and parts; food; machinery and equipment; and agricultural products."As 17 per cent of the total are agricultural and agro-industrial products, a significant percentage of Thai exports are affected by low agricultural prices. Meanwhile, some of the key manufactured products such as electronics face strong competition, while others like electrical appliances are affected by weaker demand in Asia," she said, explaining why a weaker baht alone may not be enough to lift export growth.In its "East Asia Pacific Update" released this month, the World Bank highlighted that the main risks to Thailand's economic outlook continued to be the uncertain global environment affecting Thai exports and the slow recovery of Thailand's exports relative to those of neighbouring countries."For Thailand to sustain high levels of growth, the private sector will have to regain a competitive edge in its export-product mix and quality," it said.After zero growth last year, the World Bank expects Thailand to register 3.5-per-cent export growth in 2015. Growth in 2016 is forecast at 4.2 and for 2017 it is forecast at 5.1 per cent.However, domestic sentiment towards the 2015 export figure is pessimistic. While saying that the Bank of Thailand may revise the 2015 growth forecast in June, an official said there was a possibility that exports may not grow as much as 0.8 per cent as currently expected.The Commerce Ministry this month cut its export-growth target from 4 per cent to 1 per cent. This is supported by a 3.5-per-cent contraction in January and 6.14-per-cent contraction in February.DBS Group expects the March figures, to be released this week, to show a contraction of 5.5 per cent.In a research note, HSBC acknowledged Thailand's role as a regional manufacturing hub. However, it noted that competitive pressures had been building up. Thailand's export share has been on a downward trend since the global financial crisis of 2008. A rapid rise in unit labour costs has also eroded its low-cost advantage. Productivity-enhancing reforms and a renewed emphasis on innovation are key to ensuring that Thailand successfully moves up the value chain.Thailand is not alone, though. Some other emerging economies in Asia have witnessed strengthening in their currencies in past years, while unit labour costs are rising as declining surplus labour pushes up wages faster than the rise in productivity. If this continues, their exports will remain disappointing in the years ahead unless they move up the value chain or implement productivity-raising reforms to regain their edge in global markets, HSBC said.In comparison, Indonesia's strengths as a low-cost manufacturing base are becoming clear: Exports of manufactured goods accelerated last year. Indonesia's large, youthful population makes it a natural candidate for manufacturing, the research found.The poor export outlook explains why political pressure has built up to force the Bank of Thailand to cut the policy interest rate, in a last-ditch effort to boost exports, which contribute nearly 70 per cent of gross domestic product. That may not come soon, though, for several reasons. For one thing, the central bank has to make sure that its actions have a balanced effect on growth and financial stability. A lower policy rate may not boost exports as long as the product mix remains unchanged. Worse, it may encourage unproductive investment, which would erode financial stability.Kobsidthi even doubts the effectiveness of a rate cut on economic growth, particularly in regard to domestic consumption, as the country's household debt amounts to more than 80 per cent of GDP."Also, cutting interest rates is unlikely to spur investments unless the government is able to convince the private sector that government-led projects or economic policies will be continued by subsequent governments," he said.DBS economist Gundy Cahyadi noted that it should take at least three quarters before private consumption returns to the pre-2013 crisis trajectory. It could take longer given that consumers are constrained by high debt loads. Low import growth is also an indicator of weak domestic demand."We believe that fiscal policy holds the key to stronger GDP growth going forward. Despite the optimism on fiscal policy this year, the pace of fiscal spending has actually slowed during the current fiscal year compared [with] the 2013 and 2014 fiscal years," he said.Last year, public investment contracted by 6 per cent.Forecasting 3.5-per-cent GDP growth for Thailand this year, the World Bank said exports would pick up slightly as the economies of major economies recover slowly. Tourism receipts, however, should recover in 2015 after contracting last year: Tourist arrivals are projected to rise by 10 per cent this year."Further economic recovery will depend on the competitiveness of Thai export products and political stability in the years to come," it said.Source: http://www.nationmultimedia.com/business/Strong-baht-aside-export-sector-needs-structural-c-30258874.html-- The Nation 2015-04-28 Link to comment Share on other sites More sharing options...
BSJ Posted April 27, 2015 Share Posted April 27, 2015 "Kobsidthi Silpachai, head of markets and economic research at Kasikornbank's capital markets business division, said the lack of water-infrastructure projects to prevent another flood disaster like the one in 2011 was an underlying reason for the dismal export performance of the past few years." That's pretty hard to believe! It maybe part of it, but the underlying reason??? 2 Link to comment Share on other sites More sharing options...
chiang mai Posted April 27, 2015 Share Posted April 27, 2015 He wrote that it was "an" underlying reason, not "the" underlying reason. And yes it is AN underlying reason since companies are not willing to accept the risk that their premises might be flooded again. Link to comment Share on other sites More sharing options...
Popular Post Pimay1 Posted April 27, 2015 Popular Post Share Posted April 27, 2015 I see from the OP photo "safety first" is a priority. 6 Link to comment Share on other sites More sharing options...
Popular Post bdenner Posted April 27, 2015 Popular Post Share Posted April 27, 2015 Yep - Spot the hazard! 3 Link to comment Share on other sites More sharing options...
Thaddeus Posted April 28, 2015 Share Posted April 28, 2015 Yep - Spot the hazard! The scene is missing a meat grinder large enough to push a horse in to it. 2 Link to comment Share on other sites More sharing options...
Thaddeus Posted April 28, 2015 Share Posted April 28, 2015 "Further economic recovery will depend on the competitiveness of Thai export products and political stability in the years to come," it said. Nothing to do with a level of trust or a sign of quality then. Link to comment Share on other sites More sharing options...
Popular Post Expat1 Posted April 28, 2015 Popular Post Share Posted April 28, 2015 Thailand has some major hurdles to jump to increase it's exports. Numerous major mfrs have left recently shifting to Vietnam or Indonesia. My group is looking to install a multi-million dollar factory for new electrical products and have been discussing with several Asian govts on the criteria, advantages and incentives of establishing in their respective countries. No decision is reached as yet mainly because one must determine the level of automation one wants on a factory today vs the host country's ability to supply the proper labor and infrastructure to support that level chosen. We wish to have a high end automated factory bordering on robotic almost. I can say categorically Thailand REALLY wants that factory to showcase such high end facilities operational here however, from the studies so far there is no way that is physically or commercially possible. They have no coherent coordination between departments for permits let alone operation, it is more like loose association of fiefdoms even up to the BOI level each of which can do as they please at any time which no central authority and planning. Not a very good confidence builder for an investor. The interesting thing is on the personnel side if one places a factory of this type in Thailand you can not imagine the number of highly qualified engineers, etc that really want to come and work here fro Europe (ok, maybe you can imagine) because of their perception of quality of life. An interesting conundrum. Add to this the corruption and xenophobia surrounding visa issuance it is doubtful Thailand will be chosen which is a shame on several levels IMO. 9 Link to comment Share on other sites More sharing options...
Eric Loh Posted April 28, 2015 Share Posted April 28, 2015 Government should respond with a robust and unprecedented stimulus package to help the export sector. So far we have not heard of any. So much the government can do like tax reduction for equipments, capital injection, liquidity provision, cut in export duties and excise tax, government delegations to seek more markets etc etc. unfortunately none seen or forthcoming. Anyway, if generals can run the country, then we don't need an army. 1 Link to comment Share on other sites More sharing options...
Suffinator Posted April 28, 2015 Share Posted April 28, 2015 Yes all very well and good but will this involve eradicating the structure of graft, human trafficking and slavery which plagues the entire nation? Just think what Thailand could become if those in positions of power weren't so bloody greedy. 1 Link to comment Share on other sites More sharing options...
elgordo38 Posted April 28, 2015 Share Posted April 28, 2015 They are only focused on a tree not the forest. 1 Link to comment Share on other sites More sharing options...
snowgard Posted April 28, 2015 Share Posted April 28, 2015 I don't know what they are talking about!!! Sometimes I think they are all on drugs that they all the time believe it's grow, grow, grow!!! Talk everything nice if you feel like you die sometimes not work. The realtity is they lost, lost, lost!!! Lost tourists, lost export, lost international Investors, lost trusting from other governments, ...!!! But no one want check and understand it!!! Link to comment Share on other sites More sharing options...
carstenp Posted April 28, 2015 Share Posted April 28, 2015 Thailand has some major hurdles to jump to increase it's exports. Numerous major mfrs have left recently shifting to Vietnam or Indonesia. My group is looking to install a multi-million dollar factory for new electrical products and have been discussing with several Asian govts on the criteria, advantages and incentives of establishing in their respective countries. No decision is reached as yet mainly because one must determine the level of automation one wants on a factory today vs the host country's ability to supply the proper labor and infrastructure to support that level chosen. We wish to have a high end automated factory bordering on robotic almost. I can say categorically Thailand REALLY wants that factory to showcase such high end facilities operational here however, from the studies so far there is no way that is physically or commercially possible. They have no coherent coordination between departments for permits let alone operation, it is more like loose association of fiefdoms even up to the BOI level each of which can do as they please at any time which no central authority and planning. Not a very good confidence builder for an investor. The interesting thing is on the personnel side if one places a factory of this type in Thailand you can not imagine the number of highly qualified engineers, etc that really want to come and work here fro Europe (ok, maybe you can imagine) because of their perception of quality of life. An interesting conundrum. Add to this the corruption and xenophobia surrounding visa issuance it is doubtful Thailand will be chosen which is a shame on several levels IMO. I like you post. hitting the nail of the big problems Thailand has right now, but need a little more facts, cause i follow the marked very closely and not being able to find this . You say Numerous major mfrs have left recently shifting to Vietnam or Indonesia. Can you tell me who there are, what group? Link to comment Share on other sites More sharing options...
snowgard Posted April 28, 2015 Share Posted April 28, 2015 TOYOTA left a part Link to comment Share on other sites More sharing options...
LindaLovelace Posted April 29, 2015 Share Posted April 29, 2015 Thailand has some major hurdles to jump to increase it's exports. Numerous major mfrs have left recently shifting to Vietnam or Indonesia. My group is looking to install a multi-million dollar factory for new electrical products and have been discussing with several Asian govts on the criteria, advantages and incentives of establishing in their respective countries. No decision is reached as yet mainly because one must determine the level of automation one wants on a factory today vs the host country's ability to supply the proper labor and infrastructure to support that level chosen. We wish to have a high end automated factory bordering on robotic almost. I can say categorically Thailand REALLY wants that factory to showcase such high end facilities operational here however, from the studies so far there is no way that is physically or commercially possible. They have no coherent coordination between departments for permits let alone operation, it is more like loose association of fiefdoms even up to the BOI level each of which can do as they please at any time which no central authority and planning. Not a very good confidence builder for an investor. The interesting thing is on the personnel side if one places a factory of this type in Thailand you can not imagine the number of highly qualified engineers, etc that really want to come and work here fro Europe (ok, maybe you can imagine) because of their perception of quality of life. An interesting conundrum. Add to this the corruption and xenophobia surrounding visa issuance it is doubtful Thailand will be chosen which is a shame on several levels IMO. I like you post. hitting the nail of the big problems Thailand has right now, but need a little more facts, cause i follow the marked very closely and not being able to find this . You say Numerous major mfrs have left recently shifting to Vietnam or Indonesia. Can you tell me who there are, what group? Why bother? It's been in the news. You can Google it. All other things aside, it just seems logical that the strong baht is ultimately the root of the problem. How can one compete on the world market, when, all other things being equal, one's prices are automatically higher? The strong baht certainly benefits Thailand's wealthy elite, who have been diversifying their portfolios overseas as a hedge against another local meltdown. Before accusing me of being a conspiracy theorist, let me say I have read several articles in the business news ove the past year or more about such diversification, notably by the CP Group and also PTT. Link to comment Share on other sites More sharing options...
Thaddeus Posted April 29, 2015 Share Posted April 29, 2015 They are only focused on a tree not the forest. And it isn't even the right tree. Link to comment Share on other sites More sharing options...
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