Government Asked To Act On Stronger Baht, Protect Exporters

george · November 17, 2006

Government asked to act on stronger baht, protect exporters

BANGKOK: -- Top executives of Thailand's 10 leading business associations representing industries producing, processing and exporting foods, garments and textiles have called on the government and the Bank of Thailand to help relieve their hardship caused by a sharp appreciation of the baht, saying they have been hard hit by the stronger currency and face substantial business losses.

The association executives met on Thursday to urgently discuss the "Impacts of the Continued Strengthening of the Baht", and resolved to submit letters to Prime Minister Surayud Chulanont, Finance Minister Pridiyathorn Devakula, and central bank Governor Tarisa Watanagase, asking them to find an appropriate way to ease their difficulties.

Poj Aramwattananont, President of the Thai Frozen Foods Association, said exporters are suffering from the continued appreciation of the baht, particularly when it strengthened to Bt37.50 to the US dollar and passed its earlier Bt38.39 position against the dollar.

He said the baht had appreciated by 12 per cent since December last year while other regional currencies such as Malaysia's ringgit, the Philippine peso, Indonesians rupiah, and Singapore dollar strengthened by only 3-6 per cent.

The baht has strengthened so sharply that exports had lost their competitiveness.

Should Thailand's currency continue to appreciate, the Thai business associations must reduce their overheads, reduce production and labour costs, and even suspend business operations altogether. Eventually, the associations warned, farmers and workers will lose their jobs.

Mr. Poj said the associations had made four suggestions to face the situation.

First, the government and the central bank must closely supervise the baht and attempt to maintain the currency at an appropriate level. The currency's appreciation by 1-2 per cent is acceptable to exporters.

Second, the central bank should ease its monetary measures by allowing exporters to hold US dollars for more than seven days and reduce the swap fee.

Third, the government must provide subsidy measures to help ease impacts, such as a tax measure and a power bill cut.

Fourth, the government must prohibit presenting news in a way that could dictate the movement of the baht.

--TNA 2006-11-17

cclub75 · November 17, 2006

First, the government and the central bank must closely supervise the baht and attempt to maintain the currency at an appropriate level. The currency's appreciation by 1-2 per cent is acceptable to exporters.

Difficult. BOT has burned itself in 97 by trying this. One solution could be to lower interest rates... But I'm not sure it's a good one. It will create many imbalances. And anyway, it would take time to have an effect.

Second, the central bank should ease its monetary measures by allowing exporters to hold US dollars for more than seven days and reduce the swap fee.

Yes this a technical point that can be addressed.

Third, the government must provide subsidy measures to help ease impacts, such as a tax measure and a power bill cut.

Completly insane. Who will pay ? We saw in the past the burden of Oil Fund and Rice subsidies.

Fourth, the government must prohibit presenting news in a way that could dictate the movement of the baht.

Again, insane and so typically thai : thai have the religion of the "speech". For instance, they believe that if the BOT just "says" that the thai economy is in a very bad shape, then foreign money will flee. Then THB will get weaker.

stoneman · November 17, 2006

Government asked to act on stronger baht, protect exporters

BANGKOK: -- Top executives of Thailand's 10 leading business associations representing industries producing, processing and exporting foods, garments and textiles have called on the government and the Bank of Thailand to help relieve their hardship caused by a sharp appreciation of the baht, saying they have been hard hit by the stronger currency and face substantial business losses.

The Thai government is benefitting from this and will continue to benefit...The largest import for Thailand is oil, which is traded in US$...The strong baht reduces the import cost of the largest import. Another reason that the Thai govt likes the strong baht is that very soon they will be approving some mega projects which will require the importing of millions of dollars of everything from Skytain cars to heavy equipment to new airplanes...All effecively reduced by 10%...thanks to the govt's strong baht.

Francis Maube · November 17, 2006

I guess this is a fine example how competitiviness works. Let's see how the apointed government deals with it. The previous administration would have thrown money into it to sweep the problem under the carpet. Obviously the money would have had to come from somewhere further destabilizing sound economic principle. Productivity is extremely low in LOS as pointed by the new PM in in speech to the foreign press, let's see if he puts his money were his mouth is. Sufficient economy? I suppose ther was a problem with the translation, he might have mean sustainable or perhaps quality economy.

Sophon · November 17, 2006

First, the government and the central bank must closely supervise the baht and attempt to maintain the currency at an appropriate level. The currency's appreciation by 1-2 per cent is acceptable to exporters.

Difficult. BOT has burned itself in 97 by trying this. One solution could be to lower interest rates... But I'm not sure it's a good one. It will create many imbalances. And anyway, it would take time to have an effect.

I think the situation in 97 was the exact opposite of what they want to do now.

Back then they wanted to protect the value of the Baht, and to do so they were buying up Baht and depleting their limited foreign currency reserves. Today they want to weaken the Baht, and to achieve that they would be selling Baht. And they basically have an unlimited supply of Baht.

Sophon