Private sector pushes for curbs on baht
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Make export measures, forex targets top concerns, BOT told
Private enterprises have urged the Bank of Thailand to make export-boosting measures and exchange-rate targets its top concerns, rather than inflation targeting, by urgently tackling the baht’s appreciation, which has seriously hurt not just exports but overall economic growth.
After a meeting between the Commerce Ministry and private organisations yesterday, government officials and enterprises shared a similar view that there is an urgent need for the central bank to launch concrete measures to rein in the baht.
The Commerce Ministry will soon send the results of the meeting to the BOT and the Finance Ministry for use in tackling the currency’s rise.
The meeting agreed that capital controls were essential, as well as a cut in the policy interest rate by 1 percentage point as strong measures to keep the baht above 29-30 against the greenback. This is to ensure strong export growth this year, which is the major economic driver for the Kingdom.
Payungsak Chartsutipol, chairman of the Federation of Thai Industries, said the baht’s strength was unusual. The FTI will on Tuesday meet with the central bank to propose measures for solving the currency’s appreciation.
“Export orders have been reduced for the second and the third quarters of the year because the baht’s strength has made Thai goods expensive and hurt the competitiveness of Thai traders. The baht should be quoted at 30 to the US dollar to ensure strong exports,” he said.
Payungsak said shipments of handicrafts and foods, which rely on domestic raw materials, had dropped by 30 per cent in recent months because of the baht’s rise.
Vallop Vitanakorn, vice chairman of the Thai National Shippers Council, said a rate cut and capital controls were needed soon. Thai shipments in the second and third quarters would continue to drop because of the currency problem, Vallop said.
Pornsilp Patcharintanakul, vice chairman of the Thai Chamber of Commerce, said the currency rate most favoured on average by private enterprises would be Bt30.84 to the US dollar.
Incompetitive
In a University of the Thai Chamber of Commerce survey of trade associations, 53 per cent said they had experienced lower incomes, almost 30 per cent said they could not compete with other countries’ traders because of too strong a baht, 10 per cent said they faced higher costs of production, and 10 per cent said they faced losses from investments overseas.
Pornsilp said the central bank needed to prioritise exports as its top concern. If the government does nothing to rein in the baht, Thai shipments will definitely face negative growth, the chamber vice chairman said.
Somchai Pornchindarak, president of the Thai Gems and Jewellery Traders Association, said exports of gems and jewellery had been seriously hit by the baht’s rise, the dropping gold price and higher wages.
Shipment of such products shrank 48 per cent in the first quarter of this year. With high duties and the stronger baht, Thai jewellery is being quoted at prices that are 30 per cent higher than those of the country’s trade rivals. While Thailand has many negative factors, China and India, two major rivals, have policies to reduce duties to encourage export growth, Somchai said.
He called on the government not only to cut the policy rate, but to bring in capital controls and reduce duties on imports and trading of jewellery.
The association projects that shipments of jewellery and ornaments will decline by 20 per cent this year.
Commerce Minister Boonsong Teriyapirom said the ministry would not yet lower the export-growth target of 8-9 per cent for this year, while admitting that the chances of achieving the goal had fallen because of the stronger baht.
The ministry will retain the goal as a working target.
To promote exports this year, it has launched three new strategies. The first is to penetrate 30 new destinations deemed to have emerging economic growth, and increasing exports under existing free-trade agreements. The second is to encourage cross-border trade growth by 30 per cent this year to Bt1.2 trillion, and the third is to increase trade in Asean.
To strengthen cooperation within the private sector, the ministry will also set up a working committee comprising representatives from private and government agencies who will meet monthly to discuss ways of reducing trade barriers. The first meeting will be held on May 22.
