Pattaya Daily News

08 August 2007 :: 12:08:30 pm 22974

Baht Keeps Climbing, Sinking Thai Exporters

As British novelist Charles Dickens would say, “It’s the best of times and the worst of times.” It’s the best of times if you live in Thailand, get paid in baht, and want to visit the U.S. The baht has risen to a 10-year high against the dollar, a level last reached before the Asian financial crisis of 1997.
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But it’s the worst of times if you’re a Thai exporter, selling your goods in the U.S. or countries whose currencies are linked to the U.S. dollar. Last year alone, the baht soared 14 percent against the dollar, exacting a heavy toll on the Thai economy, where exports account for almost two-thirds of GDP.

Press reports from the region show how the rise of the baht is hurting Thai companies across broad sectors of the economy. For example, an article in this week’s China Post describes the plight of several Thai firms struggling to survive. And some are simply giving up.

Just this week, shoe-maker, Union Footwear, announced that it would close a plant, at the cost of some 2,300 lost jobs. This came after three years of losses, which the company blamed partially on the baht’s rise against the dollar.

In July, a 5,000-worker garment factory near Bangkok closed, sending economic tremors around the country. The government has previously tried to curb the baht’s rise, ordering capital controls in December, but the controls have had little effect.

Thailand’s shrimp industry, the world’s largest shrimp exporter, has also been hard hit. According to Somsak Paneethatyasai, president of the Thai Shrimp Association, exporters have suffered as the baht has risen.

Financial and bank officials hold meetings almost continuously to deal with the crisis, but many experts say that they’re wasting their time. The structure of the Thai economy shapes business toward an ever-increasing trade surplus.

In this environment, foreign cash has flowed steadily into the Stock Exchange of Thailand (SET), a net of $3.6 billion so far in 2007. This influx has increased pressure on the baht, which has been the third-strongest Asian currency this year. It follows only the Indian rupee and the Philippine peso. .

In address the baht’s rise, the Bank of Thailand (BoT) has relaxed rules on foreign currency holdings to try to halt exporters from selling their dollars. It also has begun to encourage more Thais to invest overseas.

Bigger firms are lessening their baht exposure by buying hedging contracts or changing export prices into euros. Its exchange rate has hardly budged this year.

Anusorn Muttaraid, a director of Delta Electronics, Thailand’s biggest listed electronics firm, says that his company has “no currency risk this year. “We have full-year hedging,” he notes. Last year, the firm posted a foreign exchange loss.

Japan is also helping Thailand deal with the baht’s rise. It recently announced a doubling of the amount of foreign currency reserves it provides to Thailand to prevent a financial fiasco. Under a bilateral agreement, Japan will now offer up to US$6 billion from its foreign exchange reserves to Thailand in the event of currency crisis, according to a finance ministry announcement.

Most economists are predicting that Thai export growth will retreat significantly in 2007 – from 17 percent in 2006, to 12 percent this year. To some, this may suggest that exports are doing okay. But it all depends on how you measure changes in exports. For example, exports climbed 18 in June in dollars from last year, but only some 5 percent in baht.

But the growth benefits some sectors of the Thai economy more than others. According to the BoT, the high-technology sector represents most of the export increase.

The plight of one small wood company in Lampang, 600 km (370 miles) north of Bangkok, brings the story home. The firm makes salad bowls, chopping boards and bread bins. Owner Naris Wongsanthitham, age 40, is concerned that the firm might not survive because of the baht’s rise against the dollar.

Naris now spends a lot of his day making calls to customers, asking if he can raise his prices. On the other end of business, he calls suppliers asking, if they can cut theirs. He has also asked his staff, all of them locals who have worked at the factory for years — to take a pay cut from the daily 150 baht they earn to help keep the business running.

His 14-year-old firm lost money last year on sales of 120 million baht (US$4 million). The crux of the problem was the 14 percent increase in the value of the baht against the dollar.

“Business is very bad,” he observes. “The baht is hitting us a great deal.”I’m not sure we can raise prices again. We’ve already done it a few times since last year and most customers are not happy.”

Best of times or worst of times? Sadly, for Naris and many other exporters across Thailand, the answer is the latter.

Reporter : PDN staff   Photo : Internet   Category : Business News

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