Thursday, June 25, 2009

Thailand fails to halt dramatic export fall

Govt efforts fail to halt dramatic export fall

The government's efforts to drive exports are not effective enough to avert the country's worst slump in overseas sales since 1992, the University of the Thai Chamber of Commerce said yesterday.

The UTCC predicted that exports would contract by 17.7 per cent this year to US$146.33 billion (Bt5 trillion), a dramatic turnaround from last year's growth of 16.9 per cent.

Exports in the third quarter will drop to the lowest level for six years, shrinking 22.3 per cent year on year, as economic conditions remain poor.

In the worst case, exports could contract 22.7 per cent this year to $137.47 billion, the UTCC added.

Plunging exports signal that gross domestic product could shrink by more than 3-3.5 per cent, as exports make up about 65-70 per cent of GDP.

The main factors leading to the sharp export contraction are the global economic slump, increasing oil prices, the strengthening of the baht and the inefficiency of official measures to boost export growth, said the university.

The predicted 17.7-per-cent export fall is based on global trade dropping by 11 per cent, an average oil price of $63 per barrel and the baht averaging 34.4 against the US dollar.

Aat Pisanwanich, director of the UTCC's Centre for International Trade Studies, said exports would drop more sharply than during other crises because of the extent of this year's global economic meltdown.

"Many negative factors have caused exports to drop. Despite the government's attempts to boost exports, its measures are not |efficient enough to cope with the global economic downturn," he said.

He said the government's many overseas roadshows to promote exports to target and potential markets still lacked coordination between government agencies and the private sector.

The government must therefore increase its cooperation with the manufacturing and export sectors when drawing up export-promotion plans.

An intelligence unit to provide in-depth information on target markets and potential new markets is also needed, so that exporters can for example be alerted of any barriers that might obstruct trade growth, said Aat.

In drawing up its export-promotion strategies, the government must set up an 'Export Warning System', giving companies advance overseas trading and customs information.

The UTCC's forecast of a 17.7-per-cent export contraction takes into account the government's plan to inject financial liquidity for exporters, as well as moves to cut some import tariffs, he said.

The university predicts that exports to the traditional markets of the United States, Japan and the European Union's first 15 member countries will drop by 21.7 per cent this year, while exports to new potential markets in Africa, the Middle East, Latin America and Eastern Europe will fall by 16 per cent.

Exports to markets such as South Korea, Australia, Canada and Taiwan will fall 15.3 per cent, it said.

Imports this year are expected to drop by 25.7 per cent to $132.69 billion, resulting in a trade surplus of $13.63 billion. Aat said a higher trade surplus could cause the baht to appreciate.

Chainant Ukosakul, vice chairman of the Thai Chamber of Commerce's committee on trade rules and international trade, said the government must concentrate on solving exporters' liquidity problems, as many of them lack the finance to run their businesses because of lower income.

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