Strong, Volatile Baht Adversely Affecting Thai Businesses

[Gaybutton]

Everything is relative. I clearly remember back in the 1970s I was having a conversation with a colleague when gasoline prices went up to US 80 cents per gallon. He said, "I just don't know how we can live with this." I responded with, "What scares me is when 80 cents per gallon will look good."

 

According to the following article, Thai businesses want to see the baht stabilize at 35.60 to the US dollar. A couple of years ago, that would have seemed terrible. Right now, that would be great!

 

The following appears in THE NATION:

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Buoyant Baht 'A Bane'

 

Poll Plumbs Woes of Local Business Community

 

Published on July 21, 2007

 

 

Respondents in a recent poll said the strengthening of the baht was the biggest obstacle hindering their business growth this year.

 

The Chamber Business Poll of the University of the Thai Chamber of Commerce (UTCC) found that 85.8 per cent of respondents felt the rising baht was the biggest obstacle for their business, followed by oil prices and political instability.

 

Other negative factors cited included high interest rates and terrorism.

 

Forty-five per cent of those polled said their income had fallen because of these five negative factors, 41.3 per cent said their income had remained unchanged, and 14.3 per cent said their income had not been affected by these factors.

 

The poll was conducted from July 14-17 with responses from 808 business operators nationwide. The results were announced yesterday, a day after Thai Silp Southeast Asia Import Export again shut down its plants, due to a range of problems, among them the strong baht.

 

The poll showed that respondents were also concerned that the five negative factors would affect tourism, slow down investment and domestic consumption, and lead to a drop in exports.

 

Respondents also asked the government to stabilize the baht, which has been a key factor in delaying new investment this year.

 

They urged the government to cut the policy interest rate by 50-100 basis points if current measures fail to produce the desired effect.

 

Respondents also expected the minimum lending rate to be 6.5-7 per cent.

 

Thanawat Polvichai, director of UTCC's Economic and Business Forecasting Centre, said that lowering the policy rate by 25 basis points had not had any impact on the economy as a whole, as the measure was too small to stimulate other commercial banks into lowering their rates.

 

"The government should consider cutting the interest rate 50-100 basis points soon, because that would control the rising baht," he said.

 

The centre predicted that if such a cut were implemented, the baht would weaken to 34.50 to the US dollar within the next three months.

 

Respondents were most concerned about the unstable exchange rate, as it was a factor beyond their control.

 

"Business people have already adjusted their operations to maintain their competitiveness. They now want the government to take concrete action to help prevent the baht from appreciating [further]," Thanawat.

 

Other areas in which they sought government action include stimulating domestic consumption, setting the date for the national election soon, and solving problems in the deep South.

 

In addition, most respondents said they have no idea whether businesses in their sector had been shut down. However, more than 11 per cent said they believed many enterprises had been closed down because of the impact of the stronger baht, the unstable political situation and rising oil prices.

 

About 17 per cent believed that many businesses lacked liquidity, and 7.4 per cent said businesses were laying off workers.

 

Yajai Chuwicha, head of UTCC's Business Poll, said more than 35 per cent of respondents said their sales had dropped gradually because of the firmer baht, while 30 per cent said their profits had also decreased for the same reason.

 

Respondents shared the view that an acceptable exchange rate for the baht for businesses was 35.60 to the dollar and that for companies to survive, it should not be stronger than 34.90.

 

 

 

Petchanet Pratruangkrai

 

The Nation

[Guest luvthai]

At this point I am not sure there is anything they can do to halt the rise of the baht. It may have to run its course and then crash before anything can be done to stabilize it.

[Bob]

Regardless of the reasons for the US dollar fall against most other currencies, it is a miracle that the baht is rising against anything. The Thai economic growth rate has been dropping for three years, the price of oil has caused substantial problems, the tourist arrivals are significantly down (in spite of the bull put out by TAT, the Chiangmai Mai recently reported that hotel occupancy in Chiangmai is down a staggering 17% for 2007 - an amount that won't take long to cause the hotels to crash), and the export market is heading south (part of which is due the rise in the baht and the other, probably more significant factor, is due to the fact that China, Vietnam, Indonesia, and other area economies are taking over Thai markets). And all of this occurring in the midst of some political instability.

 

I wish good things for Thailand but, unless something changes soon, I'd bet dollars (yep, not baht) that a significant recession hits Thailand within the next 6-8 months.

[Guest tdperhs]

I am not generally a conspiracy theorist but it seems to me that the one nation that benefits the strengthening of the baht the most is mainland China. With the yuan still tied to the U.S. dollar and the dollar sliding heavily against the baht, Thailand's ability to compete with China in exports is impacted dramatically. China has numerous offshore agencies and partners who could be buying up baht. It is one of the few countries that can afford to float such a deal. If I am right, as the yuan starts getting distanced from the dollar, I believe you will start seeing a weakening of the baht.

[Guest BKKvisitor]

 

I'm usually not inclined to subscribe to conspiracy theories but in this case, it appears to be more than traditional supply and demand that's driving the appreciation of the baht. As pointed out above, China has much to gain as the baht rises and its one of the few large enough to manipulate it.

 

The BOT has tried and failed several times but failed because it lacks experience and resolve. Now it's relying on the tried and true method of raising interest rates which usually works but slowly. It will probably require another 75-100 basis points to be effectively stem the tide.

 

But as most readers here visit Thailand, or living on income denominated in other currencies, we need to deal with the practical aspects. Some are sufficiently solvent to handle the rising costs without changing their spending habits but most have to adjust in one or more ways. I'm in the process of planning my trip now and the first thing to catch my attention was hotel costs. I used to stay some of the nights at various 4 and 5-star hotels about Bangkok where even last year you could find some good rates at vendors like Asia Rooms. No so this year so I'm going down market fore the entire trip. But if you usually stay at Pinnacle or Malaysia, the prospect of going down market isn't a very appealing option (this is not a put down of either place; I've stayed at both frequently and find them wonderful values).

 

I'll probably be visiting the Soi 4 bars less frequently or for one drink instead of two or three. And I'll be a bit more discriminating about letting a new friend deposit the contents of his bill cup into mine (a practice some Balcony boys seem to do automatically). Since I generally don't patronize the show bars, I don't have to deal with off fees. My eating habits won't change (I developed a short list of places where I find good value and plan on sticking with them).

 

There may be one silver lining: I'm going to have to resort to the traditional way of meeting new people: cruising. It has many advantages (it's free; it can be conducted just about anywhere; it expands your "universe" beyond the regular haunts and can--at times--be quite exciting. The disadvantages? it's a more time consuming and less reliable method.

 

The following link contains some interesting, world-wide comments about traveling in a time of currency speculation:

 

http://www.miamiherald.com/986/story/175646.html

[Guest]

The following link contains some interesting, world-wide comments about traveling in a time of currency speculation:

 

http://www.miamiherald.com/986/story/175646.html

 

Thanks for that link. A very good article. I was in Spain recently and had a great time. They do have "money boy" saunas and the rate is about 50E. Not great but not bad either. The hotels there are great and there is a wonderful gay beach and many clubs.

 

Brazil is still a bargain but its currencly has also made it hard to have a good time there. The boys in the Saunas there go for abotu 30USD. Nice hotels can be had and the food is excellent.

 

Friends go to Argentina all the time and say it is amazing there.

 

One friend goes to Mexico often and loves it there and then flys over to Cuba where he says they love the USD and the cost of things there are still amazing. The boys are also very sexy and readily available.

[Guest BKKvisitor]

I've never been to Rio but it's on my short list. Argentina is definitely worth a visit and remains a bargain. But I still return more often to the LOS than all of the others combined.

[Guest]

I've never been to Rio but it's on my short list. Argentina is definitely worth a visit and remains a bargain. But I still return more often to the LOS than all of the others combined.

 

It really does depend on what you are looking for. If you like twinks, the Thailand rules. If you like muscle guys and larger built guys, you will be in heaven in Rio. The gay beach in Ipanema is fantastic and has some of the best eye candy on earth. The guys are not for "rent" but will happily go with you and get to know you.