She advised exporters to hedge their foreign-exchange risks rather than rely too heavily on the central bank's intervention.

Tarisa's comments, delivered at an economic seminar, were a reaction to last week's statement from 10 export-oriented associations, threatening to cut their output or shut down completely if the authorities fail to stabilise the baht.

She warned that the baht would certainly continue to gain strength in the near future.

Her comments imply that the impact of currency movement on exports is, in fact, less than exporters believe, while the impact of trading partners' economic growth is much more crucial to Thailand's exports.

Tarisa said the baht had strengthened against the US dollar by 12.8 per cent since the beginning of the year, the highest appreciation in the region. However, if the appreciation is measured from January 2005, the unit has strengthened by only 7.6 per cent, less than other regional currencies.

Compared with early 2005, the South Korean won is stronger by 11.7 per cent, while the Philippine peso has appreciated by 12 per cent. The Chinese yuan has appreciated in that time by only 6.3 per cent.

Yesterday, the baht closed in a range of Bt36.51-Bt36.54 per dollar.

"If we want to solve this problem, we should take a long-term approach," Tarisa said. "That the stronger baht will reduce Thai exporters' competitiveness against Asian rivals is not a serious concern. The foreign-exchange impact in all economic sectors is low compared to the economies of trading partners."

She said solving the problem with currency intervention is not tackling the problem at its roots. Businesses should boost their productivity rather than depending on baht intervention, which would be effective only at a certain level.

A one-per-cent rise in the baht against the dollar will cut exports by 0.1 per cent, she said, while a one-per-cent fall in the gross domestic product of the country's trading partners will result in a 1.44 per cent decrease in the Kingdom's exports.

In the fishery sector, a rise of one per cent in the baht will reduce exports by 0.06 per cent, while a one-per-cent reduction in trading partners' economic growth will cause a 0.53-per-cent fall in exports.

Likewise, in the manufacturing sector, a rise of one per cent in the strength of the baht will reduce exports by 0.07 per cent, while a one-per-cent fall in trading partners' GDP will cut exports by 1.44 per cent.

Tarisa said that despite the stronger baht, the dollar value of Thai exports had grown as much as 20.1 per cent year on year over the first 10 months of the year, while exports in regional markets have also grown by double digits over the same period, despite their stronger currencies.

She said the impact of foreign-exchange rates on exporters also depended on their existing margins. With quite high margins, they are still able to compete as there is room for the margins to fall.

"The BOT understands when exporters urge us to help oversee the baht, otherwise exports will be affected. The central bank has overseen the baht to prevent it from too much volatility. But they [exporters] also have to hedge currency risks. Currently, we see not many of them doing this. Although hedging will bring about costs, the rising baht in the future will cost them much more," she warned.

Speaking on the sidelines of the same seminar, Thai Chamber of Commerce and Board of Trade vice chairman Chatchai Boonyarat said that if the baht continued to move at its current rate, exports would see slower, or even flat growth in the first quarter of next year. Businesses will not be able to continue.

At this level, the cash flow of businesses is affected, not their margins, he said.

Tarisa told the seminar the baht's appreciation was being caused mainly by external factors, as the dollar has been weakening due to the twin-deficit problem in the United States.

There have also been capital inflows into Thailand. Over the first nine months of the year, US$9.7 billion (Bt354 billion) flowed into the country's non-bank sector. Of this, $3.8 billion went to the stock market, $4.5 billion was foreign direct investment and the rest went to other sectors.

Anoma Srisukkasem

 The Nation