The industrial sector may miss its target of 7 per cent growth this year, because of the stronger baht and unstable economic policies, says Federation of Thai Industries (FTI) chairman Santi Vilassakdanont.

"The FTI is surveying operating results from each industry to estimate industrial growth this year," he said.

"I accept it will be very hard to achieve growth of 7 per cent this year. I believe many companies will show a loss or lesser profit in their first-quarter reports."

He added: "I am very concerned that the export business - especially in the textile and food industries - will face considerable losses in the second quarter if the baht keeps growing stronger."

Regarding the possible end to the Bank of Thailand's 30-per-cent capital controls, at the behest of new Finance Minister Chalongphob Sussangkarn, Santi said he did not mind what measures the minister used to prevent stimulation of the baht, but the baht must not grow any stronger.

He said he was concerned that investors would lose confidence in expanding their businesses in Thailand because of the rapid changes in economic policy and the cloudy political situation.

However, if the Bank of Thailand "dumps" the interest policy rate, it would help local operators in terms of lessening their production costs and would encourage more domestic consumption and investment.

Meanwhile, the FTI joined forces with the Office of Small and Medium Enterprise Promotion (Osmep) yesterday to announce two projects aimed at enhancing competitiveness in the SME sector.

They are a business-matching project and a machine fund.

Santi said business matching would provide an opportunity for SME operators to meet potential international buyers. It would also represent a middle market for trading in raw materials and industrial parts.

It will cost Bt35 million to stage the matching events in the five regions of Thailand as well as in China, Vietnam, Laos, Cambodia, Malaysia and Africa.

The machine fund, which has a government budget of Bt170 million, will provide financial assistance to SMEs that need to buy or renovate their machinery.

Operators joining the project will receive 3 per cent of interest payments over five years by way of support from Osmep.

Santi said the project would also reduce the amount of machinery being imported into the country.

FTI figures show Thailand paid around US$8 billion (Bt282 billion) to import machinery in 2005, accounting for 6.8 per cent of the total value of the country's imports.

Chalida Ekvitthayavechnukul

The Nation