Key industry associations worry that negative factors hitting exports will not dissipate this year and cite persistent currency strength as trade enemy No 1.

Both internal and external factors are hitting exports, they said.

Associations are also anxious about the looming removal by the US of Thailand's generalised system of preferences (GSP) status.

Amidst a general economic slowdown and political uncertainty the real manufacturing sector has had to cope with falls in sales, increasing costs and waning export competitiveness.

These have fettered expansion plans and in more serious instances forced some companies to go under.

The Thai Garment Manufac-turers' Association said this year had been the industry's worst thanks to the strong currency.

President Dej Pathanaseth-pong said that in a worst-case scenario annual garment exports would fall an unheard of 5 per cent. The association's prediction is based on a stable exchange rate of Bt34.50 to the US dollar.

"Nobody knows where the currency will be during the rest of the year, weaker or stronger. Some exporters are still enjoying business growth, but the number going under is getting higher," Dej said.

The value of the country's garment exports dropped 6.9 per cent in the first quarter.

Exports to major markets like the United States, the European Union and Japan all fell nearly 20 per cent.

Dej stressed that export decline stemmed mainly from baht appreciation. The local unit has added 11 per cent against the greenback since early this year, and this has slashed garment-industry income by 10 per cent.

The baht factor will continue into the second quarter.

"Exporters are reluctant to accept new orders because they worry they will lose out to a stronger baht. Some are even considering closing down, either permanently or temporarily, and waiting for the environment to improve," Dej said.

According to the Industry Ministry's Industrial Works Department, the number of garment factories shutting down in the first quarter was 33 worth a combined Bt307 million. More than 1,800 people lost their jobs.

Sixteen new firms entered the sector, spending Bt293 million and employing almost 1,500.

The erosion of exports from this country has been arrested somewhat by a global increase in imports of 9.4 per cent in the first quarter. Imports by the country's significant customers, the US, EU and Japan, increased.

Garment-manufacturers hope the Japan-Thailand Eco-nomic Partnership agreement will boost exports. The agreement should come into effect in October, and results could be evident in the fourth quarter.

Garment exports to Japan could grow 30 per cent, and that translates to overall annual industry expansion of between 7 per cent and 8 per cent.

Dej suggested manufacturers concentrate on management and technology development to maintain export competitiveness.

Meanwhile the Thai Gem and Jewellery Traders' Association is concerned. Since the coup last year domestic sales have dived 30 per cent and companies have laid off almost half of all staff. Export growth is tipped as flat for the full year.

Association president Pornchai Chuenchomlada said domestic-sales gloom was a result of fewer tourists.

This will have a domino effect on the small and medium-sized manufacturers that play a key role in the industry. More staff redundancies will follow, affecting the overall national economy.

General economic sluggishness has prompted association members to cut production, and some have gone out of business.

The deep-South conflict has forced still more business closings.

"Lower spending will hit the overall economy," Pornchai said.

But the spectre of the removal by the US of Thailand's GSP status is the industry's principal apprehension.

GSP privileges include duty-free status for exports. Gems and jewellery will lose tariff advantages. Exports to the US account for 30 per cent of the industry's total.

"Without GSP, exports will drop by 10 per cent," Pornchai said. The industry will be over the moon if total export growth for this year comes in at between 10 per cent and 15 per cent.

Pornchai said American buyers were shifting orders to rivals such as China and India to avoid business risk from the anticipated tariff action.

However, Thailand has relied on GSP advantages for 15 years, and their removal will force it to improve manufacturing to compete in other ways, he said.

Exporters should concentrate on brand-building rather than made-to-order products and find new markets instead of being dependent on traditional customers.

Achara Pongvutitham,

Petchanet Pratruangkrai

The Nation