Boonsithi, left, at the 11th export exhibition of the group.

A strong baht and softening consumer spending may drive sales growth into negative territory for the first time in the Saha Group's 60-year history.

The group is the country's largest manufacturing and trading conglomerate.

"This is the first time in our history we have put a minus figure in our sales-growth column," group chairman Boonsithi Chokwatana said.

"The group this year expects sales to decline by 5 per cent from last year. Due to a strong baht, exports in the first six months of this year dropped by almost 10 per cent," he said.

Saha Group posted total sales of Bt130 billion in 2006, of which about 25 per cent came from exports.

Boonsithi said the current business environment was negative due to economic and political uncertainty and the appreciation of the baht, currently at Bt34.5 against the US dollar.

"While many academics and government officials project gross domestic product growth of about 4 per cent this year, from a merchant's point of view I would say GDP will be negative," Boonsithi said.

"The negative economic forecast is proven by sluggish performance projected by individual companies, including Saha Group," he added.

Boonsithi said the strong baht and reduced consumer-spending had affected the group's performance, both in exports and domestic sales.

He said sales of household items and apparel had fallen between 20 per cent and 30 per cent so far this year compared with the same period last year.

He also suggested the business climate was now worse than during the 1997 Asian economic meltdown, when the group faced zero growth.

 "We used a zero marketing strategy to survive back in 1997. This strategy assumed a zero-growth projection for all our business activities and, therefore, froze all costs under the assumption," Boonsithi explained.

He added the 1997 crisis hit high- and middle-income earners and business people but the current slump was worse because it affected everyone - including workers, grass-roots producers and small- and medium-sized companies.

He said the strengthening currency was mostly to blame. It is taking income away from the base of the economy and reducing spending power among "the important pieces of the jigsaw of the country's overall business mechanism".

"Saha Group has set itself to be cautious and conservative this year. It now has a different strategy - minus marketing. It assumes it will be cutting costs and spending less," Boonsithi said.

He said the group was concentrating on the launch of its 108 Shop convenience stores, BSC Jewellery and G10 health-food products. It hopes these will offset sluggish sales in existing businesses.

There will be no major spending by the group.

Boonsithi said manufacturing subsidiaries would buy raw materials from overseas to take advantage of the strong local currency.

He believed the government had only a short-term strategy as a result of its limited term to run the country and added it was concentrating on political problems and "overlooking the economy".

The economy needs two to three years of policy care, he said.

Saha Pathana Inter-Holding president Santi Vilassakdanont said "Thailand is losing its competitiveness to its rivals, particularly Vietnam, Malaysia, Singapore and China.

"For the sake of the business sector, I want a general election as soon as possible. It is the only solution to settle economic and political difficulties."

Boonsithi added foreign investors were less confident and many would wait for further political and economic development before spending here.

"The government should make stabilising the currency its priority as well as reducing interest rates.

"A baht at about Bt37 to the dollar is more favourable for local businesses," Boonsithi said.

The group hopes it Saha Group Export and Trade Exhibition between June 29 and July 1 at the Queen Sirikit National Convention Centre will stimulate sales.

Kwanchai     Rungfapaisarn

The Nation