While the strong baht brings smiles to Thai manufacturers who rely on imported raw materials, Thai frozen-food exporters are among the hardest hit as they use locally sourced materials.

Unsurprisingly, while the electronics export sector - particularly hard-disk drives and integrated circuits - is projected to grow 30 per cent this year, Poj Aramwattananont, president of the Thai Frozen Foods Associa-tion, said shrimp exports are in a bad situation. He said the only way to maintain export competitiveness is to lower production costs to bring down shrimp prices.

Thailand is the world's big-gest shrimp-product exporter, with total volume reaching an average of 500,000 tonnes per year.

Many negative factors - mainly the appreciation of the baht - have continued to reduce the sector's export competitiveness.

Frozen-food exporters now want to see the government implement a policy to stabilise the exchange rate to lift the country's future exports. "Thailand's trade advantages lie in sanitary standards, innovation, value-added strategies, skilled labour, good infrastructure and tax privileges. All have been run down and we must resort to our own devices. This must be changed," Poj said.

For instance, prices for big-sized shrimp at the farm door have fallen gradually from Bt135 per kilogram last November to Bt110-Bt115 now.

Poj, who is also president of Wales Group Factories, the country's leading seafood exporter, noted that the firmer baht has caused difficulties, as foreign buyers have pressured Thai exporters to reduce prices.

The group cannot complete deals with US buyers, who are bargaining for lower-price quotes for shipments to serve the upcoming Thanksgiving Day, Christmas and New Year's Day requirements.

"The most important period for Thai exporters is next month, because they will start shipping products for the remainder of the year. We will then have a clear picture of the country's exports for the second half of this year," he said.

Poj said four important factors affecting food exports were the baht's strength, interest rates, turmoil in the South and shortages of raw materials and labour.

Since October last year, the baht exchange rate has appreciated 17-18 per cent against the US dollar. The currencies of export rivals such as China have increased by only 2-3 per cent and Indonesia 10 per cent, and Vietnam actually dropped by 1-2 per cent.

The food-export industry accounted for Bt800 billion of the country's total agriculture export value of Bt1.5 trillion last year. Seafood product exports accounted for Bt130 billion of the country's total food export value including shrimp, worth Bt80 billion to Bt90 billion.

Importantly, the food-export industry uses 80 per cent local content and almost all food manufacturers are Thai investors. This means the sector directly drives the country's economy, said Poj, adding that the industry employs about one million workers.

"If the industry loses its advantages, our grass-roots people, both farmers and general people like you and me, will suffer from lower income," he said.

Poj urged the government to consider measures to assist the industry's survival. In particular, animal-feed prices should be reduced in line with the stronger baht.

Exporters of another key product, electronics and electrical appliances, foresee growing exports despite the baht factor.

Katiya Greigarn, chairman of the Electrical, Electronics and Allied Industries Club under the Federation of Thai Industries, said electronics exports, particularly hard-disc drives and integrated circuits, were projected to grow 30 per cent this year. The positive export growth is partly because major manufacturers from Singapore and Malaysia moved their manufacturing plants to Thailand last year, and their output is available for export this year.

Electrical-appliance exports are expected to increase thanks to the launch of LCD-screen televisions, but the domestic market will face a sales decline due mainly to the country's downward economic trend. The products' export value has been growing by an average of 10-15 per cent a year.

Thai manufacturers also face overwhelming smuggling of electrical appliances from China, with low quality but cheap prices. This also reduces the market share of Thai-made products.

"The electronics industry will enjoy significant export growth in spite of the stronger baht, as exporters' trading systems are all in US dollars," he said. Electronics and electrical appliances' export value reached Bt1.5 trillion last year, of which electronics and electronic parts accounted for Bt1.1 trillion, with the remainder being electrical appliances.

Katiya said the industry was facing tougher competition from major export rivals including China and Vietnam. These countries' cheap labour costs create manufacturing advantages over Thailand, which had been attracting more multinational computer manufacturers.

The industry has faced rising raw material costs, particularly for plastics, which is a main raw material. Prices of some plastics have doubled, lowering the country's export competitiveness.

But the club still foresees a bright future for exports of its products in the second half of this year. However, the government should find ways to ease the labour shortage.

Katiya said the Japan-Thailand Economic Partnership was expected to boost exports of both electronics and electrical appliances to Japan. However, Japan's requirement for high standards will hamper the export of Thai goods.

Achara Pongvutitham,

Petchanet Pratruangkrai

The Nation