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Published on July 17, 2007

Thai Garment Manufacturers' Association secretary-general Vallop Vitanakorn said that previously, exporters obtained loans simply by showing sales orders to the bank.

"Now, they're required to show letters of credit [issued by the buyers' banks] before the banks will extend new credit lines.

"Following the Thai Silp [South East Asia Import Export] factory closure, the situation is getting worse. Banks have pressured some small operators for early debt repayment. Under these conditions, many plants can be shut down like Thai Silp, because they cannot adjust their strategies to match the baht appreciation in time," Vallop said.

Thai Silp's closure last Wednesday sent a shock wave through the entire economy for fear that more export companies could go under following the sharp appreciation of the baht from 39 to the US dollar early this year to yesterday's level of slightly above 33.

Bankers have declined to comment on their tougher credit conditions.

Garment Manufacturers' Association president Dej Pathanasethpong said he estimated the total loans of the textile and garment industries were about Bt150 billion.

Yesterday, representatives of the association met Industry Minister Kosit Panpiemras to discuss problems in the industry. Dej later said that although garment industry operators had prepared themselves to handle current risk factors, half had suffered losses because the baht had appreciated much faster than adjustments in raw-material costs.

"Raw-material prices have become cheaper because of the baht's appreciation, but this won't be felt for six to nine months," he said.

He said it was very important for operators to focus more on material-requirement plans and making products that met customer demand.

The association plans to help a reopened Thai Silp rewrite its business plans and act as a

middleman in negotiating with its customers, such as Nike, in order to continue supporting the ailing company by maintaining orders.

Dej said Thai Silp's Adidas orders had been scattered among three or four other Thai factories but that Nike was willing to maintain its orders into the fourth quarter.

If Thai Silp succeeds in negotiating with the banks, it will have to boost its production to support orders from its main customers, which are projected to grow 25-30 per cent each year.

Thai Silp president Yawalak Unopas said she had no idea how she would pay wages due on Friday now that foreign creditors had declined to restructure loans and Kasikornbank had not yet extended additional loan financing.

"I'm going to meet Kasikornbank tomorrow," she said yesterday while welcoming Labour Minister Apai Chandanachulaka. Apai was visiting the firm to monitor progress in the management of Thai Silp's financial problems.

Apai said about 600 Thai Silp workers had resigned and not returned to work after the company's abrupt plant closure last Wednesday.

The strong baht is even expected to hurt auto-makers despite the high ratio of their imported raw materials.

Toyota Motor Thailand senior vice president Wichien Emprasertsuk said the baht's appreciation would have an effect on the auto market in the second half of the year in addition to poor sentiment caused by political instability.

"At Toyota, the effect is not serious, because we're dealing with imports and exports. But some export-oriented companies have stopped exporting, realising that the more they export, the more they will lose," Wichien said.

At present, Toyota is maintaining its export target, but Wichien believes that if the foreign-exchange rate is not stabilised, Thailand's competitiveness will drop, and this will hurt the economy in the long term.

Sukjai Luangmeekul, vice chairman of the Federation of Thai Industries' Auto Club, said due to the strong baht, the impact on makers of auto parts was no less serious than that being experienced by Thai Silp.

"The government has blamed exporters for not keeping their dollars. That's hard to do, because they need to sell dollars to raise working capital," he said.

Chalida   Ekvitthayavechnukul,

Diew Khongsin

The Nation