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Published on July 17, 2007

The Bank of Thailand (BOT) is considering additional measures to stem the spiralling baht, including allowing Thai businesses to hold US dollars in offshore accounts.

BOT Governor Tarisa Wata-nagase told a Joint Public/ Private Committee meeting that she had discussed the off-shore accounts measure with Finance Minister Chalongphob Sussang-karn yesterday.

She did not reveal details of the measures, which will be proposed to Chalongphob.

Last week, it was agreed Thai listed companies should be allowed to invest unlimited amounts in foreign stock exchanges and as direct investment, while individual investors could be encouraged to invest overseas.

Tarisa talked about more measures when the Joint Public/Private Committee came up with seven short-term and four medium- and long-term proposals to rein in the rising baht.

The proposals were submitted yesterday at the meeting

with Tarisa, Chalongphob, Commerce Minister Krirk-krai Jirapaet and Prime Minister Surayud Chulanont. Deputy Prime Minister and Industry Minister Kosit Panpiemras has been assigned to review the proposals.

"We are open to any suggestions from the private sector. We expect to stabilise the baht as soon as possible," Kosit said.

The proposals were floated as the baht continued to make gains against the US dollar. The baht yesterday appreciated to close at Bt33.26-Bt33.28 against the greenback after it opened the market at Bt33.31-Bt33.33. So far this year, it has appreciated over 7 per cent against the US dollar, which has prompted concerns about Thailand's diminishing competitiveness against other countries.

Highlights of the proposals from the committee comprising the Federation of Thai Industries, the Thai Chamber of Commerce and the Thai Bankers Association include extending the period exporters could hold dollars from the current 14 days. The dollar holding limit of US$200 million should also be lifted. 

The general public should also be allowed to hold dollars for longer than the present 14 days and they should be allowed to deposit the foreign currency at Thai banks with interest. 

The government has been urged to speed up tax redemption for exporters to help increase their liquidity, which would encourage them not to sell dollars and increase the baht value. State enterprises should be encouraged to retire dollar loans before due date while business operators should make advance imports of raw materials. The government should also set up a fund to help small and medium-sized companies, which have been affected by the strong baht.

Apisak Tantivorawong, chairman of the Thai Bankers' Association, said the short-term measures would help to stabilise the baht and further increase the country's exports.

"The short-term measures could be used temporarily but it would depend on the market. But we can't tell when these measures should be removed," he said.

Among the four medium- to long-term measures, the government has been recommended to set up a fund, as in Japan, to handle the baht appreciation. Other suggestions include more privileges to local investors to encourage overseas investment, cooperation between government sector and private sector to develop the competitiveness of Thai businesses, and stimulation of mega-projects to encourage the country's imports.

TCC chairman Pramon Suthivongse suggested the dollar-holding period be extended to three or six months.

FTI chairman Santi Vilassakdanont said if the government could control the baht's appreciation, exports should be on target, and no more businesses would have to be closed down. He urged the government to stimulate the country's economy via mega-projects, while helping develop industries to increase their competitiveness in world markets.

Rejecting proposals by economists that Thailand set a range for the baht's movement against the dollar, Chalongphop yesterday said the fixed-exchange regime is old-fashioned.

He said the way to tackle the baht appreciation was for the central bank to fully implement existing measures. He said the central bank may have acted too slowly so far.

Tarisa reiterated the central bank would not revive the fixed-exchange regime, which was replaced by the managed float system in 1997.

Asked how the central bank would help exporters amid the rising baht, she said the BOT has already helped "oversee" the baht. In addition, the central bank has already fully implemented existing measures and there was nothing much left for it to do about the baht.

Despite the strong baht, Krirk-krai insisted Thailand's export growth would be 12.5 per cent this year in dollar terms.

"So far, the problem has been the unstable baht, which is affecting mostly the agricultural sector and some other industries such as textiles and garments, furniture and rubbers that use local content as raw materials," he said.

But he said agricultural exports, including rice and tapioca, would be less affected this year as the harvest season was nearly over.

To minimise the impact of the strong baht, the ministry would soon discuss with all concerned government agencies ways to formulate concrete actions for stabilising the currency and act on proposals from the private sector.

Krirk-krai said besides dealing with the baht's appreciation, the ministry would also support the private sector to increase their competitiveness by utilising the Japan-Thailand Economic Partnership Agreement and promoting business adjustment in accordance with trade liberalisation under the Asean Economic Community within 2015.

He said the government would consider setting up an "SME Fund" to ensure SME exporters could survive despite many negative factors. Initially, the fund would support those sectors that are facing a heavy impact due to the strengthening of the baht.

Somruedi  Banchongduang,

Petchanet Pratruangkrai

The Nation