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Published on July 21, 2007

Ministers, government officials and private companies agree that new measures to counter baht appreciation approved by the prime minister yesterday will improve currency management.

The baht yesterday opened at Bt33.52 against the greenback, up 0.18 per cent from Thursday or 3 per cent from the end of last month. The weekly close weakened from Bt33.30 last week. Dealers attributed the weakening to lower capital inflows on the stock exchange.

Bank of Thailand (BOT) assistant governor Suchada Kirakul said the baht had been weakening over the past few days because foreign capital inflows were stable and exporters had slowed down to unload dollars because of restored confidence after a series of measures were launched.

"These measures are aimed at improving the efficiency of the business sector. They were not temporary measures to rein in the appreciating baht, and the central bank could introduce further measures if the baht reversed its trend," she said.

Prime Minister Surayud Chulanont approved six of seven measures proposed by the Joint Public/Private Committee yesterday morning. Later on six of the Bank of Thailand's eight measures were approved.

Exporters will be allowed to bring in foreign-currency sales proceeds within 360 days from a current 120 days. Once inside the Kingdom, the income can be held for an unlimited period, against 14 days at present. Meanwhile exporters can deposit an unlimited amount at local commercial banks. As proposed by the committee, a Bt5-billion small- and medium-sized exporters' fund will be set up with equal contributions from the central bank and commercial banks, through which low-rate loans will be extended to exporters who suffer from lower baht income and liquidity shortages. Earlier this week, the Finance Ministry planned to have state enterprises refinance foreign loans.

Some of the measures can be enforced immediately while others that need Cabinet endorsement will be discussed at its Tuesday meeting, according to Deputy Prime Minister and Industry Minister Kosit Panpiemras.

"The measures are not a panacea as this is an endless worldwide phenomenon. We need to improve efficiency in overseeing the baht, but we won't swim against the tide. This needs participation from all parties," Kosit said.

BOT Governor Tarisa Watanagase said after a meeting with Finance Minister Chalongphob Sussangkarn in the afternoon that the measures were aimed at reducing private-sector operating costs and encouraging more capital outflows. "These measures will create more channels in managing the baht more efficiently and ensuring more balanced capital flows," she said.

She also insisted the capital-reserve requirement would remain due to its psychological impact and said Thailand would not resume a fixed-exchange regime, as suggested by some economists.

Tarisa insisted a fixed-exchange rate or a fixed range for the currency proposed by economists was not appropriate given the fluctuation of the amount of global capital flow.

She said the BOT listened to and respected the opinions of critics but realised economic thought could be right or wrong.

"We have already passed the old era of the fixed-exchange-rate regime and learned lessons. If we turn back to the peg we will get it down just for a while," said the governor.

The measures were drafted to handle the rise of the baht, which is eroding the competitiveness of several labour-intensive industries such as textiles.

Tan Kong Khoon, president and chief executive officer of the Bank of Ayudhya, said three weeks ago it had set up a special team to visit export borrowers in low-margin industries.

He said export clients now accounted for 20 per cent of the bank's lending portfolio. The bank is now visiting these clients weekly to better observe their situations.

Federation of Thai Industries chairman Santi Vilassakdanont said the private sector was encouraged to proceed with operations in the confidence that the measures would stabilise and weaken the baht against the dollar.

Board of Trade chairman Pramon Suthivongse agreed, saying the government's decision yesterday showed the public sector was open to suggestions from the private sector.

Thai President Foods chief Pipat Paniengvate noted that though the measures came a bit late they were better than nothing. Psychologically, foreign speculators would be driven away, he said.

"If the baht is allowed to weaken without any supporting measures, the situation could get worse. I strongly agree with the BOT measures, as all are based on opinions from business operators in the export and import areas," he said.