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Published on August 25, 2007

The Economic Steering Committee yesterday asked the Finance Ministry for tax incentives to encourage business to invest overseas, especially in research and development, brand creation and distribution.

However, it did not seek tax breaks for factory relocation, said committee chairman Kosit Panpiemras, who is deputy prime minister and industry minister.

Kosit said after the meeting that the promotion of overseas investment would help the country achieve growth rate targets which otherwise may be hit by an expected deceleration in exports.

Kosit however said the government expected exports would grow in line with a predicted 12.5 per cent for the year, in spite of news that they expanded just 6 per cent year on year in July.

He said the steering committee considered a revision of export growth unnecessary, but the currency required attention - as did promotion of overseas investment by domestic companies.

Finance Minister Chalongphob Sussangkarn said the steering committee did not feel exporters required new assistance measures.

However, the panel has asked the Commerce Ministry to aid agriculture and food exports, growth of which has fallen below expectations.

Chalongphob added that manufacturing was doing well. However, the export of some electrical appliances has fallen because firms are still making outdated television sets and video players.

The steering panel viewed government plans to encourage investment overseas as "problematic".

It recommended boosting private-sector "confidence", which the committee considered to be low. Many manufacturers suffer from limited capability and a government fillip is required.

National Economic and Social Development Board secretary-general Ampon Kittiampon said industries seeking overseas relocation would not receive tax incentives.

He echoed the ministers' views that exports should grow 12.5 per cent in the full year and that gross domestic product would increase at least 4 per cent in the period.

Chalongphob said that if the government started spending on new infrastructure and state enterprises drew down more money, the national economy would revive.

However, the Finance Ministry has been struggling to disperse Bt357 billion appropriated for state enterprises.

So far only 40.37 per cent of that money has been drawn down, prompting Deputy Finance Minister Sommai Phasee to summon chief executives of 17 state enterprises accounting for 93 per cent of spending.

Many of these are involved in projects that need cash but have been suspended by Assets Examination Committee probes into alleged graft committed during the tenure of the last government.

The enterprises include the National Housing Authority, TOT and Airports of Thailand.

Disruption is exacerbated by troubles in the electronic-auction process and natural disasters.

Sommai said the Cabinet would consider resolution of "widespread malfunctions" in e-auctioning at the central audit department in September.

Sommai expressed confidence that by the end of the year 68 per cent - or Bt229 billion - of the appropriations for state enterprises would be spent. At that time last year, spending was Bt246 billion.

The Expressway and Rapid Transit Authority of Thailand has spend Bt15 billion on the Bang Phli-Suksawat motorway and Bt3.8 billion on the Airport Rail Link.

Nevertheless, state enterprises will rely on the coming general election to spur consumption and aid liquidity and cash flow.

Business is calling for cooperation between the private sector and the state to revitalise industry. It fears bankruptcies will lead to rising unemployment.

Original-equipment manufacturers see the cost of labour rising and profit margins squeezing 5 per cent. As a result, they are in trouble, said Tayin Cord chairman Tamrong Kunopakarn.

He said a handful of labour-intensive industries had struggled to survive for years because they failed to compete with lower-cost rivals in terms of price, quality and service.

When the baht appreciated sharply, they were hit hard and some have gone to the wall.

Tamrong suggested that the Industry, Labour and Public Health ministries and the Bank of Thailand listen to business and help it solve problems. Employers and employees should work together to improve productivity questions.

In addition, the central bank should stabilise the currency in line with regional units such as the yuan and Vietnamese dong, he said.

"If we don't help each other, I believe the crisis will become protracted and more jobs will be lost," he added.

Thai-Israeli Chamber of Commerce president Saksit Chalermvongsavej said that without teamwork, both the state and private sectors would suffer and the country's competitiveness along with them.

"The public and private sectors are a partnership. If the private sector goes bankrupt, the public sector will not get taxes," he said. Private business has management, production and marketing problems. It has not improved production technologies or internal management, resulting in higher costs and losses.

Many companies have a few brand-name clients only and, as a result, are losing bargaining power and over extending themselves.

The central bank deputy governor in charge of monetary stability, Atchana Waiquamdee, said the Bank of Thailand had tried to slow baht appreciation to reduce effects on exports, which have been a "single economic engine".

Economic growth must be maintained at certain levels to sustain employment, she said. The bank spent US$18 billion (Bt619 billion) on currency intervention last year and $8 billion in the first half of this year.

In spite of that, rapid currency appreciation caused low-margin companies to go bust and sack staff.

"It is lucky the appreciating baht did not happen when the economy was in trouble and jobs were scarce," she said.

Anoma Srisukkasem,

Piyanart Sivalo

The Nation