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Published on December 15, 2007

These factors could greatly diminish the country's export competitiveness, they said yesterday. At the same time the Commerce Ministry announced that Thailand's export target would represent a lower annualised growth rate next year.

Export value will rise only 10 to 12.5 per cent, compared to 16.1 per cent this year, to between US$165 billion (Bt5.54 trillion) and $168.75 billion.

Export value in 2007 will rise to $150 billion, from its previous value of $145.9 billion.

Pornsilp Patcharintanakul, secretary general to the Board of Trade, said that food and farm sectors would face tough competition next year. "The costs of production for these sectors will increase, while exporters will face high competition because the baht's strength will force an increase in selling prices," said Pornsilp. He pointed out that oil would be approximately $100 per barrel next year, which would create higher costs for producers of major crops. The baht could appreciate to Bt32 to the US dollar, he said.

Although rising fuel prices would affect all countries, Thailand's farm and food sectors would be especially hard hit because of the domino affect of the rising cost of raw materials, said Pornsilp.

To ensure that exporters maintain their competitiveness, he suggested the new government control the baht's value in line with export rivals. The government must also balance the supply of food crops and fuel crops, as high demand for fuel will cause higher costs in food and agro-industries.

Payungsak Chartsutipol, vice chairman of the Federation of Thai Industries, also said he expected exports next year to show slower growth. Factors causing the slowdown are a slowing world economy, in particular the slowing economic growth of major trading partners like the United States.

"Sectors that use a high proportion of local content like food and agriculture will face the biggest problems, as they will shoulder a higher cost of production driven by high oil prices, against zero benefit from the strong baht," he said.

Aat Pisanwanich, director of the International Trade Studies Centre at the University of the Thai Chamber of Commerce, said export expansion would fall by 0.37 per cent if the baht became 1 per cent stronger. Every 1 per cent fall in the world's economy would also decrease Thailand's export growth by 1.9 per cent. The centre predicted that the baht would be at an average of Bt32 to Bt33 per dollar next year. The world's economy is expected to grow by 4.7 to 4.8 per cent from this year's forecast of 5.2 per cent growth.

Another factor affecting the slowing of exports next year are the stringent non-tariff barriers erected by the US, the EU and Japan, in particular for the food sector, Aat said.

Meanwhile, Commerce Minister Krirk-krai Jirapaet said that exports would still be a key engine to drive economic growth next year, despite concern over the baht's appreciation and skyrocketing oil prices.

Exports by agriculture and agro-industries would grow by 4.5 per cent, and the sector accounts for 13.8 per cent of total export value. Exports of the industry sector would be up by 10.7 per cent next year. The sector accounts for 67.3 per cent of total export value. The ministry predicted that Thailand would enjoy a trade surplus of $11 billion this year. It also predicted that total imports would grow by 7 per cent to $130 billion this year. Imports are expected to increase by 10 per cent, to $145 billion, causing the country to gain a trade surplus of $20 billion next year. The 10- to 12.5-per-cent export target next year is based on a baht value of Bt33.5 per dollar and an average Dubai oil price of $85 per barrel next year.

Krirk-krai said that the government remained optimistic about double-digit export expansion next year because world trade would still increase by 6.7 to 6.8 per cent, despite the strong increase in oil prices.

Exports would benefit from many free-trade pacts with trading partners, including Japan, Australia, New Zealand, China and India.

Factors for the government to consider are high logistics costs, the use by trading partners of non-tariff barriers such as food-safety and sanitary standards, and a labour shortage. The ministry also said that exports to traditional markets, including the US, the EU and Japan, would decrease from 53.4 per cent to 50.9 per cent next year, while new potential markets such as Indochina, India, Russia, the Middle East, Latin America and Africa would play a more significant role in Thailand's exports. Exports to new markets would increase to 49.1 per cent, from this year's 46.6 per cent.

Exports to the US are expected to grow by 2 per cent, to Japan by10 per cent, and to the EU by 7 per cent. Exports to the Middle East will grow by 20 per cent next year, to Africa by 20 per cent, to Eastern Europe by 25 per cent, to India by 40 per cent and to China by 20 per cent.

Petchanet Pratruangkrai

 The Nation