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Published on March 10, 2008

Since the baht started appreciating more than a year ago, exporters have encountered difficulties as buyers delayed placing orders while waiting for the currency to stabilise.

To survive, SMEs have focused more on the domestic market, which is one way to avoid exchange losses. However, they predict that the baht will continue its appreciation.

The Bank of Thailand together with commercial banks will make available soft loans totalling Bt40 billion to help SMEs after the measure revocation. The loans carry MLR rate minus 2.25 percentage points.

Songwon Lanyose, managing director of Chiangmai International Dec, a manufacturer of handmade saa paper, said the company's profits had dropped by more than 20 per cent due mainly to the strengthening baht.

Consequently, revenue plunged from Bt82 million in 2006 to Bt65 million last year. In addition, foreign buyers have delayed placing orders with the company because of the uncertain baht. The company has had to shift from exports to the domestic market for survival.

"The government should implement any measures which directly support SMEs and also stabilise the baht value, instead of allowing a continued stronger currency," he said.

Pannada Krasinsri, managing director of the Guru Craft paper-mache exporter, said the company had not had an export order since late last year. Previously, its export target was to grow by 100 per cent per year. As a result, she has turned to trading more in the domestic market.

The cancellation of the 30-per-cent measure has prompted the company to change its financial management policy. It now plans to take export orders in baht rather than the US dollar.

"The removal of the capital control without any assistance measures will encourage a continued stronger baht," Pannada said. "SMEs exporters fear taking orders due to the business risk. The domestic market will ensure our profit."

Napat Pukavanatch, managing director of Oh! Bear - a manufacturer of teddy bears - said some of the company's importers had suspended orders. As a small exporter, the company has not managed currency forward like the big exporters.

Previously, the company's export revenue accounted for 90 per cent of the total but has now plummeted to 70 per cent due to the strengthening baht.

"Without the capital-control measure the baht will appreciate to 28 against the US dollar," she said, adding that the company's profit has fallen by 30 per cent to date.

The government encourages exporters to rely more on other currencies such as the yen, but this will not solve the problem given that the greenback has now weakened against all the world's major currencies.

Napat said the company had had to change its export management by quoting new export prices to absorb the stronger baht.

Oh! Bear has also decided to suspend its investment in opening five outlets in Thailand this year as a result of lower sales.

Petchanet Pratruangkrai

The Nation