FTI proposes 9 measures to control baht

Although the baht has found a groove, the Federation of Thai Industries fears long-term troubles from currency movements and has proposed nine more fiscal and monetary measures to the government.

FTI secretary-general Tanit Sorat said yesterday that although the baht had quieted down, domestic interest rates were still relatively high, attracting capital into the country, which pushes the local currency up.

The unit has been ranging between 29.50 and 29.75 per US dollar for the past month.

Exporters could be in a tight spot with no bargaining power over buyers, he told a seminar on impacts from the baht's appreciation and exporters' demand for government assistance.

Among the nine additional measures proposed for the exchange rate, the government may need to oversee the baht to ensure stability and keep it aligned with regional peers. The Bank of Thailand and the Finance Ministry could co-launch fiscal and monetary measures to curb short-term capital for speculation.

If necessary, the policy rate may be cut gradually, taking into account the risks of inflation and asset bubbles.

The central bank should extend the time that exporters can hold foreign currencies to lessen the amount converted into the baht, which could accelerate the Thai unit's upward climb.

Taxes should be levied on foreign capital, while a wealth fund should be established to seek returns and invest in infrastructure in the country and abroad.

Incentives should be promoted to encourage the private sector to invest overseas.

The government should work with Asean members to solve the exchange-rate problem and set the policy rate in a close range. Clear capital controls should be enforced.

Visit Limlurcha, vice chairman of Great Oriental Food Products Co, said the baht's movement had hurt food exports, as they use local ingredients, while the currency's appreciation could bring long-term problems, as Asia remains attractive for investment.

The government should plan clear measures for the exchange rate, such as introducing a tax on short-term capital for speculation, he said.

It is difficult for small and medium-sized enterprises to buy forward contracts to mitigate foreign-currency risks, he added.