Shippers' council worried about possible US downgrade

Corporate April 01, 2014 00:00

By Petchanet Pratruangkrai

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The Thai National Shippers' Council is highly worried by the prolonged political conflict and the possibility of the country's trade status being downgraded by the United States this year, as both risk damaging Thailand's export competitiveness.

The TNSC projects export growth this year of no more than 5 per cent because foreign traders are losing confidence in Thailand. Although February’s exports increased by 2.43 per cent year on year, shipments in the first quarter could face flat growth.
TNSC chairman Nopporn Thepsithar said the export sector faced many risks. The two major concerns are the prolonged political unrest and lack of a permanent government to implement policies driving exports, as well as the risk of the country’s key industries being downgraded by the US when it revises its trade status.
“Thailand could find it more difficult to compete with export rivals as traders lose confidence amid the political conflict,” he said, adding that Thailand could face higher tariffs by 3-5 per cent next year if it is downgraded to Tier III, the weakest category for US trade status.
Thailand has been in Tier II for three years.
The US is scheduled to revise Thailand’s trade status in September after allegations that several of the Kingdom’s industries have violated labour standards, including those involving children. The garment, sugar and fishery industries are among those whose practices have been questioned.
Nopporn said that if it were downgraded, Thailand would not only face difficulties trading with the US, but also with other key partners such as the European Union and Japan, as they are also concerned about illegal workforces. The country’s image could be damaged, and that could affect trading ability next year.
Also, he said the manufacturing and export sectors were hoping that the political conflict will end soon, as it has started to stall investment. 
Other risks that could affect Thailand’s trading are Japan’s scheduled increase of its value-added tax from 5 per cent to 8 per cent this month, as well as fluctuating exchange rates and volatile oil prices.
Vallop Vitanakorn, vice chairman of the TNSC, said that as long as there is no permanent government, Thailand was unable to move ahead with negotiations on a free-trade agreement with the EU. As the union will cut off its Generalised System of Preferences for Thailand by the end of this year, the country will lose trade privileges when competing with other countries in the European market.
Vallop said that to ensure export growth of 5 per cent this year, average shipment value needed to be more than US$20 billion (Bt650 billion) a month. However, working against that possibility is the ongoing political problem, while shipments in the future could be reduced by less investment.
The lack of a Board of Investment committee to grant privileges to foreign investors will also affect Thailand’s export ability in the near future, he said.
About Bt500 billion to Bt600 billion of combined initial investment capital is waiting for approval by the BOI, but the caretaker government is not empowered to appoint a new committee.