THE THAI National Shippers Council predicts exports will grow only by 3 per cent this year instead of the 5-per-cent target of the government, held down by lower production efficiency, high competition, and the political instability at home.
The domestic problem has continued to pound on manufacturing and trading, while the lack of a permanent government has reduced hopes for Thailand to conclude a free-trade agreement (FTA) with the European Union. Thai businesses stand to lose competitiveness against rivals such as Singapore and Vietnam.
Council chairman Nopporn Thepsithar said yesterday that exporters were resigned to low growth because many negative factors are dulling export competitiveness in the immediate and long runs.
“The political instability has had a domino effect on domestic trading and the export sector. Thai producers have lower economies of scale, so they cannot compete in overseas markets,” he said.
According to the council and a study by Chulalongkorn University, industrial capacity utilisation has been gradually slipping in the past year because of lower domestic spending, while the cost of production has increased.
This year, Thai producers are running their plants at 61 per cent of capacity, while other Asean countries have gradually increased their utilisation to 65-71 per cent.
The fluctuation of the baht has also caused a problem for Thai traders in the long run. Despite its weakness, the unit has been more volatile than other Asean currencies. The loss of European Union trade privileges for Thai products at the end of this year and the delay in concluding the FTA between Thailand and the EU have also damaged Thai exporters’ competitiveness.
Vice chairman Vallop Vitanakorn said the end to the Generalised System of Preferences (GSP) was one of the key concerns of Thai exporters in the near future.
Although the EU has tended to increase its imports from Thailand this year, imports could seriously shrink next year after the union cuts tariff privileges for Thailand early next year.
FTA hopes fade
With hopes fading fast for clinching the EU-Thailand FTA by the end of the year because Thailand has no government, other countries – mainly Vietnam, Singapore and Malaysia – could grab more market share, as those countries will soon have FTAs with the EU. The dropping of the GSP will increase the prices of Thai goods and discourage some buyers from ordering from Thailand.
With the withdrawal of the GSP, duties on food products from Thailand could jump from 7 per cent to 20 per cent next year and on footwear from 7 to 17.8 per cent. This will definitely cause trouble for Thai export competitiveness.
The council projects that Thai exports to the EU this year will increase by about 7 per cent because the EU will accelerate its imports before the GSP for Thai products expires. However, next year the EU will cut its imports from Thailand because of their higher cost.
The council urged the government and its agencies to announce clearly that the FTA negotiations will be wrapped up within one year so that traders will have more confidence to deal with Thailand.
The council also believes that shipments to other major markets such as Japan and the United States, as well as Asean and China, will not be as bright as expected this year given uncertain global economic growth. The rise in the consumption tax in Japan could weigh on consumer spending and import demand.
According to the Chulalongkorn study, Thai shipments will expand 3.27 per cent this year. Shipments to the EU will grow 7.09 per cent, to the US 2.58 per cent, to Japan 3.44 per cent, to China 2.8 per cent and to Asean a bare 0.31 per cent.
Shipments to Asean and Chinese markets will slowly increase this year amid rising competitiveness in the market. The slower Chinese economy will reduce demand for raw-material imports to support that country’s manufacturing sector.