Govt considers call for help by 10 industries

Baht flotation hikes debt burden

By WATCHARAPONG THONGRUNG/ The Nation
DATE : 08/07/1997 02:00:52

THE Council of Economic Ministers yesterday agreed in principal with measures proposed by the Industry Ministry to help 10 industries that have been drastically affected by the July 2 managed float of the baht.

The targeted industries are the electrical and electronic, food, construction material, petrochemical, steel, automotive, textile, apparel and footwear sectors, Deputy Industry Minister Somphob Amartayakul said.

The Industry Ministry is expected to forward the measures to Cabinet for approval next Tuesday, he said.

Measures being considered by the ministry include:

* The postponement of debt payments, especially foreign debt;

* Permission for foreign exchange losses to be booked on balance sheets, or so-called amortisation, for three to five years instead of one year;

* Increasing liquidity in the financial system so industry would not have to rely on high-cost funding from underground financial institutions;

* Providing soft loans for producers that have export orders on hand but lack working capital to fulfil them;

* Cutting fees on the use of foreign exchange earned from exports for paying freight charges;

* Campaigns and incentives for producers to cut costs, improve production, and restructure their cost structures;

* Cutting the high electricity tariff during peak periods for factories that operate around-the-clock;

* Improving government procedures which contribute to the costs of producers and exporters, such as import tax rebate regulations.

Somphob said the Industry Ministry must coordinate with other related agencies to finalise the measures to help the 10 manufacturing industries.

However, he said, discussions with representatives of the 10 industries indicate that the depreciation of the baht has provided more gains than losses to those industries as their raw material import costs are less than their export revenues.

"Their real problem is the [increased] debt burden, so we will help them regarding the increased cost of their debt and raw material imports," Somphob said.

The secretary-general of the National Economic and Social Development Board (NESDB), Wirat Wattanasiritham, said the government has yet to conclude measures to reduce the impact of the managed float of the baht as it is awaiting a clearer picture.

The government has ordered the NESDB to work out with the central bank and the Finance Ministry how to assess the impact and submit it to the Council of Economic inisters next week for consideration.

Wirat said urgent measures will be adopted to alleviate the suffering the new currency system has caused the private sector. The impact will differ greatly from the 1984 baht devaluation due to the different economic factors, including raw material imports, wages and the increase in the private sector foreign debt from 40 per cent to 80 per cent of the total foreign debt of Bt66 billion.

In addition, the government will consider measures to enhance the competitiveness of the export sector.

However, Wirat agreed that the floating of the baht would definitely affect economic growth this year, but declined to predict the growth rate.

Yesterday's Econimic-Political Barometers

Compiled by The Nation