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Economic peril awaits Thai workers as baht rises

Updated On: Jul 17, 2007

Despite the World Bank revising its economic growth forecast for this year for Thailand, predicting it will exceed the 4.3 per cent growth announced in April due to optimistic expectation for the December elections, the rising baht is causing some concern.

The baht surged to a ten-year high at 33.18 to the U.S. dollar due to investment inflows.

Last week saw the laying off of 5,000 workers of Thai Silp South East Asia Import Export Co., who were promptly re-hired after the company “was thrown a financial lifeline by the Thai Garment Manufacturing Association”. This week, Ministry of Labour Permanent Secretary Juthathawat Inthornsuksri was informed that Siam Asahi Technoglass Co. Ltd. “would let go nearly 1,000 workers” by end of July. The Labour Ministry is now “scrambling to ensure protection” for the affected workers. The question remains how many such firms can state agencies rescue given the onerous competition in the international garment industry?

It was fortunate that Thai Silp was a sizeable industrial establishment on which governmental honour rested, for as a Bangkok Post editorial commented, were it “a back-alley shophouse factory with just 20 or so workers that had suffered the crunch there would have been no one to offer it a cushion to fall back on”. That this hard fact should be noted by all is imperative as Phongsak Assakul, president of the Thai Textile Manufacturing Association, has come out to warn the government that “up to 300,000 workers could lose their jobs in the apparel industry if the baht continues its relentless strengthening against the dollar”. This would be about a third of the 1 million-odd people the industry employs.

He also expressed his hope that the government “will sit up and take measures to stop the rot” for “it is hardly credible to say that currency volatility was what had drained away a large factory's cash reserves overnight, contributing to its downfall”. The Finance Minister Chalongphob Sussankarn also acknowledged that it is not only the rising baht that has brought about the woes in the garment industry. He said, “The reality is that [Thai Silp] closed because it failed to recognize that we can no longer depend on cheap labour to compete overseas.”

This comment can be applied to the whole garment industry of Thailand which has been easily out-classed in the labour-intensive market by Vietnam and China. What needs to be done now to rescue the Thai workforce is to create a niche market for Thai products such as “home-grown fashion designers to build their own brand names as a way to add appeal and value to the locally-manufactured garments and apparel”. To that end and as a temporary stop-gap measure for the trade deficit, the Thai Foreign Trade Department has kicked off a Bt1.6-million “Campaign to Increase People's Awareness of Using Thai Goods” through the mass media. PM Surayud has also assured the public that his government will act to stop the baht’s volatility.

In addition to the economic woes, the constitutional crisis does not seem to be blowing over. The authorities are becoming more draconian by the weeks. In addition to proposing an Internal Security Act, the government is tracking down political groups who are purporting to “campaign for a ‘no’ vote at the referendum of the draft constitution on August 19”. Thai Interior Minister Aree Wongarya said that voting “no” is illegal and anyone who does so will be prosecuted. Prime Minister’s Office Minister Thirapat Serirangsan had earlier indicated that “political groups who resort to ‘undemocratic’ means (i.e. bribing and intimidation) to have the new charter voted down in a referendum will face harsh penalties, both fines and imprisonment”.Perhaps the government need not be so harsh. The recent Assumption University’s Abac poll conducted in 12 major provinces from July 5-14, including Bangkok, Chiang Mai and Songkhla, showed that more than 57 per cent of the 3,146 people surveyed said they agreed with the final draft, compared with almost 23 per cent who disagreed and 20 per cent who gave no comment.

Over in the South, the Nation slammed the government for prolonging its ineffectual stance. Instead of announcing effective measures to bring peace to the South, Surayud’s latest visit is in line with his past tours of the region and no different from “the pep rallies of the previous government”. While Surayud has always maintained that the Southern states will not get autonomy, he has also never made clear what changes he will bring about. He merely goes on with his “peaceful reconciliation” and calling on all sides to trust one another. Without firm action now, Surayud is paving the way for “political suicide” for future governments. This is especially true for the next administration as it “likely to be much weaker and full of potential political landmines”.  (16 July 2007)

Sources:

Labor Ministry faces another 1,000 layoffs (Nation, 16 July 2007)

Unprepared for strong baht (Bangkok Post, 16 July 2007)

Charter draft gets positive response (Nation, 16 July 2007)

Economic warning signs (Bangkok Post, 14 July 2007)

PM says insurgent attacks dropping (Bangkok Post, 14 July 2007)

Analysis: Premier has wasted opportunity in South (Nation, 14 July 2007)

Govt. searching out anti-charter groups (Bangkok Post, 14 July 2007)

PM softens security law stance (Bangkok Post, 14 July 2007)

Department to wealthy: 'Buy Thai' (Nation, 14 July 2007)

World Bank expects improved growth (Bangkok Post, 14 July 2007)

Many Factories in Thailand Likely To Close Due To Baht Surge (Bernama, 13 July 2007)

Garment industry at risk (Bangkok Post, 12 July 2007)

Thai prime minister says government will curb volatility in baht, near 10-year highs (AP, 13 July 2007)