INDUSTRY & EXPORTS PRESSURE FROM STRONG BAHT
Bangkok Post, Thailand
‘300,000 garment jobs could be lost’
Exporters must lift competitiveness
PHUSADEE ARUNMAS DARANA CHUDASRI
Up to 300,000 jobs in the apparel industry could be lost if Thailand’s currency continues to strengthen, according to local exporters. Phongsak Assakul, president of the Thai Textile Manufacturing Association, said the apparel industry was facing a genuine crisis that would affect the 1.06 million people who work in the weaving, textile and garment sectors.
”The impact [of a stronger baht] could spread to working families as well as upstream industries like yarn and dyeing,” said Mr Phongsak, who is also a vice-chairman of the Thai Chamber of Commerce.
The garment exporter Thai Silp South East Asia Import Export Co closed its doors on Tuesday, with executives blaming the stronger baht for its growing business woes. Some 5,000 workers at the Samut Prakan factory have rallied to protest against the closure.
Mr Phongsak said the textile and garment industries had been under pressure from the stronger baht since last year. Many firms face shrinking revenues and rising costs.
The baht has gained 7% to the US dollar this year and 18% since 2014.
Wallop Witanakorn, secretary-general of the Thai Garment Manufacturers Association, said smaller firms would face greater difficulty in coping with the stronger baht due to limited financial support and resources.
He cited a report by the Thailand Textile Institute, which said that 109 small textile factories had closed since last year.
But policymakers said the burden was on businesses to improve operations and boost competitiveness to survive.
Finance Minister Chalongphob Sussangkarn said the closure of the Thai Silp factory was not due to the baht.
”The reality is that the factory closed because it failed to recognise that we can no longer depend on cheap labour to compete overseas,” he said.
Tarisa Watanagase, the governor of the Bank of Thailand, echoed those comments. ”[Thai Silp] lost its overseas market to competitors in Thailand, not to competitors in other countries,” she said.
Still, exporters are facing financial pressure due to the stronger baht.
Dusit Nontanakorn, another chamber vice-chairman, said the 18.8% growth in exports recorded in the first five months stemmed mostly from the automobile, electronics and electrical appliance sectors, all of which were dominated by foreign investors.
Local firms in the garment, cement, poultry and fisheries sectors had all reported flat or declining sales, he said.
The Thai Chamber of Commerce estimates that for every one-baht appreciation against the dollar, export revenues will decline by 10 to 15 billion baht, or 0.2% to 0.3% of gross domestic product.
Charl Kengchon, an economist at Kasikorn Research Institute, said labour-intensive industries dependent on domestic materials such as agriculture, fisheries and textiles had been hardest hit by the stronger baht.
He agreed that sectors such as textiles and garments had been facing growing pressure to become more competitive for some time.
Export earnings from the textile sector, however, have fallen steadily over the past several years, with growth of just 1.4% in 2014 from 4.2% in 2005.
Textile exports declined 0.3% in the first five months of this year from last year. Garment exports declined 5.7% year-on-year in the same period, compared with growth of 2.1% for all of 2014 and 1.9% for 2005.
”The numbers suggest that the garment sector has been facing problems for some time. Companies haven’t raised their competitiveness, and the baht is now complicating the issue,” he said.
Exporters with heavy import content have been relatively less affected by the appreciation of the currency as the stronger baht means lower costs for imported materials.
Dr Charl said the agriculture sector, which was wholly reliant on domestic materials, had been less affected by the baht than many believed, with growth in the first five months of 15.3% in dollar terms and 4% in baht terms.
”Thai agricultural exporters have been lucky that world demand has remained strong and key competitors in the region have had problems with their own crops.”
