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MOUNTING ANXIETY OVER VIETNAM
Rice sales could drop on currency disparity
PHUSADEE ARUNMAS
Thai exports are expected to remain intact although Vietnam, one of the country's exporting rivals especially for rice, has cut its official dong rate by almost 2% against the US dollar in what analysts called an effective devaluation.
''It will take about one or two months to see the real impact of the dong devaluation or whether it affects our exports,'' said Rachane Potjanasuntorn, the director-general of the Department of Export Promotion.
''Vietnam's currency devaluation is targeted at addressing its domestic problems, particularly skyrocketing inflation of 25%, and mounting trade and current account deficits. Despite the devaluation, we believe the production costs of Vietnam will not be much cheaper because of oil price pressure.''
Thailand's baht has also shown some weakness against the dollar, with the current rate standing at about 33.1 baht compared with 31 baht early this year, he added.
According to Mr Rachane, Thailand is also expected to face a trade deficit this year given the expected increase in imports, particularly of fuel oil, equipment and machinery for production.
Thailand posted a $1.8-billion trade deficit in April, the largest since June 2005, due largely to soaring oil prices.
Imports were worth $15.39 billion in April, up 41.5% from the year before, against exports of $13.63 billion, up 27.7%. Oil imports alone rose 80% in value in April.
The current account deficit widened to $1.66 billion for April, compared with a surplus of $342 million in March, due to repatriations by foreign investors.
Dej Pathanasethpong, president of the Thai Garment Manufacturers Association, shared the same view, saying Thai garment exports were unlikely to be affected. Vietnam has maintained restrictions on production capacity due to a tight labour supply and relatively high inflation.
The association expects Thai textile and garment exports to grow this year by at least 15%, helped by increased prices, from US$72 billion last year.
CP Group, Thailand's largest agribusiness concern, also foresaw no impact from the dong devaluation, since food will always sell regardless of economic conditions, according to Adirek Sripratak, president and CEO of Charoen Pokphand Foods Plc (CPF), the group's listed flagship company.
On the contrary, he said, a weaker dong could be a boon for the group, as CP is also exporting from Vietnam.
He added that the sectors likely to be the hardest hit were real estate and financial and banking businesses.
The CP Group entered Vietnam 16 years ago and now has 16 projects in the country. CPF has seen revenue growth of 20% in the country from businesses ranging from seafood, processed food and poultry to animal feed.
CP said late last year that the group would invest at least $3.6 billion (123.60 billion baht) over the next five years in Vietnam, eyeing a wide range of businesses from telecoms, property and banking to retailing and wholesaling.
But rice exporters are bracing for a blow because the dong devaluation would enable Vietnam to quote lower prices for its grain shipments.
''Although the rate is only 2%, the impact will be felt. It offers a competitive edge over Thai rice,'' said Chookiat Ophaswongse, the president of the Rice Exporters Association.
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