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Growth not shared evenlyIndustries enjoy rising demand while crucial farm sector faces surpluses and falling world prices WORANUJ MANEERUNGSEE
The industrial sector has fared much better, particularly foreign companies whose investments in fields such as electronics, automobiles and parts were starting to bear fruit, said Viroj Amatakulchai, secretary-general of the Board of Trade. "Up to 70% of vehicles and parts are shipped by foreign companies, with only 30% coming from Thai-owned firms," he said. In the first four months of this year, the dollar value of Thai exports rose year-on-year by 24.6% to $21.9 billion. The government and private sector promptly revised their growth projections for the year to between 9.5% and 12%, meaning exports would fetch $64 billion to $65 billion. The earlier target had been 6% growth to $62 billion. But the country's economy is unlikely to grow as quickly as exports have done, as long as the farm sector remains weak. Overall economic growth this year is expected to be 4-4.5%. The poor performance in the farm sector has weakened purchasing power of people in rural areas, frustrating the government's attempts to stimulate local consumption, said Arporn Chewakrengkrai, an economic adviser to Prime Minister Chuan Leekpai. The prices of several key farm products dropped in the first quarter of this year. Rice was down by 8% from a year earlier, for example. Thai rice exporters are now facing tough competition from Vietnam, which has been quoting prices at $40-50 a ton cheaper than for Thai rice to become the top shipper to the Philippines and Indonesia. Oversupply and flat demand in the world market have weakened the prices of other key Thai farm exports as well. Tapioca product prices were down by 10.5% from a year earlier, frozen and processed chicken by 3.4%, sugar 27.5%, fruit and vegetables 25.6%, canned pineapple 43.8%, and raw coffee 38.3%. The government and the private sector have conceded that farm products and agro-industrial goods would face difficult times this year. In the face of sporadic farmers' protests, the government has responded with the usual - and usually money-losing - price-intervention programmes. Authorities say they lack the budget to do more in the near term, while declaring that core problems such as inefficient cultivation must be tackled. Despite being one of world's largest producers of agricultural goods, yields per rai in Thailand are lower than in most other countries. Even in Vietnam, one rai can produce about twice as much as it does in Thailand. While he Commerce and Agriculture ministries work on yet another "national agenda" for the farm sector, it will be a buyers' market this year for farm goods, says Pornsilp Patchrintanakul, managing director of CP Intertrade, a Charoen Pokphand Group affiliate.
Charuayporn Tantipipatpong, president of the Thai Food Processors' Association, said more challenges lay ahead in Europe. The weakening of the euro against the US dollar would force Thai exporters to lower prices to compete both with local products and those shipped from Eastern Europe, she said. To maintain competitiveness, Thai Pineapple Canning Industry Corp, where Ms Charuayporn is the managing director, had to mark down its canned pineapple to $7 per case from $10 late last year. In the first quarter, the export value of farm products rose year-on-year by 10.9% to $1.7 billion and agro-industrial goods by 8.6% to $1.2 billion. The numbers look healthy, but it should be noted that the first quarter of 1999 was very poor by comparison. More telling is the fact that the value of industrial exports jumped in the same period by 31% to $11 billion, and other products by 53% to $2 billion, according to the Business Economics Department. Total export revenue for the first quarter rose by 30.3% to $17.06 billion. First-quarter imports totalled $13.8 billion, up 21.6%. The most significant increases were seen in electrical appliances, electronics, garments and textiles, vehicles and parts, gems and jewellery, ornaments and furniture. Teerana Bhongmakapat, an economics lecturer at Chulalongkorn University, linked greatly improved export performance to rising demand, particularly in recovering Asian countries. As well, the IMF has revised upward its forecast for world trade growth this year, to 7.9% from 6.2%.
Other factors included strong support from parent companies to local partners, increased re-exports of electrical appliances, electronic goods and vehicles. Many companies also adopted more aggressive export strategies in order to offset sluggish domestic sales. "The liquidity squeeze that had caused major problems for Thai manufacturers a couple of years ago has now eased," he said. "Financial institutions as well have started to relax lending rules for exporters." Dr Teerana cautioned that the 30% first-quarter growth figure was somewhat misleading, given the low base of January-March 1999, when export revenues had fallen by 4.1% from a year earlier. But he acknowledged that Thai exports to every market had posted significant improvements just the same, and steady growth was likely throughout the year. Exports to the United States were likely to slow next year, he said, as US interest rates, now above 6%, could dent Americans' purchasing power and appetite for imports. The United States is largest export destination for Thailand, importing products worth $2.1 billion in January and February, a 29.6% rise from the same period of last year. Next came Japan at $1.7 billion, up 33%, and the European Union at $1.7 billion, up 18.9%. According to the Export Promotion Department, another concern for Thai exporters was continuing high oil prices, which might further weaken consumers' purchasing power of consumers. Fortunately for Thai businesses, low inflation and interest rater have helped cushion the effects of oil prices to a large degree. However, industry experts agree that a sustainable future for Thai exports still depends primarily on how rapidly all sectors can achieve fundamental restructuring. They suggested that the government pay special attention to the agro-industrial sector, whose health directly affects the largest number of local people. |
While Thailand's exports have risen significantly in value since late last year, the critical farm sector remains in the doldrums with no solutions in sight in the near term.
One reason, he said, was that every exporting nation particularly from Asia had stepped up exports as a way to beat the recession, and price wars have been the result.
Dr Teerana said the recovery of the world economy, rather than restructuring efforts by the Thai government, was responsible for the country's improved exports.© Copyright The Post Publishing Public Co., Ltd. 2000
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