The value of the baht is rising and by making Thai exports more expensive overseas, threaten small and medium Thai exporters.
This time the appreciation seems to be worse than it was back in 2007 (See archives).
The government is taking measures to stem the rise (See infographic on right).
These measures include a bond yield tax (Read article in today's Bangkok Post).
The measures are described as a "mild remedy" because the capital controls that the IMF is now advising were already used by Thailand back in 2007 with mixed results.
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Rampant baht can't be stopped
Financial experts have expressed little confidence in the government's measures to rein in the baht as they believe outside influences are far too powerful and likely to stay that way.
In the opinion of Prapas Tonpibulsak, chief investment officer of Ayudhya Fund Management, Asian economies remain attractive to foreign investors as those of Europe and the US are too weak.
And it could take a week or more for the dust to clear from the new measures to judge how effective they are, he said
Tuesday, the baht remained strong at 29.98/30.00 to the dollar compared to 30.03/30.06 the day before, compounding the problems of exporters.
The government and the Bank of Thailand have scrambled over the past week to try to rein in the baht's spectacular rise against the dollar.
The central bank has introduced steps to promote overseas investment of Thai companies and lifted the ceiling on foreign currency deposits.
The cabinet yesterday endorsed more measures proposed by the Finance Ministry to counter the baht's appreciation and to ease the damage being caused to small and medium exporters.
These include reimposing the 15% withholding tax on interest gains for foreign investors in the local state bond market. This will be in effect from today but will not be retroactive.
Niwat Kanjanaphoomin, president of the Thai Bond Market Association (ThaiBMA), said the effect of this would be to discourage foreign inflows of capital into the bond market.
Besides trying to control the money influx, the cabinet is promoting capital outflows by speeding up foreign currency investment by government and state enterprises. This is designed to reduce the impact on small and medium exporters by supporting forward contracts and providing them with soft loans.
Finance Minister Korn Chatikavanij expects the steps to ease the baht's rise and help reduce foreign exchange risks for 17,000 small and medium exporters.
But to market analysts, the steps are only a mild remedy that will not rein in the pace of the strengthening baht which has reached 11% against foreign currencies since early this year
Even Prime Minister Abhisit Vejjajiva concedes the measures will not solve the problem.
Going on [global] economic trends, the baht is not expected to get any weaker in the near future," he said yesterday.
The measures instead are aimed at assisting small and medium exporters and will hopefully slow capital inflow...
Mr Abhisit indicated the government may add more steps in the next two weeks to encourage the private sector to import machinery that will help boost productivity and reap benefits from the baht's appreciation.
(Source: Bangkok Post, Rampant baht can't be stopped, Few believe government can fight outside pressures, 13/10/2010, Post Reporters, link)
curb - reduce or stop
appreciation - when a country's currency becomes more valuable compared to the currencies of other countries
measures - actions that are intended to achieve or deal with something มาตราการ
stem the rise - reduce or stop the rise
bond - a formal contract to repay borrowed money with interest at fixed intervals, a paper certificate is issued much like a stock certiticate (See Wikipedia) พันธบัตร
bond yield - the interest rate of the bond, the annual income from a bond expressed as a percentage of the current market price of the bond, the annual coupon of the bond divided by the market price of the bond (See The Economist glossary)
capital controls - restrictions on the flow of investment money (capital) into a country, in order to ensure stability and that large flows don't flow in suddenly creating large amounts of credit and money and then suddenly flow out taking it all away and creating a crisis, Thailand used capital controls in 2007 (See Wikipedia)
mixed results - uncertain results, benefits uncertain, some good points and some bad points
rampant - increasing or spreading in an uncontrolled way รุกลาม อาละวาด กำเริบ รุนแรงจนควบคุมไว้ไม่ได้
confidence - feeling sure about something ความมั่นใจ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
officer - a high level person in an organisation with special responsibilities (a government officer, a police officer, an army officer)
attractive - worth having or doing
clear - go away (example: The police cleared the protesters from Ratchaprasong.)
take a week or more for the dust to clear - it will take a week or more for the situation to settle down and react after the changes, to see what the effect of the changes will be
judge - decide (look at what happened and say either the measures worked or did not work)
effective - producing the result that was intended ได้ผลดี
spectacular - extremely impressive ที่ตระการตา, very exciting to look at น่าตื่นเต้น
central bank - the government's bank that controls all the other banks in a country, sets monetary policy, maintains the stability of the national currency and money supply, sets interest rates and inflation targets, saves failing banks as a lender of last resort during times of financial crisis (See Wikipedia)
promote - to enourage and support something (take action to convince people to do something freely with their own decision, not forcing them)
ceiling - an upper limit, cannot go beyond this amount เพดาน ขีดจำกัด
lifted the ceiling - raise the limit, make a higher largest possible amount
currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)
endorsed - officially approved รับรอง
proposed - suggested (but not yet chosen or decided upon)
counter - to take action to oppose or stop something ต่อต้าน
ease - to make less severe บรรเทา, ทำให้ง่าย
withholding tax - a tax that goes direct to the government and never reaches the hands of the taxpayer (examples: tax that a bank takes directly out of the interest earned by a depositor, tax directly by a company on their employee's income)
interest - payments made for the use of another's money for a period of time
interest gains -
local - within this country
state - government รัฐ
bond - something that gives people a reason to love one another or feel they have a duty to one another ผูกมัด
local state bond market - the market for Thai government bonds
in effect - existing as a law (people have to follow the law or face penalties)
retroactive - when a law or decision will be used even for cases before it existed (may be a little unfair since people didn't know about it yet)
Thai Bond Market Association (ThaiBMA) - "in 1994 started as the Bond Dealers Club (BDC) under the Association of Securities Companies, played roles as the first and only organized secondary market for bonds, introduced an electronic bond trading system called 'Bondnet' for the first time in the history of the Thai bond market" (See website)
discourage - cause someone to lose enthusiasm and not do something ทำให้ไม่อยาก (ทำสิ่งใดสิ่งหนึ่ง)
capital - the money of owners invested in a business (See glossary)
influx - something coming into a place (here: investment money coming into the country)
enterprises - companies
state enterprises - companies owned and run by the government
impact - an effect or influence, the good things or bad things that an event causes, good or bad effects of an event ผลกระทบ
reduce the impact - reduce the bad effects of an event
forward contract - a contract between two parties to "buy or sell an asset at a specified future time at a price agreed today" (See Wikipedia)
spot contract - "an agreement to buy or sell an asset today"
soft loans - loans with special terms that are easier than normal (low interest rate, easy pay back period, etc)
foreign exchange - foreign currencies (a company gets when they sell goods overseas or when they exchang money for another currency)
risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
mild - gentle and small (not very large, strong, extreme or very serious)
remedy - 1. a solution to a problem, 2. a way to cure a disease or health problem
rein in - control, prevent from increasing
pace - the speed at which something happens ท่างทำนอง ย่างก้าว จังหวะ ที่สิ่งต่างๆ ดำเนินไป, the speed and rhythm of something (See glossary)
concede - admit, admit that something is true (accept and say that some bad fact is true, even it would be better if it wasn't)
global - throughout the world ทั่วโลก
expected - believe will happen คาดว่า (จะเกิดขึ้น)
indicate - show that something is true, exists or will happen
encourage - to make someone more likely to do something, or to make something more likely to happen ปลุกใจ
sector - a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
import - to buy or bring in products from another country นำเข้า
boost - to increase; to strengthen เพิ่ม; ทำให้มีกำลังมากขึ้น
productivity - producing more for the same amount of resources (labour, capital, machines), the speed at which a worker, company, or country produces goods (some are faster than others)
reap - gain
benefits - goods things that can happen from an activity ผลประโยชน์
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