Dong devaluation 'won't hit Thailand'
Two countries' exports are different, says Korn
- Published: 27/11/2009 at 12:00 AM
- Newspaper section: News
Vietnam's snap currency devaluation will have little impact on the Thai economy, according to many local economists and business leaders.
The State Bank of Vietnam yesterday reset its interbank exchange rate at 17,961 dong to the US dollar, or 5.4 per cent lower than the rate on Wednesday.
Vietnamese authorities also announced they would hike interest rates a full percentage point to 8%, effective from Dec 1 to try to help curb rising inflation in the country.
The move comes even as most Asian currencies, including the baht, have faced upward pressure this year due to weakness in the greenback and concerns about the US economy. The dollar fell to a 14-year low against the Japanese yen yesterday at 86.28, while the baht remained roughly unchanged at 33.15 to the dollar.
Finance Minister Korn Chatikavanij said the devaluation of the dong had no impact on currencies or interest rates in the region. The devaluation, the second for Vietnam since 2008, reflected problems in the country's domestic economy after years of rapid growth.
"The depreciation of the Vietnamese dong also has no impact on the competitiveness of the Thai economy. Thai exports are quite different to Vietnamese exports, even in rice," Mr Korn said.
Thailand is the world's largest rice exporter with a projected 8.5 million tonnes for this year, followed by Vietnam at an estimated 6 million tonnes.
Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said the devaluation of the dong would widen the price gap between Thai and Vietnamese rice by around $10 a tonne based on current prices. Thai 5% white rice is currently priced at $80 more a tonne than Vietnamese rice.
The wider price gap should help Vietnam market its rice, Mr Chookiat said.
But he cautioned that it is too early to say how the devaluation would affect Thai exports, as shipments would be based largely on global demand in 2010.
"Our concern is now more about the appreciation of the baht," said Mr Chookiat. "Most rice exporters are more cautious for fear of currency losses, as many are afraid that the baht could rise to 32 baht against the dollar."
Phongsak Assakul, a vice-chairman of the Thai Chamber of Commerce, said that in addition to rice, Vietnam is a major trade competitor with Thailand in the garment sector.
"The dong devaluation by the Vietnamese government aims to increase its edge in attracting foreign purchase orders and expanding export values as the global economy continues to recover," Mr Phongsak said.
But Thanavath Phonvichai, an economist at the University of the Thai Chamber of Commerce, said he did not believe a weaker dong would have a significant impact on Thai agricultural exports. "Vietnam is the only country in the region that has devalued its currency. Thailand would be more affected if Malaysia, Indonesia or Singapore decide to follow."
About the author
- Writer: Phusadee Arunmas and Wichit Chantanusornsiri
