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Shipments are increasing in value but the rapidly changing trading environment is creating new challenges that require a new look at priorities in export production

 

EXPORTS

Healthy growth coming back

WORANUJ MANEERUNGSEE

When times are tough, there are always exports to rely on. For a major agricultural nation with a burgeoning industrial sector, shipments abroad are crucial to a revival of the economy.

With the weak baht improving the competitiveness of Thai products, exports to all major markets such as Asean, Japan, the European Union and the United States showed healthy increases in the past year, expanding export growth to US$70 billion, 20% more than in the previous year.

The Commerce Ministry forecasts growth of at least 11% in 2001, with exports reaching $100 billion in 2003.

In 2000, exports were helped by a favourable environment, although the sharp lift in oil prices and the volatility of the baht in the second half of the year were wild cards. The price of oil surged to $33 a barrel in the fourth quarter compared with about $22 early in the year, leading to a sharp increase in the costs of production and transport for manufacturers and weakening the purchasing power of consumers.

As well, Thailand's oil imports in the first nine months jumped totalled $4.3 billion, 66.4% more than in the same period in 1999. However, as all countries experienced similar cost increases, export growth regained momentum after a brief pause.

The Commerce Ministry believes that the worst is over and that oil prices and the global economy will be more stable next year, providing a solid platform for export growth. The ministry expects crude oil to sell at $25-30 a barrel next year.

As well, economic recovery within Asean is expected to give exports an added fillip. Stronger export growth in the region would help offset a possible slowdown in trade with the US where the overheated economy is showing speed wobbles.

The anticipated strengthening of the euro against the US dollar is also expected to help Thai exports to the European Union.

One factor impeding growth is the government's strict rules intended to reduce the risk of financial institutions incurring more bad loans. Although interest rates are low, making borrowing more attractive than previously, banks are reluctant to provide new loans at a time when they have to set aside hefty provisions against risk.

Like everyone else, exporters are waiting to see if the new government to be elected in January eases the rules.

Ponkeite Thangsombat, vice-president of the Thai Food Processors' Association, said the lack of new funds from commercial banks had prompted Thang Nguan Hah, his company, to delay new investment.

''If new credit lines are still frozen by the banks, donût anticipate any new investment by Thai firms. Economic growth will be affected inevitably,'' he said, adding that because of a lack of financial support from lenders, Thang Nguan Hah had to maintain huge cash reserves.

Viroj Amatakulchai, secretary-general of the Board of Trade of Thailand, said tight fiscal and monetary policy endangered economic prospects in 2001. He urged the new government to ease the rules, freeing up revolving capital for business. Even so, most exporters agreed that the economy would improve in 2001 regardless of who was in power. The new government would be obligated to continue policies that would stimulate the economy.

Mr Viroj said he was worried that the shape of the US economy might adversely affect Thai exports. The US is Thailand's largest export market accounting for 21.4% of total export value, followed by Asean on 19%, the EU 15.8% and Japan 14.8%.

Main export goods to the US include computers and components, apparel, electrical circuits, canned seafood and footwear.

Chinese goods are expected to pose a significant threat to Thai goods in the US market next year after China-US trade relations were normalised in mid-2000.

Chinese goods are guaranteed the same low-tariff access to the US as products from most other nations.

To counter the challenge, the Commerce Ministry plans to come up with special trade promotion packages in the US where it will increase the number of Thai Trade Promotion Centres to five from four. The new centre is likely to be in Dallas or Atlanta, complementing existing ones in Miami, Los Angeles, Chicago and New York.

Although Thailand's export performance seems to be a case of ''so far so good'', observers warn that more must be done to ensure sustainable growth.

They say it's time for Thailand to look again at whether it should seriously promote high-cost industrial goods made by multinationals, or give more emphasis to agriculture, the sector that provides most jobs and products that are competitive abroad.

Of Thailand's top 10 export products, only three are agricultural - canned seafood, rice and frozen shrimps.

Problems for the farm sector in Thailand are common to all agricultural nations - the weather and price swings. As well, there is a growing range of non-tariff barriers such as sanitary standards, particularly those imposed by developed countries.

For example, the EU Commission plans to bring in new standards on food safety over the next two years, requiring that suppliers upgrade every step from production from the farm gate to the table.

Industrial goods accounted for about 75% of Thailand's export earnings of $70 billion in 2000, while traditional farm products accounted for 10.4% and agro-industrial goods 8%.

Among the industrial goods, computers and components alone generated $6.2 billion in the first nine months of 2000, followed by electrical circuits on $3.1 billion, apparel $2.4 billion and vehicles and parts $2.2 billion.

The healthy performance of Thai electronic exports were credited to parent firms of multinationals operating in Thailand which expanded their markets during the recession.

Boontipa Simaskul, head of the Business Economics Department, said Thailand should pay more attention to expanding the electronics industry as it offered huge potential.

Information technology products are a big pie. Every country is making inroads into this industry,'' she said, adding the industry earned a steady inflow of foreign currency.

Promotion of high-technology goods warranted greater priority, as it would attract capital and technology, as well as provide skilled jobs requiring training programmes for Thai workers.

By the end of 2000, a total of 835 ventures in the electronics and electrical appliances industries were under way in Thailand, creating at least 300,000 jobs. Board of Investment privileges had been sought for projects totalling $18 billion.

Mrs Boontipa said Thailand exports of electronics and electrical goods were worth one-fifth of those shipped by Singapore and one-third those exported by Malaysia.

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