Exporters worry over baht and minimum wage

Exporters worry over baht and minimum wage

Exporters are concerned with a strengthening currency, a slower economy and the US-China trade war pressuring shipments this year.
Exporters are concerned with a strengthening currency, a slower economy and the US-China trade war pressuring shipments this year.

Exporters are concerned with myriad risks -- a strengthening currency, a slower economy and the US-China trade war -- pressuring shipments this year, which are projected to grow by 3%.

Sanan Angubolkul, vice-chairman of the Board of Trade, who on Monday participated in a joint meeting between the International Trade Promotion Department and other private associations to evaluate export prospects, said Thai shipments will grow by 3% to US$260 billion (8.13 trillion) in 2019 based on a baht value of 31-32 to the US dollar.

"Thailand is expected to ship an average of $22 billion per month," said Mr Sanan.

In 2018, export value was $252.5 billion, up by 6.7% from 2017.

He said the baht appreciation will affect the shipment of farm products (rice, rubber, tapioca and sugar) and industrial products (electronics, automotive, home appliances and plastic beads).

"Exchange rate movements will create more negative momentum than the trade war because Thai shipments will lose competitiveness," said Mr Sanan.

"A gain of one baht against the dollar will decrease shipments by roughly 260 billion baht."

He said the board will coordinate with the government to drive the export sector to reach the latter's goal of shipment growth of 5%, focusing on new markets.

Mr Sanan said a new risk for the economy is increasing daily minimum wages, expected to pressure exports.

Earlier, each provincial wage committee voted to increase daily minimum wages by 2-10 baht per day.

"But exporters in more than 40 provinces disagreed with the wage hike as it will worsen the country's export situation, especially labour-intensive industries," he said.

The minimum wage hike will mostly benefit 6-7 million foreign labourers, said Mr Sanan.

"Thai labourers will be under pressure to increase their skills to earn a higher salary than the minimum wage," he said.

Mr Sanan said the daily minimum wage rise should be discussed with private companies for a year in advance in order to provide a grace period for them to plan and prepare.

"Exporters have already quoted their forward exchange rates since last year, but they have yet to prepare for the wage hike," he said.

Visit Limlurcha, vice-chairman of the Thai National Shippers' Council, said the daily minimum wage hike will result in higher production costs that many companies will not be able to avoid.

It will be a key obstacle for foreign investors as the current wages are significantly higher than neighbouring countries.

"The wage increase cannot stimulate the economy because foreign labourers have less spending power in Thailand and they prefer to send money back to their home countries," said Mr Visit.

Thai exporters also called for the next government to expand and speed up free-trade agreements (FTAs) with important trade countries to increase Thailand's export competitiveness, such as a negotiating the FTA between Thailand and the EU, and participating in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

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