Rice traders have suffered from the recent strengthening of the baht, and exporters in other fields are expecting poorer performance if the Thai currency keeps escalating against the US dollar, making Thai products more expensive for global buyers.

They now fear that Thailand might not achieve its export income target, set at US$130 billion (Bt4.96 trillion) based on an exchange rate of Bt40 to the dollar, while some products, particularly shrimp and rice, could lose their No-1 position in the world market.

Thai Shrimp Association president Somsak Paneetatyasai said the stronger baht would directly reduce the country's export competitiveness, because exporters must quote higher prices.

"The government has undertaken a managed-float currency for years, which leads to export difficulties whenever there is a stronger baht," he said.

The baht strengthened to a six-and-a half-year high, briefly touching Bt37.98 to the yesterday morning. Exporters, however, prefer an exchange rate of Bt40 to the dollar, because a weak baht would help them offset extra costs resulting from steep fuel prices and higher interest rates. They say a strong baht would make products from rival countries more attractive.

Thailand is now the world's biggest shrimp-exporting country, with an average of 300,000 tonnes per year going to major export markets like the US, the EU and Japan. It also exports about 7.5 million tonnes of rice annually.

Export income is now the main engine driving the Thai economy. Without the burgeoning growth in the export account, Thailand could have recorded larger trade- and current-account deficits.

"If our exports are worth $1 million, each Bt1 increase to the dollar will result in a loss of Bt1 million," said Thienchai Mahasiri, president of the Thai Garment Manufacturers' Association. However, he said most members of his association had prepared for the situation by buying currency-hedging contracts. He said the association has targeted export growth this year of 8 per cent, to Bt145 billion. However, the strengthening baht may decrease growth.

Thienchai said the worst-case scenario was the baht's appreciation causing export income to fall 10 per cent this year.

Sumeth Laomoraphorn, president of leading rice exporter CP Intertrade, said the stronger baht would hurt all exporters.

 "We have to accept that export growth this year will not be as good as expected. We didn't expect this problem," he said.

Currently, buyers are turning rice from Vietnam, India, China and Pakistan instead of from Thailand, because of Thailand's rising price.

Sumeth said that since the government had done nothing to prevent the baht from strengthening further, all that exporters could do now was try hard to promote Thai rice brands.

He said the Thai Rice Exporters' Association had targeted exports of 7.5 million to 8 million tonnes of rice this year. However, they might revise this figure downwards, if the baht continues to rise.

Sompong Kitireanglarp, president of rice exporter Ponglarb Co Ltd, said the stronger baht had decreased exporters' revenues, although they had received very low margins from their exports. He said he had lost Bt450 for each tonne of rice.

The Export and Import Bank of Thailand predicts the baht will strengthen further, reaching Bt37.50 to the dollar.

Sompong said the company's export target of 200,000 tonnes might drop to 150,000 tonnes. He urged the government to stabilise the exchange rate before the impact intensified.

Rut Subniran, chairman of the executive board of Pathum Thani Rice Mill and Granary Plc, said that at the exchange rate of Bt38 to the dollar, exporters were now facing trouble, because they had not prepared for such an appreciation.

Thai Frozen Food Association president Poj Aramwattananont said the association would conduct a meeting soon after the end of Songkran, to help exporters find a way to solve the problem.

The association has targeted export growth of 15 per cent this year, to $2 billion, but it may revise that figure after the meeting.

Pornchai Chuenchomlada, president of Thai Gem and Jewellery Traders' Association, said if the baht did not strengthen further for more a month, jewellery exporters could achieve their set targets. But if it kept strengthening, say to Bt37, they would face big problems.

"Our trading partners might then shift their orders to rival countries," he said.

Achara Pongvutitham,

Petchanet Pratruangkrai

The Nation