Although several of Thailand's key exporting industries expect a tough second half of the year because of the continued strengthening of the baht, their main concern is the lack of long-term policies promoting innovation and enforcing rules related to standards - things they say are ruining the country's export competitiveness.

At a round-table seminar this month entitled "Riding through the Export Crisis in the Second Half", exporters urged the government - whenever it is formed - to be more active in creating a vision of how the export sector should evolve, in terms of both long-term sustainability and clearing obstacles to achievement.

Success will only be achieved if there is serious discussion with exporters and efforts are made to ensure the vision is evenly shared by all government agencies involved in export trading, they said.

On the foreign-exchange rate, exporters would prefer the baht to weaken from about Bt38 to the US dollar to Bt39 or Bt40, as this would raise their income. However, given the huge capital inflows likely to occur in such a situation, it is best if exchange-rate volatility can be kept to a minimum, they said.

Paiboon Ponsuwanna, chairman of the Federation of Thai Industries' food processing industry club, said that despite higher wages and the stronger baht, exports of processed foods would rise in the second half, although factories would enjoy lower profits.

However, his concern is not about prospects over the next six months, but over the long term, because a lack of clear policies will dash Thailand's hope of becoming a kitchen to the world, he said.

"Thailand has never focused on research and development. Our raw materials are still of low quality. We need to start from the farmers. They should be informed what they should grow and where, and how they should improve the quality of their products."

Paiboon said that with poor raw materials, it is difficult to add value to Thai food products.

"Also, few officials understand the rules of traceability and hazard control, although these are key factors in boosting processed food exports. Buyers want to know from where the raw materials have come, and for reasons of hygiene, how they were cultivated or captured," he said. "There's still a large gap of understanding in these areas."

Rice Exporters' Association secretary-general Korbsook Iamsiri said the problems that are hurting rice exporters are related to the government's rice price guarantee programme, which ends next month.

"If the government is serious about boosting rice exports, then the guaranteed price should not be raised higher. There should be other programmes to help farmers that are not related to price. If you want to boost exports, don't consider just the farmer issue. Think about the overall picture, or our competitiveness will be hit hard," Korbsook said. "And when they are concocting new policies, they should also ask for exporters' opinions.

"It doesn't help that the guaranteed price is raised every year. How can we compete with exporters from other countries under these circumstances?"

She said rice exporters believed the scheme pushed buyers away to Vietnam and other rice-exporting countries. Because exporters had to quote prices in line with the guaranteed price and also take into account the exchange rate, the price of Thai rice in April was US$70 (Bt2,700) per tonne higher than that for rice from Vietnam.

For every baht gained in the strength of the Thai currency against the US dollar the free-on-board price of Thai white rice rises by $8, she said.

"In the white rice market, we have already lost the No 1 position to Vietnam, which exported 4.5 million tonnes of white rice last year. If the gap [between us had been] $30 per tonne, buyers would

 have stuck with Thai rice because it is of higher quality," she said.

This year, Thailand expects to export 7.25 million tonnes of rice, comprising four million tonnes of white rice, two million tonnes of jasmine rice and one million tonnes of parboiled rice.

It also expects to win additional orders for one million tonnes from Iran and Iraq, which last year switched to Vietnam because of the price difference.

The garment industry is pinning its hopes on the new government continuing with the Bangkok Fashion City scheme, because this will draw new designers and merchandisers to the industry who will help make Thai products more popular on the global market.

Despite high production costs, Thailand maintains a competitive edge over many countries because it has both upstream and downstream players, said Garment Manufacturers' Association president Dej Pathanasethpong.

"That won't stay for ever, though," he said.

Dej hopes the government will proceed with negotiation and signing of free-trade agreements with the US and Japan, which will open up those markets for Thai apparel. Japan's orders are now valued at $270 million, he said, but its orders from China are 40 times higher and a free-trade pact should divert some of this business to Thailand.

"There's no more time for discussing the pros and cons sector by sector. We have to look at the comprehensive picture," Dej said. "We can further discuss what we can agree on and present a resolution for parliamentary approval.

"It's not that we're not caring about farmers. The garment industry also deals with a large number of people. It deals with the well-being of one million households."

Because free-trade agreements with Japan and the US were not signed this year as expected, the garment industry expects export growth in the second half to be only 3 or 4 per cent, compared to the original target of between 15 and 17 per cent, Dej said.

Aat Pisanwanich, director of the Thai Chamber of Commerce University's Centre for International Trade Studies, expects the impact of the stronger baht on Thailand's exports will be clearer in the second and third quarters.

While exports expanded 20 per cent in the first quarter, the growth rate in the following two quarters will be only 11 per cent and 8 per cent, respectively, he said.

"Growth should resume in the fourth quarter when the festive season kicks in. But the annual rate should be 12.9 per cent, or Bt5 trillion," Aat said. "In the next six months, the government should be more active in marketing. Previous attempts were not very effective and had had little involvement from private companies."

Achara Deboonme

The Nation