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Published on July 14, 2007

Prime Minister Surayud Chulanont has asked the Finance Ministry and Bank of Thailand to report baht activity every Friday, while Tuesday's Cabinet meeting will discuss ways to handle the possible closure of export firms as a result of the strong currency.

Garment-exporter Thai Silp South East Asia Import Export's brief closure this week has prompted concern about the impact of the baht on industry.

On Monday, the Commerce and Industry ministries meet with private companies to sound out measures needed for survival. The government is worried about mass job losses.

The baht closed yesterday at between 33.30 and 33.35 to the US dollar, after peaking at 33.22 in the morning.

Finance Minister Chalong-phob Sussangkarn said yesterday that over the past two months US$600 million (Bt20 billion) had been invested in the stock market, causing currency volatility.

However, Chalongphob told Surayud the situation was under control.

"I have told the prime minister the current tools to deal with the baht should be sufficient. But we have to act quickly to match the flow of capital. I have told the prime minister we should strengthen the system through cooperation between the Finance Ministry and the central bank."

For instance, Chalongphob suggested that loans for big projects be converted into baht and used to buy foreign currency for imported products.

He said he had discussed solutions to possible company closures as a result of the strong currency.

Surayud gave an assurance the rise of the baht would not lead to a financial crisis of the magnitude of 1997. Nonethe-less, he said he was worried about the textile industry, which competes largely on low labour costs.

Other industries can adjust because they do not have to compete against cheap products from China and Vietnam, he said, citing jewellery.

Despite Thai Silp, Thai banks have seen no sign of financial trouble from their export-oriented clients.

Yaowalak Phoonthong, executive vice president of the Bank of Ayudhya, said Thai Silp had regularly serviced its debts. She welcomed the company's proposal to borrow Bt50 million more but said approval from the bank board was necessary.

Bangkok Bank president Chartsiri Sophonpanich said there was no sign of problems as most clients hedged their foreign-exchange income.

Siam City Bank officer Lersak Chulathet saw no sign of rising non-performing loans due to baht appreciation, noting it had few clients in the textile and garment industry.

"The strong baht certainly affects clients, but the appreciation of 8 per cent is not worrisome. No client has approached us for debt-restructuring or other assistance to absorb baht impact," Lersak said.

Despite fears of more factory closings, Social Security Office secretary-general Surin Chiravisit yesterday insisted the economy was doing well in spite of the currency's strength.

In a television interview, he said the number of workers as well as the number of employers in the social security system had been on the rise since 2005. Contributions to the fund have risen from Bt7.5 billion in May last year to Bt8.2 billion in May this year.

"Contributions have been rising, reflecting positive economic health," he said.

Surin added that in the three years from 2005, the number of workers had increased from 8.2 million in 2005 to 8.6 million in 2006 and 9 million in 2007. The number of companies was 350,000 in 2005, 360,000 in 2006 and 380,000 in 2007.

 "Certainly, there are closures of factories, but the number of new factories is rising at a greater rate than shutdowns.

 "The baht has been strong for half a year, but the number of factories has been rising. This shows we are still resilient to currency impact," he said.

Bank of Thailand Governor Tarisa Watanagase said it was looking at ways to promote more currency outflows.

The Stock Exchange of Thailand will discuss the baht with the Federation of Thai Industries and bankers and seek ways to assist listed exporters, said SET executive Wichet Tantiwantich.