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Published on July 21, 2007

Respondents in a recent poll said the strengthening of the baht was the biggest obstacle hindering their business growth this year.

The Chamber Business Poll of the University of the Thai Chamber of Commerce (UTCC) found that 85.8 per cent of respondents felt the rising baht was the biggest obstacle for their business, followed by oil prices and political instability.

Other negative factors cited included high interest rates and terrorism.

Forty-five per cent of those polled said their income had fallen because of these five negative factors, 41.3 per cent said their income had remained unchanged, and 14.3 per cent said their income had not been affected by these factors.

The poll was conducted from July 14-17 with responses from 808 business operators nationwide. The results were announced yesterday, a day after Thai Silp Southeast Asia Import Export again shut down its plants, due to a range of problems, among them the strong baht.

The poll showed that respondents were also concerned that the five negative factors would affect tourism, slow down investment and domestic consumption, and lead to a drop in exports.

Respondents also asked the government to stabilise the baht, which has been a key factor in delaying new investment this year.

They urged the government to cut the policy interest rate by 50-100 basis points if current measures fail to produce the desired effect.

Respondents also expected the minimum lending rate to be 6.5-7 per cent.

Thanawat Polvichai, director of UTCC's Economic and Business Forecasting Centre, said that lowering the policy rate by 25 basis points had not had any impact on the economy as a whole, as the measure was too small to stimulate other commercial banks into lowering their rates.

"The government should consider cutting the interest rate 50-100 basis points soon, because that woudl control the rising baht," he said.

The centre predicted that if such a cut were implemented, the baht would weaken to 34.50 to the US dollar within the next three months.

Respondents were most concerned about the unstable exchange rate, as it was a factor beyond their control.

"Business people have already adjusted their operations to maintain their competitiveness. They now want the government to take concrete action to help prevent the baht from appreciating [further]," Thanawat.

Other areas in which they sought government action include stimulating domestic consumption, setting the date for the national election soon, and solving problems in the deep South.

In addition, most respondents said they have no idea whether businesses in their sector had been shut down. However, more than 11 per cent said they believed many enterprises had been closed down because of the impact of the stronger baht, the unstable political situation and rising oil prices.

About 17 per cent believed that many businesses lacked liquidity, and 7.4 per cent said businesses were laying off workers.

Yajai Chuwicha, head of UTCC's Business Poll, said more than 35 per cent of respondents said their sales had dropped gradually because of the firmer baht, while 30 per cent said their profits had also decreased for the same reason.

Respondents shared the view that an acceptable exchange rate for the baht for businesses was 35.60 to the dollar and that for companies to survive, it should not be stronger than 34.90.

 

Petchanet Pratruangkrai

The Nation