Ten years after the 1997 devaluation triggered a regional recession, the reversing fortunes of the baht threatens a similar result
- From: Chim <ChimS1@xxxxxxx>
- Date: Sun, 15 Jul 2007 15:12:19 -0700
Monday July 16, 2007 Unprepared for strong baht
The sudden emergency over the value of the national currency displays
deep and alarming problems in both the political and economic
establishments. Ten years after the 1997 devaluation triggered a
regional recession, the reversing fortunes of the baht threatens a
similar result.
A large factory has slammed the doors on its workers, and thousands of
small businesses are said to be on the edge of insolvency. Ministers
are rushing between meetings and press conferences. Most lamentably,
taxpayers are once again seen as the only way out of a problem that
was foreseeable and mostly preventable.
Once again, authorities and the business community seem to have turned
a possible opportunity into a deep crisis. The lack of preparation for
a rise in the value of the baht is particularly stunning given the
fact the currency has been on a steady increase for well over two
years.
In July of 2005, the value of the baht was hovering at around 42 to
one US dollar. Figures show that the value of the baht has increased
gradually and without drama. Through political crises and a military
coup, the baht kept rising. Yet now, authorities seem flabbergasted to
discover that the national currency has ''suddenly'' climbed in
value.
Phongsak Assakul, president of the Thai Textile Manufacturing
Association, claimed that the garment industry could lose 300,000 of
the one million existing jobs. Hundreds of important companies could
be ruined. Mind you, this is the same association that warned in 1997
that the baht devaluation could cost half the industry jobs because
the cost of importing raw materials had risen too fast.
The public must be forgiven if it is sceptical about this. What seems
to have happened is that a highly profitable business refused to
adjust to reality and plan for the future. The fact is that in 1997,
textile moguls and economists alike widely criticised the garment
trade as a sunset business. The Thai textile industry was founded more
than 30 years ago with the strategy of high-intensity assembly lines
staffed by tens of thousands of low-paid workers. Hundreds of
thousands of poorly educated workers, primarily young women, put
Thailand on the world map as the producer of low-cost pants, shirts,
socks and coats for countries around the world.
Since then, little has happened. A handful of bright young business
people have moved their factories and workers up the evolutionary
chain. Their educated, motivated workers and managers produce high-
class goods, and receive salaries and bonuses accordingly.
Most factories, however, have stuck stubbornly to their old ways.
Their workers are still low-paid, their production is unimaginative
and mostly unattractive. Technology, modern marketing and quality
control is so bad that Thailand is being replaced by other countries
able to produce such low-quality goods at even lower prices. Vietnam,
Cambodia and China are among the nations eager for the work.
As unprepared as a grasshopper in the rainy season, the textile
business now is crying crocodile tears. The baht is rising, all is
lost. Last week, a Bang Phli factory locked out 5,000 workers and then
came running to the government for help. Everyone conferred and helped
the company raise 500 million baht for the sake of those workers. This
is no way to do business.
Nor can taxpayers afford to support tens of thousands of workers
victimised by basic business errors of their bosses.. Finance Minister
Chalongphob Sussangkarn, effectively this government's economic tsar,
has been relaxed in this crisis. The Bank of Thailand, especially
Governor Tarisa Watanagase, has appeared perplexed and puzzled about
just how to proceed.
But Mrs Tarisa is also right. The country cannot afford to try to
fight the world's currency market trends. The US dollar has continued
to fall, and the baht is destined to rise, along with most other world
currencies. Since 1997, successive governments have ignored warnings
to ease dependence on exports. Industry has refused to move up the
quality supply chain, or to put up provisions for the inevitable rainy
day.
It is disappointing, to say the least, that the country is being let
down so badly by both our political and business leaders.
.
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