This week's devaluation of the dong will affect Thai rice exports, particularly to the Philippines, as it strengthens the competitiveness of Vietnamese exporters.
Manila normally prefers to import rice from Vietnam rather than Thailand due to its lower cost. The 5.5-per-cent devaluation of the dong will now enable Vietnamese exporters to quote even lower prices of goods, at the expense of the Kingdom.
However, opinions were mixed yesterday on the overall impact of Vietnam's move.
Some exporters predicted the devaluation would hit Thai exports this quarter, while Finance Minister Korn Chatikavanij said Thai trade was unlikely to be affected by Vietnam's decision to devalue and to hike interest rates.
Vietnam's central bank made the moves on Wednesday in a bid to ease pressure on the dong and to calm inflation, which has risen at the fastest pace in six months this month.
"Vietnam's decision to devalue the dong will not affect exports or other currencies in the region," Korn told reporters. "Thailand has no plan to hike its interest rate any time soon."
The minister said the premium quality of Thailand's rice insulated it from competition with Vietnam.
Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said firms would face more difficulty competing with Vietnamese exports due to the wider price gap between Thai and Vietnamese rice.
"The price of Vietnamese rice is much lower than Thai rice due to the weaker dong. The depreciation will cause export difficulties for Thai rice," said Chookiat, adding that Thailand will definitely lose its export market in the Philippines, which already generally favours cheaper rice from Vietnam.
Five-per-cent Vietnamese white rice is quoted at US$480-$500 (Bt15,909-Bt16,572) a tonne, while Thai rice is quoted at $560. Following the weaker baht, Vietnam rice should drop to $460-470 a tonne, assuring Vietnam of winning the Philippines' bidding for 600,000 tonnes of rice next month, according to the association.
Phongsak Assakul, vice president of the association, expressed concern that the currency move would slow the recovery in Thai export growth this quarter, due to tougher competition from Vietnam.
"Vietnam has chosen a suitable time to weaken its currency during a recovery in global economic growth. Purchasing orders will go its way because of lower prices," he said.
Phongsak suggested the Bank of Thailand should control the baht to ensure competitiveness, as the weaker dong would affect Thai export growth. The government may not have to announce a weaker unit, but it should ensure the baht is not too strong compared with other currencies.
Dej Pathanasethpong, president of the Thai Garment Manufacturers Association, said Vietnamese businesses would not necessarily cut export prices following the dong's depreciation.
Early this week, he visited Vietnam and met executives of a garment firm in Hanoi. They told him the company had no need to reduce export prices. Vietnamese exporters compete with China and therefore want competitive prices, but they do not need to be reduced further.
He said garment exporters, particularly in Thailand, should not merely focus on trying to match the price of Chinese goods. Chinese garments control 35 per cent of world trade, so firms should be competitive in terms of quality as well as price.
"At the same manufacturing standard and for the same goods, we don't have to offer the cheapest price but take care that our prices are not higher than China's," Dej said.
The currency devaluation in Vietnam will lead to business conflict among Vietnamese exporters because of price-cutting, he added.
Thanavath Phonvichai, director of the University of the Thai Chamber of Commerce's Economic and Business Forecasting Centre, said the weaker dong should not have a major impact on Thai export competitiveness.
"Although Vietnam is one of our major export rivals, it should not affect the growth of Thai exports, as most export products of Vietnam are commodities, while Thai products have better innovation," he said.
Thailand and Vietnam focus on different markets. If the currencies of other Asian countries like Malaysia and Indonesia have not weakened, Vietnam's move should not cause difficulty for Thai exports overall, he added.
However, Thanavath predicted that the baht was likely to appreciate by 3-5 per cent against the US dollar next year. If the government can create baht stability and assure it moves in line with other neighbouring countries' currencies, then it should not affect export competitiveness next year, he said.
Santi Vilassakdanont, chairman of the Federation of Thai Industries, said the dong's depreciation would affect some Thai sectors, such as rice and textiles, as they have to compete with much lower Vietnamese costs.
"The government must find measures to support exporters. If other countries, apart from Vietnam, weaken their currencies, Thai exporters will not be able to compete and the country's economic recovery will be delayed," he said.
Kan Trakulhoon, president and CEO of Siam Cement Group, said regional currencies, including the baht, were tending to appreciate against the weaker US dollar.
However, he believes the Bank of Thailand will be able to find measures to stabilise the baht and maintain the country's competitiveness.
Source: The Nation
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