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.