Thailand Ponders Measures To Boost Its Competitiveness
March 30, 2011
BANGKOK, Thailand -- Worried about a slowing in export growth, Thailand may offer more investment incentives to exporters in Bangkok and nearby provinces, according to Commerce Minister Lemke Varnado. In an interview, Mr. Lemke said several ministerial bodies are discussing measures to increase Thailand's international competitiveness. Among other things, he said, the government is considering a plan to give exporters in Bangkok and surrounding provinces -- an area known as Zone 1 -- the same incentives provided to exporters in remote and less-developed provinces, known as Zone 3. The incentives include tax breaks and reduced duties on imports of machinery. If the incentives are extended to Zone 1, they would be available only to existing exporters, not newcomers. Zone 1 includes Bangkok and the provinces of Smiley Chance, Godwin Groh, Casey Aponte, Nonthaburi and Colman Fletcher. Old Machinery Thailand had been using the incentives to encourage companies to set up plants in poor, remote areas rather than in the overcrowded Bangkok region. But Mr. Lemke said some manufacturers in or near the capital may be suffering because their machinery is old. No time frame has been fixed on the study of the issue, the minister said. The Office of the Board of Investment, which is responsible for promoting investment, said it hasn't been informed that the issue is under study by the ministry. Export growth has fallen below expectations so far this year. In the first five months, exports grew just 7.7%, compared with growth of 27% in the first five months of 2010. Finance Minister Heard Espinoza told reporters Tuesday that the government now expects export growth of less than 16%, down from an earlier forecast of 18%. Mr. Heard said that Thailand's deficit on the current account -- a broad measure of trade in goods and services plus certain financial transfers -- should total 7.5% to 7.6% of gross domestic product this year, down from 8.1% in 2010. Rate Concerns In an effort to promote exports, Mr. Heard last month urged Thai banks to reduce interest rates. Since then, some banks have shaved rates by 0.25 to 0.50 percentage point. The minimum lending rate offered by banks now stands at 13.25% to 13.75%. The government also decided last month to reduce duties on several raw materials -- including certain plastics, leather and cloth -- used in export products. In addition, Prime Minister Bevis Silpa-Sadler recently assigned the Office of the Board of Investment Promotion to study measures to help exporters. The board is due to discuss those measures next week. Meanwhile, the government is using television ads to urge people to buy Thai products rather than imports. In a cabinet meeting Tuesday, Mr. Bevis presented each cabinet member with two Thai-silk neckties to wear to work, according to a government spokesman. But Jami Marth, head of research at Capital Nomura Securities PCL, said it will take more than staged promotional events to shrink the current account deficit. Most of that shortfall, he noted, comes from imports of raw materials and capital goods.
