Export sector employment impact of baht appreciation
ECONOMY / IMPACT OF STRONG LOCAL CURRENCYTDRI: Jobless rate manageable
PARISTA YUTHAMANOPBangkok Post Article July 31, 2007
The 5,000 workers laid off by Thai Silp South East Asia Import Export Co could be seen as early casualties of the economy's struggle to cope with the baht that has risen sharply since last year.
But the event raises an important question — how long will it take for labour intensive industries to upgrade themselves to cope with the strong baht?
Yongyuth Chalamwong, a labour expert at the Thailand Development Research Institute, said systemic unemployment was unlikely since there was still a labour shortage, especially in the low-skilled segments.
He said laid-off workers would be able to move to other firms. As long as the economy grew by at least 4%, there should be no employment problem at a macro-level.
"Low-skilled workers in the processed food, textile and garment and leather industries have some degree of mobility. They can move to other types of businesses in labour-intensive industries," Dr Yongyuth said.
Most textile firms will survive if the baht is kept stable, as they will resort to imported technology and raw materials. Those with overseas manufacturing joint ventures can also expect profits abroad to help offset their local losses.
"Most companies are adapting all the time to maintain their market shares. [Joint-venture] firms are also knowledgeable. They rely on the marketing strengths of their parent firms. They do not suffer much from the baht," MrYongyuth said.
Local garment manufacturers are also capable of adjusting to the competition, given their better skills compared to those of their competitors in markets such as Bangladesh, China and Vietnam.
"Local producers should focus on product quality in light of the strengthening baht. They still have fine skills that should enable them to bargain for higher prices," he said.
In any case, sub-contracted employees would be the hardest hit by the fallout from the baht. The textile and garment industry, for instance, employs 195,000 sub-contracted workers, or 15% of the industry's 1.3 million total, most of whom have primary-school education at most.
Of the 427,000 people employed in the electrical and electronics industries, 230,000 have secondary-school education. "The electronics, garment and automotive industries will be less affected by the baht since they stand to gain from raw-materials imports. But the processed food, textile and electrical appliance industries will be more affected," he said.
Dr Yongyuth said small and medium sized enterprises, on the other hand, would be hurt by the slowdown in consumption and investment as a result of political uncertainties.
Phongsak Assakul, president of the Thai Textile Manufacturing Association, said the textile and garment industry would be affected if the baht did not weaken from the current level.
He said industry-wide employment could be affected if manufacturers could not adjust to the rapid currency appreciation. The strengthening baht will affect not only export companies but also the entire local supply chain.
Mr Phongsak said that exports of labour-intensive industries had been spared in the past because manufacturers had increased their sales volumes to offset the decline in their baht revenues.
"The private sector is trying to adjust. Some have succeeded. Some haven't. But we certainly cannot survive if the currency appreciates beyond those of our competitors," he said.
