THE EFFECTS OF FINANCIAL CRISIS

The Effects of Financial Crisis: Affecting The Export And Stock Market of Thailand

The Effects of Financial Crisis: Affecting The Export And Stock Market Of Thailand

4.0 Analysis

4.2 Effect on Export Sector of Thailand

An over-all assessment of Thailand's export promotion policy and measures yields generally favorable results. Export promotion is considered a superior development strategy. Indeed, as export growth willcontinue to be an important factor in the country's economic growth, efforts should be made to sustain growth in this sector through export promotion and investment in necessary infrastructure. All measures currently used to promote exports are effective. However, other approaches to fmancing (such as leasing, which requires a special law) should be promoted. A form of post-shipment financing, (i.e., factoring), should also be developed. Providing credit facilities for long-term investment in export projects will go a long way to encourage more interest in investing in export ventures, and in turning import-substitution projects into export projects. Indeed, it is believed that setting up an export credit guarantee and insurance scheme would have the same effect. Finally, as Thai exports continue to grow, the risk that importing countries will impose more barriers also grows. A crucial issue Thailand willface is deemingwhat an "unfair subsidy" is and, thus, how Thailand will be able to handle countervailing or anti-dumping duties. Indeed, Thailand will have to come up with a number of alternative schemes which are the least likely to be subjected to such charges.

In this respect, the Bank of Thailand charged commercial banks an interest rate of 5 percent per annum, and required them to charge exporters no more than 7 percent of the yearly interest rate on the loan granted by the BOT. Under the new procedure, the Bank of Thailand maintains the original rate of the 5 percent per annum generally given to commercial banks in connection with entrepreneurs in general, but charges the banks only 3- 4percent of the interest rate provided to small exporters and small export manufacturers whose revolving capital is not more than 10million baht. Moreover, commercial banks must base half of the packing credit on Central Bank funds and the remainder on their own funds. It also requires that commercial banks charge exportersregardless of size - an interest rate not exceeding 10percent. Records show that, in the past, the major beneficiaries of this kind of credit were the large exporters of agricultural products. But recent changes in regulations and procedures have resulted in an increased number of users who are small exporters of nontraditional products (i.e. manufactured goods). Moreover, ideas for an "export credit guarantee and insurance scheme" have been discussed over the last several years. The government decided to go ahead with such a scheme in 1988, but a change in the Cabinet (in August 1988) delayed its implementation. Previously, the scheme was not considered very necessary because Thailand mostly exported consumer products to well-established markets. The initiative actually came from those construction companies competing for projects in the Middle ...