Dear
friends,
The
rapid
appreciation
of the
Baht
currency
has made
difficult
the Bank
of
Thailand
(BoT)’s
conduct
of
currency
exchange
rate
policy.
The
situation
is not
different
from
being
placed
between
hell and
high
waters—as
the
absence
of
control
on
capital
inflow
will
result
in
excessive
appreciation
of the
Baht
with
serious
impacts
on
exports,
while
the use
of
control
on shot-term
capital
flow
will
affect
investment
with
equal
severity.
The
above
situation
begs an
interesting
question:
which
target
should
Thailand
place
more
emphasis
on—“export”
or “investment”?
In my
view,
the BoT
decision
to curb
short-term
capital
inflow
and
prevent
excessive
appreciation
of the
Baht was
the
right
policy
move due
to the
following
reasons:
Export
is more
important
to the
overall
economy
When one
considers
the
impact
on the
overall
economy
and on
the Thai
people,
the BoT
decision
to
prioritize
the
export
sector
was the
right
approach.
During
the past
several
years,
exports
have
been
more
important
to the
Thai
economy
than
foreign
investment.
Exports
during
the
first
nine
months
of 2006
were
valued
at
95,617.36
USD,
while
the
inflow
of
investment
in the
form of
debt
securities
equaled
only
2,533.09
USD.
Even if
one
looks at
all
types of
securities
combined,
the
amount
of total
portfolio
investment
still
stands
at only
31,265.75
USD.
The
impact
of
currency
exchange
rate on
exports
also has
a direct
effect
on
employment
and the
people’s
lives,
whereas
investment
has a
more
indirect
and
lesser
impact
on jobs
and
people’s
welfare
as those
involved
in the
stock
market
are the
well-to-do
minority
which
makes up
only a
small
fraction
of the
population.
Investment
in the
stock
market
accounts
for only
a small
part of
overall
capital.
In the
context
of
impacts
on
foreign
investment,
while
measures
to
control
short-term
capital
inflow
may have
serious
impacts
on
investment,
the
Thailand
Stock
Exchange
Market
accounts
for only
20 per
cent of
the
overall
capital
sources.
This is
because
the
majority
of
investment
capital
comes
from
commercial
banks.
Therefore,
although
capital
funds
from the
stock
market
are
faced
with
limitations,
capital
loan
options
from
alternative
sources
remain
widely
available
to the
business
sector.
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