Moves to deal with the new threat to Thailand’s already depressed export performance come as the Chairman of Bangkok Bank expresses concern about the impact of the American move on the bank’s clients. He said the bank was monitoring its loan base closely and speaking with customers. Deja Tulananda said that the current economic climate was a hard one for business in Thailand saying that non-performing loan rates will rise.
The Thai Prime Minister Prayut Chan ocha has called for an end to speculation over the US trade bombshell delivered by US Donald Trump last Friday and has convened a special committee as government officials set to work to tackle the issue either through negotiations with its US counterparts or by addressing the formal reason given for the move which may entail reviewing Thailand’s labour laws to bring them up to international standards. He warned that stoking the issue into a political one would be the wrong approach for Thailand.
The Thai prime minister on Tuesday called for an end to public speculation on what might have prompted the sudden US move to suspend Thailand’s preferential trade status with the United States last Friday after six years of consideration.
‘Don’t make it become a political issue. Don’t make it worse’ – the Thai Prime Minister
He also revealed that moves were afoot to engage with the US side which remains Thailand’s second-biggest trade partner, in discussions on the issue. ‘We’ll pursue talks on this. If it doesn’t work, it will be because it involves US laws. And try not to speculate about this or make connections. Don’t make it become a political issue. Don’t make it worse,’ he implored.
฿1.3 billion or nearly ฿40 billion of Thai exports
It comes as concern about the impact of the move grows as the ฿1.3 billion in exports that are affected by the move, comprising of approximately 30% of Thailand’s exports to America under the General System of Preferences are for goods where the US can easily find other sources of supply. These goods will now be subject to an average duty of 4.5% with duties ranging from 0.1% up to 25%.
Thai trade executives to target a boost in exports for the 6 months leading up to the suspension
Despite the setback, however, officials and trade executives at the Ministry of Commerce are viewing the coming 6 months before the suspension comes into effect on April 25th 2020 as a window of opportunity for Thai exporters to maximise sales.
This strategy was outlined this week by Somdet Susomboon the acting director-general of the Department of Trade. ‘The first priority is to increase exports to the US over the next six months before the GSP cuts become effective,’ he said.
In the meantime, the ministry is rebooting its efforts to target new markets for Thai products impacted by last Friday’s announcement in Washington DC.
Prime Minister convenes a special committee
On Tuesday, the prime minister convened a special committee of officials from the Ministry of Foreign Affairs, the Labour Ministry and the Commerce Ministry to address the suspension.
In addition to pursuing other markets, it is being suggested that Thailand will commence talks with the United States based on the formal reason given for the suspension, being workers rights in Thailand.
Thailand must respect US legal provisions
The prime minister has said that recognition must be given to US laws governing trade.
On Monday, he suggested that Thailand could look at its labour laws as part of the discussion in the context of the country’s efforts to rise to higher international standards but warned of the constraints to this approach. ‘The labour issues are tied with our legal system, and we cannot change the law whenever we like based on other countries’ opinions. This is a complicated issue that requires compromise and balance between domestic administration and maintaining international relationships,’ he said.
Thailand to engage with US representatives at ASEAN summit being held in Bangkok
Meanwhile, the director-general of the Department of Foreign Trade at the Commerce Ministry Keerati Rushchano also on Tuesday confirmed that Thai officials will be looking to discuss the issue with US representatives at the ASEAN summit this week.
They would be trying to explore with the US side any possibility that the Americans may reconsider the decision. ‘We need to negotiate the issues in detail before saying what the real reason behind this GSP suspension is,’ he said.
Ministry of Commerce official insists that the suspension not linked to the pesticide ban
However, Mr Keerati at the same time insisted that the shock announcement on Friday last was not linked to the controversial ban on US pesticides on October 22nd in spite of strong US representations to Thailand on October 18th last.
‘The government and Ministry of Commerce have been aware of possible GSP suspension and have prepared measures to help Thai exporters such as identifying new alternative markets and promoting the adding of value to the products,’ he said.
He also added that he was confident that Thailand’s export drive in the United States would weather this storm.
Bangkok Bank Chairman expresses concern
It comes as Bangkok Bank, one of Thailand’s largest commercial banks, on Tuesday expressed concern about the American trade announcement. It suggested that the decision may impact its loan performance.
The bank’s Chairman Deja Tulananda, was concerned at the impact of the suspension of preferences for a range of Thai products sold in the United States. He indicated that the announcement on Friday had already had an impact on Thailand’s hard-pressed economy and suggested that bank’s focus for loan growth would now be on larger concerns and those linked with state projects.
‘The Thai economy has been softening, partly due to the GSP declaration dragging down growth. It is a hard time for businesses. We have to monitor our customers for any sign of trouble. Requests for loans are expected from large companies which have signed up for the government’s mega projects, such as the Sky train and the high-speed rail route connecting three major international airports.’
Bank boss urges Thailand to engage with US officials
The Bangkok Bank chairman said he is hoping that the matter could be discussed with the US side at the ASEAN summit taking place in Muang Thong Thani, Bangkok from October 31st to November 5th.
Non-performing loans will rise in the last quarter
The bank indicated that non-performing loans would rise in the last quarter of the year and it was endeavouring to keep the level stable at 3.4%. ‘We might see an upward trend in NPLs. However, we are quite lucky that we have approved few retail loans. To prevent a spread in NPLs, we need to look after our customers more closely and talk to them before the problem occurs,’ Mr Deja outlined.