http://www.businessweek.com/news/2011-06-28/thai-opposition-aims-to-keep-baht-competitive-suchart-says.html

Bloomberg News

Thai Opposition Aims to Keep Baht Competitive, Suchart Says

June 28, 2011

(Updates with baht in fifth paragraph.)

June 28 (Bloomberg) -- Thailand’s main opposition party, leading in polls ahead of the July 3 election, will seek to keep the country’s currency “competitive,” its economic chief, Suchart Thadathamrongvej, said.

“The baht has to be competitive,” Suchart, who was Thailand’s finance minister in 2008, said in an interview at Pheu Thai’s party headquarters in Bangkok yesterday. Most studies show “if you have a managed fixed-exchange rate, it’s better than a flexible exchange rate,” he said.

Pheu Thai, headed by the sister of former Prime Minister Thaksin Shinawatra, has the lead in opinion polls ahead of next month’s election after pledging to raise minimum wages, extend tax incentives and guarantee rice prices for farmers. Suchart said the party aims to raise incomes for the lowest-paid workers and create more domestic demand to reduce the country’s reliance on exports.

Thailand’s policy makers have already been taking steps to stem the currency’s appreciation. The country’s foreign-exchange reserves have increased more than 7 percent to $185.42 billion this year, according to central bank data, a sign the monetary authority bought dollars to stem the baht’s climb.

The currency was little changed at 30.95 per dollar at 11:46 a.m. in Bangkok today.

Exports Ease

The baht has added 4.6 percent against the dollar in the past year, and is down 3.1 percent this year. A stronger currency makes exports more expensive. Growth in overseas sales, which account for about two-thirds of the Thai economy, slowed to 17.6 percent in May.

Southeast Asia’s largest economy after Indonesia removed a 15 percent tax exemption for foreigners on income from domestic bonds to curb currency gains last year. The baht touched its strongest level since 1997 in November.

Pheu Thai has pledged to raise the minimum wage to 300 baht ($9.7) per day should it become the government. The daily minimum wage in Thailand ranges from 159 baht in the northern Phayao province to 221 baht in the resort island of Phuket, according to the Labour Protection and Welfare Department’s website.

“If you start redistributing the money from you to the poorer part of your family, then you will become richer,” Suchart said. The party aims to raise the wages within six months, he said. Abhisit’s Democrat party has promised to raise wages by 25 percent in two years.

Difficult Plan

Thailand’s Development Research Institute said in a report yesterday that the Democrat’s wage increase is “possible” while Pheu Thai’s campaign “is more difficult” as it means at least a 36 percent jump from the current rates. According to its research, Thailand’s minimum wage has risen 2.4 percent per year on average since 1998. The highest raise was 9.1 percent during 2007-2008.

The nation’s gross domestic product growth could exceed 7 percent on average in the long term during Pheu Thai’s management, Suchart said. Expansion next year may be “one percentage point” more than any prediction, he said.

Thai GDP fell 2.3 percent in 2009 amid a global recession, before climbing 7.8 percent last year. The government’s planning agency forecasts growth of 3.5 percent to 4.5 percent this year as global demand slows from the 2010 rebound.

Thaksin was ousted in a 2006 coup and has lived overseas since fleeing a jail sentence for abuse of power. About 100 people have been killed following disputes over the last election.

--With assistance from Yumi Teso and Tony Jordan in Bangkok. Editors: Stephanie Phang, Tony Jordan

%THB BOT TB <Equity> CN

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

To contact the editors responsible for this story: Tony Jordan at tjordan3@bloomberg.net; Stephanie Phang at sphang@bloomberg.net


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