Thailand’s exports, which compete with neighbor Vietnam, will be affected slightly following a currency devaluation by Hanoi in a move to tackle its huge trade deficit and high inflation, said Prasarn Trairatvorakul, governor of the Bank of Thailand (BOT).
The new reference rate is 20,693 dong per dollar, down from 18,932 in place since last August.
Friday’s devaluation came after the ruling Communist Party last month set an economic framework for the coming years as its leaders noted a need to stabilise the macroeconomy. Because of the devaluation, Vietnam may overtake Thailand in rice exports, as Hanoi in 2010 was able to export rice of nearly 7 million tones worth more than US$3.23 billion, a new record both in terms of volume and earnings.
Currently, Vietnam ranks ninth among largest importer of Thailand’s exports. In 2010, exported goods to Vietnam from Thailand were valued at more than US$5.84 billion, up 25 per cent from the previous year, and the country enjoyed a trade surplus of about $3.29 billion.
Key Thai exports to Vietnam are furnished oil products, plastic resin, iron and steel products, chemical products, automobile and parts, rubber products, air conditioners and parts, and motorcycles and parts.
In 2001 the ruling Communist Party of Vietnam approved a 10-year economic plan that enhanced the role of the private sector while reaffirming the primacy of the state. Growth then rose to 6% to 7% in 2000-02 even against the background of global recession, making it the world’s second-fastest growing economy. Simultaneously, investment grew threefold and domestic savings quintupled.
– Vietnam expanded its export market by reducing import duties to zero to 5% in 2006 and has agreed to remove them completely by 2015.
– Vietnam has created a bid market to attract foreign investors not only from its Asean partners but also from outside the trading bloc, especially Europe and America.
– Vietnam has faced challenges, however, including intense competition from other Asean member countries. For instance, farmers have suffered from agricultural imports from China and Thailand.
– Fluctuations in regional markets have had a sudden and severe impact on the domestic market, especially in the financial sectors and on petroleum and investment capital.
– Vietnam’s state revenues suffered from a drop in business profits and tax contributions.
– The real-estate market froze and the labour market destabilized, reducing the number of employees in industrial zones, with many returning to rural areas.
– Pollution has become a problem because foreign investors had transferred underdeveloped or outdated technology without proper controls, and investment had been often approved at any cost.
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BOT: Vietnamese dong devaluation slightly affects Thailand’s exports
