The US-China trade dispute is having a knock-on effect in Southeast Asia, vice chairman Montri Mahaplerkpong said this week, with Washington now claiming that Chinese products are being exported to the US via Vietnam under the guise of Vietnamese goods.

The US could implement measures to reduce Vietnamese exports, damaging the Thai economy because Southeast Asia as a whole represents Thailand’s top export destination, accounting for 25 per cent of total exports, Montri said.

He warned that the US could target Asean member-countries one by one, starting with Vietnam, which has a large trade surplus with the US, as does Thailand.

Vietnam ranks 20th on the list of countries with significant trade surpluses with the US and Thailand 11th, according to Montri.

The top nine nations on that list are at risk of trade tariffs from the US, he said. Thailand’s trade surplus is projected to rise due to an upsurge in Chinese investment aimed at establishing manufacturing bases here. Thailand is thus at risk of being caught directly in the trade-war crossfire.

Montri said the impacts on Thailand from ongoing trade tensions between Japan and South Korea remain limited, but if they impose tariffs on one another, Thailand would suffer because it exports electronic and automotive parts to both.

He does not expect Thailand to be harmed by US trade tensions with India and the European Union, but cautions that trade spats around the world will hurt the global economy and ultimately Thai exports. Countries should thus be embracing free trade to boost global growth.

The FTI will be represented at the Asean-Apec meeting at the end of July to encourage all Asean nations to push for free trade among the 21 Apec countries, including the US, China, Japan and South Korea.

Representatives of the private sector in each country will jointly submit suggestions to that effect at the meeting, Montri said.

“The trade-war issue has not been widely discussed at these meetings in the past. If all members cooperate to find a solution, then there is potential for progress to be made.”

He believes the government should be preparing now to cope with the expected fallout, such as by diversifying export destinations and reducing exporters’ reliance on countries such as China. Thai manufacturing parts going to China have dropped off alarmingly due to the US tariffs, he noted.

Thailand should also focus more on exporting consumer goods, such as durian and other fruits, for which the overseas market is growing strongly, he said.

It was the fourth straight month of reduced exports but the figures suggested a relative uptick, compared with the 6.2 per cent contraction in May, she said.

However, if gold and oil-related products were taken out of the equation, June exports would show a much higher contraction of 8 per cent, due to the high value of gold exports.

Imports in June were US$18.197 billion, down 9.4 per cent year on year, resulting in an overall trade surplus of US$3.212 billion.

In January-June 2019 the value of Thailand’s exports stood at US$122.971 billion, down 2.9 per cent on the first six months of 2018, while imports were valued at US$119.027 billion, down 2.41 per cent year on year.

If Thailand’s exports can reach an average of US$21 billion per month for the rest of the year, the country still has a chance of seeing an overall expansion in exports of between one per cent and two per cent in 2019 – and Pimchanok does expect exports to rise in the last quarter of the year.

In June Thailand’s exports were down across the board to its major trading partners: 2.1 per cent to the US, 14.9 per cent to China, 1.9 per cent to Japan and a whopping 7.7 per cent to the European Union.

The requested information covers the past activities of the agencies and how they are related to the government’s 12 policies, he added.

The minister’s permanent secretary Prasong Poontaneat said Uttama had asked the state agencies to review the new economic measures to be implemented by the government such as those intended to bridge many kinds of gaps.

He added that the government has an adequate fiscal 2019 budget to implement the new economic policies.

Lawan Saengsanit, director general of the Fiscal Policy Office, said the office would quickly finish their study for restructuring personal income tax as ordered by Uttama. The study will also cover alternative sources of government income in the event that income tax is reduced.

Restructuring income taxes is among the promises made by Phalang Pracharat Party during the recent election campaign.

“Several state enterprise showed a financial result in this fiscal year better than last year and also better than early estimates, especially the energy industry such as Electricity Generating Authority of Thailand [EGAT], the Provincial Electricity Authority [PEA], and PTT Plc,” he said.

Meanwhile, Government Saving Bank and Government Housing Bank also reported financial results improved over the same period of last year, as the both state owned banks had developed their business and services to better meet customer demand.

The top five state agencies for generating revenue in the first nine months and made high payments to the Finance Ministry were: Government Lottery Office at Bt32.6 billion paid to the Finance Ministry, PTT Plc at Bt29 billion to the Finance Ministry, EGAT at Bt18.9 billion, Government Saving Bank at Bt16.5 billion and PEA at Bt14.9 billion.

NBTC secretary-general Takorn Tantasith said on Monday that under the draft plan, there will be two multi-band auctions. The first will consist of higher frequency bands, such as 26-28 GHz, together with the 2600 MHz middle band and the lower 700 MHz band.

For the second auction, middle bands of 3400–3600 MHz and 1800 MHz will be released altogether.

The timeline for the auctions will be announced as soon as possible after the plan is approved by the NBTC board.

The multi-band auction plan is regarded as a means to prepare spectrum resources for the speedy development and utilisation of 5G technology in Thailand.

The retail and wholesale businesses for small and medium-sized enterprises (SMEs) are in a worrisome situation in terms of debt, said Naris Sathapholdeja, head of TMB Analytics.

This is as a result of the technological disruption in businesses and the increasing popularity of online trading, leading traditional SMEs to shrink and NPLs to increase.

In the first quarter, wholesale business and SME loans contracted by 1.2 per cent year on year, but NPLs increased by 7.4 per cent. Businesses in the wholesaling of construction material saw an increase in NPLs by 6.8 per cent.

Furthermore, agricultural wholesalers also saw NPL increases, of 11.8 per cent year on year with normal loans contracting by 11 per cent. Food wholesalers saw NPLs grow by 7.7 per cent and loans contracted by 6 per cent. Small retail businesses’ NPLs grew by 6.8 per cent and loans grew by only 0.8 per cent.

New NPL formation during the first quarter of this year was valued at around Bt25 billion – some 53 per cent of which are from the retail and wholesale sectors, valued at Bt12 billion.

Naris said that wholesale businesses are more worrisome than retail businesses. This is because wholesalers are directly affected by large businesses that can offer cheaper products.

As for retail businesses, even if they are negatively impacted by e-commerce, entrepreneurs still have the opportunity to start trading their goods online.

Kasikornbank has been cautious on releasing new loans amid rising NPL levels in the retail, wholesale and agricultural sectors. NPLs are an economic indicator that the stability of these businesses has decreased and thus, financial institutions must be more careful when giving out loans, said Preedee Daochai, president of Kasikornbank.

Apiphan Charoenansusorn, president of Siam Commercial Bank, said: “Industries that are at risk must be monitored closely. For instance, banks have to take more caution on giving out loans to the agricultural and retail sectors.”

TMB said the drop reduced the fund’s return by 0.47 per cent. The least impacted funds are those covering oil investment, gold, and property funds, at 0.53 per cent, followed by a balanced fund.

Naris Sathaphondecha, the senior director of the TMB economic analysis centre (TMB Analytics), said that the baht’s appreciation not only affected the export market and tourism businesses but investors’ portfolios – especially the FIF. The currency has risen 5.8 per cent this year.

The Bt1.2 trillion earlier valuation for the existing FIF funds comprised Bt836 billion in fixed income, Bt243 billion in equities, and Bt30 billion in commodity and property funds.

“The baht’s appreciation widely affects every sector related to business. When investing in US dollars, inventors find returns have less value in baht. The strong baht affects the returns on funds as investors are concerned about the exchange rate. The investment markets have gone down, especially the stock market. Investors will soon know that they are losing profits because of exchange rate. ” he said.

However, the effect of baht appreciation is mostly felt on the fund that has low protection for currency risk, also known as a totally naked protection fund. These fund risk lower net asset values (NAV) or losses on investment. “The most affected fund since early this year has been a mixed fund on gold and oil investments. It received a lower return at 0.53 per cent. Also affected are the discretionary risk prevention groups and partial risk prevention groups, with fund returns dropping 0.44 per cent,” Naris said.

However, the debenture fund was largely unaffected by the appreciation because of risk prevention measures. The fund’s return dropped by 0.21 per cent.

“If you look closely, the return was reduced by Bt27 billion from the value of the fund. The stock dropped by Bt16 billion and the mixed fund fell about Bt6.8 billion. Why did the AUM (assets under management) fall dramatically? It depends on the AUM’s base investment. If there are large investments, the imports will be massive. Therefore, when investors hold investment units, they must consider the impact of a lower exchange rate affecting the returns and whether baht appreciation will occur in the future” Naris added.

The measures, such as increasing the amount covered via state-welfare cards, free electricity and discounts on LPG, are aimed at providing aide for low-income people and will be implemented for the next three months from August.

On Saturday, Sontirat met with the Energy Ministry’s permanent secretary Kulit Sombatsri, officials from the ministry and state enterprises such as the Electricity Generating Authority of Thailand (Egat) and PTT Group, to brainstorm the ministry’s policy directions.

Sontirat said the meeting was held to hear and consider the ideas and problems aired by the different parties.

“On Monday, I will discuss urgent measures and energy framework to be initiated in the next three months with the Energy Ministry’s secretary-general and its state agencies. The aim is to set a clear direction for all energy operators,” the minister said.

He added that the meeting on Monday will also discuss energy-related measures to help low-income earners through state welfare cards, such as a discount on the price of LPG and free electricity for users of no more than 50 units per month.

“We will discuss how these measures can actually reach the low-income strata. We want to find the right way of helping these people so they become stronger, instead of just providing them with subsidies,” Sontirat added.

He said in the long-term, the energy measure will not just reduce the expenses of low-income people, but will also give them access to alternative energy and give them a chance to produce energy for their personal use and for sale. This will create a form of sustainable assistance.

Sontirat said the PTT Group also suggested the concept of gaining “energy from the ground” by promoting the plantation of energy crops like palm and cane. This idea will not only make the agricultural sector sustainable, but will also support other stakeholders and the economy as a whole, he said.

Also present at the meeting was Commerce Ministry’s permanent secretary Rear Admiral Somkiat Pholprayoon, who is also secretary-general of SBPAC.

Jurin said emergency measures still posed a problem when it comes to development in the five provinces.

“We need to tackle the problem on three dimensions – investment, tourism and cross-border trade, which is worth about Bt230 billion,” Jurin said, adding that Thailand is still suffering a trade deficit in exports to Malaysia, especially when it comes to rubber products.

“The multi-party meeting aimed to seek solutions to restore and build the basic economy in the five provinces so people have a better life,” Jurin, who is also deputy prime minister, said.

Meanwhile, Thavorn said that last week he had listened to a briefing from related parties, along with the transport minister and his deputy, and realised that a four-pronged approach will have to be taken with the development of the five provinces. The measures are:

1) Developing land transport and increasing both main and secondary transportation routes as well as connections to Malaysia and Singapore in line with the government’s one-belt-one-road strategy;

2) Developing water transport by opening three water gateways in the South, that also connect with Malaysia and China as part of the one-belt-one-road strategy;

3) Developing rail transport and connecting with other regions;

4) Developing air transport in line with the Transport Ministry’s plan to not open any new airports for 10 years, but to develop existing airports in the South, including plans to expand the Narathiwat airport.

Niphon, meanwhile, said the Interior Ministry will apply the principle of King Rama IX, “Understanding, Accessibility and Development”, to help build a better life for people in the South.

“We will focus on the decentralisation of power in the southern border provinces, especially by increasing the number of special economic zones, which will create jobs for people. In the agricultural sector, we will use ‘local mechanisms’ to solve local problems by encouraging more usage of agricultural products, like making rubber roads to generate demand for rubber and creating a stability for the price of rubber,” Niphon said.

Leigh met Uttama to present a report on IMF’s estimation of the Thai economy for 2019 under the IMF Article IV Consultation. The report showed that though Thailand has been hit negatively by the US-China trade war, its economy has continued to grow due to domestic consumption and strong macroeconomic fundamentals.

The report also showed that Thailand’s international financial position remained stable, and that it will be able to cope with the volatility of the global economy thanks to its high international reserves.

IMF believes that private consumption and investment in Thailand are also likely to expand, though it has advised the government to be aware of the potential risk of international trade conflicts that might result in an economic slowdown for major trading partners.

However, the IMF report lauded Thailand’s recent fiscal policy, especially the 2018 State Finance Fiscal Discipline Act, which was passed to set up a financial discipline framework for the country and develop laws to make the government transparent and prevent corruption.

Leigh said the fiscal policy still needs to be expanded and that the government should accelerate its investments, especially in the Eastern Economic Corridor (EEC), and speed up the implementation of social welfare policies, such as the state-welfare card that aims to benefit more than 14.6 million low-income earners.

The IMF has also advised the government to develop the country’s workforce, so it is more productive and can boost Thailand’s competitiveness in line with the 20-year national strategy. It also said that in order to enter the digital economy era in accordance with the Thailand 4.0 model, the government needs to invest in education and public health as well as provide equal opportunities to people.

Meanwhile, Uttama told the IMF team that the government has continued promoting the EEC and has also been investing to develop the country’s infrastructure, such as the rail system, roads, ports and airports. The government will also improve the law on public-private partnerships so the private sector can also invest to develop infrastructure projects. He said the government is also planning to revise the country’s tax system in order to promote investment and to support small and medium enterprises in particular.