Finance Minister Uttama Savanayana said the central bank and the Finance Ministry had together come up with the measures announced on Wednesday.

“It is the first step, and we will do more in the future,” he said in response to scepticism about the effectiveness of the measures to rein in the rising baht in the long run.

The central bank announced several measures including allowing exporters to park more money abroad, allowing retail investors to invest directly in foreign securities, increasing the aggregate investment limit regulated by the Securities and Exchange Commission, facilitating easier transfer of money out of the country for individuals and allowing foreign currency settlement for onshore gold trading.

“We don’t believe that the rate cut and the measures to boost capital outflows would be effective in weakening the baht,” said Jitipol Puksamatanan, chief markets strategist at Krung Thai Bank.

“Market participants believe the baht is a safe haven asset and hence there is high demand for the Thai currency,” he added.

He, however, agreed that it was an important step in increasing liquidity in the foreign exchange market, which may lead to less market intervention by the central bank in the long run. Gold traders will also enter the currency speculation turf, he added.

Phacharaphot Nuntramas, senior director at Krungthai Compass research, predicted that the baht may continue to appreciate and even rise to Bt29 to the dollar by early next year. This is because the steady increase in tourist arrivals would bring in more earnings in foreign currencies. It is also the season for exporters to repatriate their earnings back home, he noted.

Meanwhile, Visit Limluecha, vice chairman of the Thai National Shippers’ Council — an exporters’ club — said that exporters were satisfied with the latest measures to curb the baht’s rise. However, it remains to be seen whether these measures will be effective. “If the baht is going to continue to rise, the central bank may need to impose drastic measures to deter short-term inflows aimed primarily for speculation,” he said.

Somprawin Manprasert, chief economist and executive vice president at Krungsri Bank, said the rate cut and capital outflow measures demonstrated that the central bank was moving in the right direction. The baht is unlikely to appreciate rapidly as it did in the past, he said, adding Thailand could achieve economic growth of 2.9 per cent this year, down from the 3.8 per cent growth forecast early in the year.

“The economy will not slide further,” he said, sounding optimistic.

He, however, suggested that the Bank of Thailand should communicate more with the market.

The report, titled “E-commerce & SMEs: Uncovering Thailand’s Hidden Assets” is based on research of some 7,000 shops and sellers nationwide on Shopee, Sea’s e-commerce platform.

It was conducted by the Sea Insights team, Sea’s research and public policy unit. It includes in-depth analysis of the effects of e-commerce adoption on sellers’ household income, productivity, and efficiency.

Key findings include:

➤ E-commerce can drive explosive growth in revenue for SMEs — 133 per cent growth for SMEs with both online and offline selling channels and up to 370 per cent for fully digital SMEs (where e-commerce sales make up over 80 per cent of total retail revenue).

➤ Approximately 82 per cent of SMEs also report a higher household income due to e-commerce.

➤ E-commerce is driving greater connectivity between buyers and sellers across Thailand. Buyers and sellers are now no longer geographically limited to markets in their area.

Sellers can access distant markets, while buyers can discover a broader range of products, with the lower income regions such as the North, Northeast and South seeing the greatest increase in share of merchants selling outside their own regions (increase of 49, 47 & 45 percentage points respectively).

The report indicates the potential of e-commerce as a tool for empowerment of sellers, and also reveals the large-scale economic impact of e-commerce.

E-commerce has the potential to create inclusive growth in terms of income, employment, efficiency, and decrease the limitations of their physical location, the report says.

The report illustrates how e-commerce can be a pathway to inclusive growth, by uncovering the untapped potential of groups such as SMEs, merchants outside Bangkok, and also hidden entrepreneurs (eg homemakers and students).

Thailand’s e-commerce industry is experiencing high growth. From 2015 to 2019, gross merchandise value (GMV) grew 54 per cent and is valued at US$5 billion.

The e-commerce industry is expected to grow by 24 per cent annually to $18 billion in GMV by 2025. In addition to rapid growth, Thailand has a strong foundation for e-commerce with 38 million digital natives out of a total population of 68 million people, and a smartphone penetration of 71 per cent, the report says.

Additionally, 78 per cent of Thailand’s population is banked, compared to only 41 per cent for the Asean6 countries. Moreover, 51 per cent of consumers buy goods using social media. However, e-commerce in Thailand is still underpenetrated. Compared to China’s e-commerce industry, which accounts for 30 per cent of the country’s total retail in 2018, Thailand’s only accounts for 2 per cent.

Santitarn Sathirathai, Sea group chief economist, states: “This is the largest in-depth report on e-commerce in Thailand, and shows that it is generating a tangible economic benefit for [the country]. In particular, it is increasing the competitiveness of SMEs, empowering sellers who reside outside Bangkok, and paving the way for new types of entrepreneurs, or what we call ‘hidden entrepreneurs’. We hope that this report will be beneficial for both private and public entities, as well as, strengthening the digital economy ecosystem, and bridging the collaboration between private and public sector, which is an important element in digital economy.”

The other findings from the report include:

Traditional SMEs, retail SMEs who had an existing offline business prior to adopting e-commerce, gain several benefits from e-commerce:

1) A surge in total revenue. On average, e-commerce adoption lifts both online and offline revenue by 133 per cent, which is roughly an average annual increase of 51 per cent. This increase ranges from a 93 per cent boost for merchants with online sales below 20 per cent of total sales, to as high as 369 per cent for sellers who fully embrace digital integration (ie online sales for more than 80 per cent of sales). The higher the level of digital integration the bigger the jump.

2) A sharp improvement in efficiency. Merchants also attained higher revenue through an increase in efficiency rather than having to hire a large sales force. The report defines efficiency as revenue per employee. On average, sellers underwent a 128 per cent increase in efficiency. This is especially important in the context of Thai economy where there are severe labour shortages.

3) A substantial investment in employment. Thai sellers also employed more people on average. When asked what merchants primarily do with their profits from e-commerce, those that decided to use their profits to invest in labour saw an improvement in employment of up to 46 per cent.

For sellers outside Bangkok, e-commerce allows merchants to discover new markets by reducing distance constraints. It also helps buyers find new products from faraway provinces more easily by reducing search costs.

Before adopting e-commerce, 45 per cent of SMEs sold outside of their own region. After adopting e-commerce, 81 per cent of SMEs now sell outside their own region.

The number of trade connections roughly doubled after adopting e-commerce. E-commerce allows instantaneous reach across the country, with regions with relatively lower incomes such as the North, Northeast and South seeing the greatest increase in share of merchants selling to provinces outside their own regions.

For instance, the proportion of sellers in the North of Thailand who sell to customers outside the region they live in rose by 49 percentage points, from 43 per cent of all sellers to 92 per cent.

For the hidden entrepreneurs, e-commerce helps generate alternative sources of income. Entrepreneurs come in many forms, and are not limited to those who own offline businesses. These “hidden entrepreneurs” each have unique contexts, nuances and environments that they require to properly flourish.

These hidden entrepreneurs include students, homemakers, and employees. They are more likely to have full-time responsibilities (63 per cent) such as being a homemaker, employed, or student, 58 per cent are not the primary earner, and 75 per cent are female.

Hidden entrepreneurs have different motivations for adopting e-commerce. For instance, homemakers value the ability to have more household time through e-commerce.

For students, the two important motivations are the ease to set up a business and lower business cost. Hidden entrepreneurs also use profits from e-commerce differently depending on their needs and situation. For example, students are most likely to utilise profits to pay for their education, and in doing so, achieve a higher standard of living for themselves. On the other hand, the top use of profits for homemakers is to care for their family.

It said this week the Bank of Thailand’s immediate rate cut announced on Wednesday (November 6) to 1.25 per cent would impact commercial banks differently depending on their scale of business.

The key policy rate is the lowest since the 2008 global financial crisis.

Commercial banks have begun trimming their lending and deposit rates in step with the central bank’s cut, Tisco noted.

One of two scenarios can be expected to emerge. Banks might cut their minimum lending rate (MLR) rate by 25 basis points or their minimum retail rate (MRR) and minimum overdraft rate (MOR) by 12.5 basis points.

If so, it could drop profits by 4 per cent for large and midsized banks and 1 per cent for smaller banks such as Kiatnakin Bank (KKP) and Thanachart Bank.

Only Bangkok Bank (BBL), due to its large size, could expect larger profits next year – up to 7.8 per cent in the first scenario and 4.2 per cent in the second, Tisco said.

The projection does not take into account cuts in the deposit rates, which are currently already so low that banks have little leeway for further reductions.

Tisco advised investors to buy BBL at Bt203 per share, Kasikornbank at Bt174, Siam Commercial Bank at Bt145, KKP at Bt84 and Krung Thai Bank at Bt18.40.

If banks cut their MRR and MOR by 25 basis points but keep deposit rates unchanged, it said, profits would recede by 6-8 per cent for large banks and 2-4 per cent for smaller ones.

When the central bank cut its policy rate in August, banks dropped lending rates by 15 basis points and deposit rates by 10, resulting in profits declining by 1-2 per cent for large banks and rising by 0-1 per cent for smaller banks.

The survey is Mercer’s flagship annual compensation and benefits bench-marking study, with participation increasing to 607 companies this year across various industries.

In addition, it also conducts regular pulse surveys throughout the year to keep up with impact of the rapidly changing business environment as well as the latest trends in compensation and workforce.

The 2020 salary increase forecast across key industries in Thailand remains stable at 5 per cent, consistent with the low rate of inflation projected at 1.1 per cent, compared to 1 per cent this year, according to an executive briefing form IMA Asia/Asia Pacific in October.

The automotive sector is forecast to enjoy the highest salary increase of 5.5 per cent, while salary in the chemical industry is likely to see a slight rise of 5.2 per cent.

The forecast of variable bonus trend across all industries that plan to pay workers for their 2019 performance is 2.3 times the monthly base salary.

The automotive industry is predicted to pay the highest variable bonus at 3.6 times the monthly base salary when compared with other industries, followed by the life insurance and high tech industries, which plan to pay a variable bonus of 2.5 times the monthly base salary.

Voluntary attrition trends

Across industries, the voluntary turnover rates were on the rise last year with the turnover rate increasing to 12.8 per cent in 2018 compared to 12.5 per cent in 2017. However, according to the latest data from Mercer’s Asia Market Pulse Survey, in Q1/2019 the voluntary attrition rate seemed to have stabilised and remained the same as the first quarter of 2018 at 4 per cent.

While the main reasons cited for employees leaving their organisation in Asia varies by age group and gender, in general the top three reasons for employees leaving their organisation are competitive pay, manager interaction, and clear career path and job security, according to Mercer Asia Pulse Survey(first-half/2019) and 2019 Global Talent Trends Study.

The high-tech industry in Thailand has the highest involuntary turnover rate at 7 per cent and this can be attributed to the increasing role of technology and the need for organisations to adapt to automation and digitalisation.

Hiring trends

The hiring trend in Thailand in 2020 is expected to drop slightly with 29 per cent of organisations planning to add new hires compared to 31 per cent in 2019. Given the stabilising voluntary turnover rate, the focus of most organisations is on upskilling and retaining key talent.

Piratat Srisajalerdvaja, Mercer Thailand’s Career Product Leader, said: “The jobs we are familiar with today are disappearing and the emphasis on access to new skills needed for the future workforce will impact the way we define and benchmark jobs in the future.”

“To cope with the demand for digital skill sets, companies are paying a premium for discrete skills or relying on broadly defined jobs to give them the scope to bring in or build these skills. We anticipate that work will morph into ‘skill clusters’ which will become the foundation of base salaries in the future. Rather than being merely technical or functional skills, a skill cluster is more holistic and includes both cognitive and behavioral skills,” Piratat said.

“Digital transformation forms a key part of Thailand’s national agenda with the Thailand 4.0 Master Plan and Digital Economy Plans (2018-2021) and in order to attract, retain and grow, companies need to adapt to the new digital reality and an evolving workforce,” said Juckchai Boonyawat, CEO of Mercer Thailand.

“Faced with changes including digital disruption, an aging population and gig or contract workers, companies in Thailand need more than ever to revisit their total rewards and compensation and personalise and incentivise the experience for each of their diverse employees. A number of companies have already implemented flexible benefits programmes and pay-for-performance incentive models to meet these challenges,” Juckchai added.

Shift to agile rewards

As new roles are created and existing roles change with automation and AI, it is becoming more difficult to keep up with employee pay expectations and market values. According to Mercer’s 2019 Global Talent Trends Study, the number 1 workforce rewards priority is offering more diverse rewards.

The good news is that priorities in human resource (HR) reflect what employees are asking for, both HR and employees agree that offering a wider variety of incentives and differentiating rewards for high performers will make a difference.

To truly align to the business, investments in rewards should reflect a company’s strategic focus. In many cases, this means taking a step away from market norms and moving towards more differentiated offerings to satisfy both changing employee needs and the demand for new skills. Leading firms are focusing on the overall pay experience and expanding the focus beyond base pay to include career growth, incentives, and recognition.

Puneet Swani, Senior Partner and Career Business Leader/International Region at Mercer said: “As the pace of change accelerates and we enter into this new world of work, companies should rethink how they can be future fit by putting their people at the heart of the change. Whether embracing digitalisation, building competencies and skills needed for future competitive advantage or creating the right work environment and culture, changing the way organisations invest in their employees will yield a greater return for the business far into the future”.

Amornthep Chawala, head of research at CIMB Thai, said the Bank of Thailand (BOT)’s decision to cut the key interest rate to 1.25 per cent, the lowest rate since 2009, was a reflection of the worry among members of the BOT’s Monetary Policy Committee (MPC). Thailand’s economic growth has been affected by the global trade war, which has caused a contraction in exports, as well as a slowdown in household consumption and private investment. His comments came after five out of the seven MPC members voted to cut the policy interest rate on Wednesday (November 6). With the government yet to accelerate public investment, the central bank has had to step in and provide support to the economy.

“But the [rate] cut is too small and too late. We have to wait and see whether it can save the Thai economy, which has slowed down significantly,” he cautioned.

Meanwhile, Krungsri Bank said that the cut was expected to be the last one for this year.

The rate cut by 25 basis points to 1.25 per cent marks a historic low for the key policy rate, Krungsri Bank said on Wednesday.

The baht is the currency that has strengthened the most in the Asian region, appreciating by around 7 per cent since early this year, the bank said.

The baht reacted immediately to the rate cut, weakening to around Bt30.40 per dollar, said the bank.

The MPC cited economic slowdown exceeding expectations as justification for the cut. The MPC will meet again on December 18, but they are expected to maintain the rate at 1.25 per cent for the rest of this year, the bank said.

Central bank governor Veerathai Santiprabhob announced the measures on Wednesday  as a bid to slow the baht’s worryingly rapid appreciation. The new measures will come into effect on Friday (November 8), he said.

The  details are as follows:

The Thai baht has been under pressure due to imbalanced capital flows in the current environment of highly uncertain and volatile external conditions, the Ministry of Finance (MOF) and the Bank of Thailand (BOT) decided to relax regulations to stimulate capital outflows to help promote capital flow balance and lessen pressure on the baht. Such relaxations include allowing exporters to keep foreign currency proceeds overseas, allowing retail investors to invest in foreign securities without going through a Thai intermediary institution and allowing businesses and individuals to transfer funds abroad more freely. These relaxations will be effective 8 November 2019, with details as follows:

1. Repatriation of export proceeds

• Exporters with proceeds below USD 200,000 per bill of lading will be allowed to keep the proceeds abroad, without a time limit (a relaxation from the current USD 50,000 threshold.)  In 2018, bills of lading with value less than USD 200,000 amounted to export value of over USD 100 billion, accounting for almost half of all Thai exports.
• Exporters with foreign currency proceeds exceeding the above new threshold will be allowed to use the revenues to offset foreign currency expenses, without having to repatriate the funds. Exporters can simply register with the BOT and provide necessary documentation to commercial banks, without prior approval from the BOT.
• Rules on foreign currency deposit (FCD) account held with onshore banks will be streamlined to provide flexibility in managing foreign currencies.

The above relaxations will help businesses reduce fund transfer costs and manage foreign exchange risks more efficiently. In addition, the BOT has been in discussion with the Minister of Finance to increase the threshold for export proceeds that do not need to be repatriated to USD 1 million per bill of lading within the next three months. Such proceeds account for approximately 80 percent of all exports.

2.  Investment in foreign securities

• Retail investors will be allowed to invest up to USD 200,000 per year in foreign securities, without having to invest via a Thai intermediary institution. Previously, they would need to meet a specified criteria in terms of asset ownership in order to invest directly.
• The aggregate investment limit allocated to investors regulated by the Thai Securities and Exchange Commission (SEC) will be increased to USD 150 billion.  This relaxation helps facilitate the increasing demand for foreign portfolio investment. In addition, investors will be able to retain the allocated limit for investment over a longer period, thus enhancing efficiency in investment planning and management.

3. Outward transfers

• Outward transfers, which are currently allowed based on a positive list of specific purposes, will now be allowed freely except for a few specific purposes (negative list), such as for settlement of FX/THB transactions with financial institutions abroad.
• Individuals who wish to relocate abroad or transfer funds to relatives abroad will be able to do so freely.  While those who wish to purchase real estate abroad will be allowed to do so up to USD 50 million per year as previously, but the property can now be in the name of a family member.  This relaxation will help facilitate migration as well as sending children to study abroad.
• Documentation will no longer need to be provided to commercial banks when conducting outward transfers of less than USD 200,000. This is an increase from the USD 50,000 threshold currently in place, to reduce the burden of providing documents and facilitate the ease of conducting foreign exchange transactions.

4. Settlement of gold trading in foreign currency

Thai investors will be allowed to trade gold in foreign currencies (through FCD accounts opened with onshore commercial banks) with designated gold trading companies that have received approval from the BOT. Previously, such transactions could only be done in baht. This is to reduce the pressure on the Thai baht from gold-related transactions. Investors are able to keep foreign currency proceeds from gold investment in their FCD accounts, without having to exchange into baht for subsequent purchases. This relaxation will increase investment options for investors and will be aligned with the more relaxed foreign investment regulations. In addition, the BOT is also prepared to approve gold futures trading in foreign currencies in the next phase.