OCSB secretary general Worawan Chitaroon said that when the bill has been endorsed by the Council of State, it will be forwarded to the Cabinet for deliberation and approval to replace the outdated Cane and Sugar Act of B.E. 2527.

Among other things, the new bill will allow sugar cane to be used as a material for other products rather than for only making sugar and will also do away with provisions that violate the regulations of the World Trade Organisation, she said.

“The current Cane and Sugar Act has been in use since 1984 so some provisions do not go along with Thailand’s commitment to international rules, prompting Brazil to file a complaint with the WTO that Thailand subsidises its industry in violation of WTO regulations,” Worawan said.

“And the new bill will allow sugar cane to be used to make other products that will benefit not only farmers and sugar mills but also consumers and the overall national economy.”

She said the new bill would particularly benefit the bio petrol and bio-chemical industries in the Eastern Economic Corridor zone.

Narathip Anantasook, chief of the Office of the Federation of Sugar Cane Farmers of Thailand, said sugar cane planters have provided input for the drafting of the new bill.

Narathip added that the federation had proposed the new provisions that would prevent Thailand from violating the WTO regulations regarding the sugar industry.

He said the coup order that floats the price of sugar in line with the WTO regulations would expire in September and the new bill would prompt the country to comply with the WTO rules.

Komkrit Nakhalak, assistant managing director of Mitr Phol Sugar Co Ltd, said the new bill’s regulations that would allow sugar cane to be used for other products would benefit the EEC project.

He said Mitr Phol also has a project to build a biological fuel factory on its 4,000 rai of land in Khon Kaen’s Ban Phai district and the project would benefit from the new bill.

The lag in forming a new coalition government has led to a delay in the scheduled October start date for the 2020 budget.

“The new annual budget for the next fiscal year is expected to come into force in early January next year, a three-month delay,” said Dechapiwat.

Prime Minister General Prayut Chan-o-cha has struggled to form a Cabinet since the general election in March but vowed the new ministers would be sworn in by the middle of this month.

Economists and businesses have expressed concern that delayed budget disbursement could deepen the slowdown in an economy already impacted by contraction of exports.

Dechapiwat, however, said that the new government could use the bridging fund worth about Bt1.5 trillion, or half of the expenditure in fiscal 2019. The new government could spend taxpayers’ money on so-called current spending – such as salaries for state employees and other fixed items.

The government can also meet its obligations on public investment. The total expenditure for salaries of state officials, other fixed items and capital spending in the period from October to December 2019 is estimated at Bt1.2 trillion, he said.

The bridging fund would allow the government to maintain the state welfare card project for 14 million recipients. The junta-backed government allocated Bt40 billion for the state welfare card project for fiscal 2020. The new government could spend about Bt20 billion during the budget delay, said Dechapiwat.

“The welfare card project would not be disrupted,” he added.

Regarding the fiscal 2019 budget due for completion at the end of September, so far capital spending had reached only Bt400 billion of the total planned Bt650 billion, Dechapiwat said. The Budget Bureau Office had ordered state agencies to sign pending contracts with private firms by the end of September, he added.

“The Office is targeting 100 per cent disbursement of the Bt3 trillion under the current fiscal 2019 budget. Full spending would boost the economy during the delay in government formation,” he said.

The junta-backed government set expenditure for fiscal 2020 at Bt3.2 trillion, up 6.7 per cent, with an estimated budget deficit of Bt450 billion. The incoming government, however, will review the spending plan as the coalition administration is composed of political parties with differing policy priorities. The new Cabinet is scheduled to take office by middle of this month, when ministers will start forming spending plans with the Budget Bureau. The Bureau will then submit the budget framework to the Cabinet for approval in August, before organising a public hearing on the draft budget and then re-submitting the draft budget to the Cabinet for approval.

The draft will be forwarded to Parliament in early October, for up to 105 days of deliberation by the lower house flowed by up to 20 days in the Senate. It will will then be submitted for royal endorsement and is expected to come into force in early January next year, Dechapiwat said.

On June 30, the European Union and Vietnam signed the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) in Hanoi.

The FTA, dubbed the “most ambitious and comprehensive” free-trade pact that the EU has ever negotiated with a developing country, aims to lower taxes on 99 per cent of goods traded by both countries. Once it is enforced. Vietnam will be able to immediately lower taxes on 65 per cent of goods imported from the EU, and gradually lower tax on the remaining imports in the next 10 years. The EU, meanwhile, will immediately lower taxes on 71 per cent of goods imported from Vietnam and slowly lower tariff on the remainder in the next seven years.

The EVIPA, which was signed at the same time, aims to help Vietnam in the development of its law-enforcement frameworks in order to maintain transparency and attract more investments from European countries.

The EU is also expected to use the EVFTA as a prototype in its negotiations with Thailand, especially in terms of pushing forward top-priority agenda such as opening markets for pharmaceuticals, automobiles and alcoholic beverages, liberalisation of service and investment sectors, protection of intellectual property, penetration into public procurement markets, investment dispute settlement and compliance to obligations of international organisations.

TPSO’s analysis, however, revealed that once the EVFTA is enforced, Vietnam may gain an advantage over Thailand when it comes to competing in the EU market due to more competitive prices thanks to tax exemptions and GSP (Generalised System of Preferences), which Thailand lost in 2015.

The agreement, however, will pave the way for Vietnam to access the EU market, which has a population of over 508 million and a gross domestic product (GDP) of approximately US$18 trillion (Bt552 trillion).

During the signing ceremony, Vietnam’s Industry and Trade Minister Tran Tuan Ahn said his country’s exports to the EU will rise by 4 to 6 per cent reaching a value of $19 billion and $75 billion by 2028. The EVFTA is also expected to boost Vietnam’s exports in agricultural and fishery and aquatic animal categories.

However, according to TPSO these agreements may affect Thai-EU trade in the following sectors:

Vehicles and components

Thai entrepreneurs should be prepared for the possible migration of automotive component manufacturing bases to Vietnam, and to combat this, they should adapt their manufacturing and marketing plans in line with the emerging electric car industry.

Computer, computer components and electrical circuit boards

Vietnam’s competitive edge in this industry is growing and it might convince manufacturers to move their base from Thailand. Hence, Thai entrepreneurs should upgrade the skills of their workforce and utilise modern technology and innovations to boost the products’ values and maintain their competitiveness.

Apparel

Vietnam is already benefiting from lower labour cost and a much bigger workforce. In order to compete with Vietnam, Thai entrepreneurs will need to use new technology and innovation to improve and diversify their products, like using fibre that has special qualities, build stronger brands and expand the market via online channels.

Rice

Though Thailand still has an upper hand in the market thanks to its well-known high-quality jasmine rice, it still needs to improve the manufacturing of organic and coloured jasmine rice that has a high demand in European niche markets. Thailand also needs to promote the unique characteristics of Thai jasmine rice to distinguish it from competitors and maintain premium prices. Entrepreneurs should also apply new technology and innovations such as Blockchain to help boost confidence in food safety among consumers.

Processed aquatic animals (shrimp, fish, squid)

It is estimated that EVFTA will boost Vietnam’s exports in this sector considerably in 2019. In order to deal with this, Thai entrepreneurs should study the dining trends of European consumers and create new products that match the market’s needs. They should also focus on conserving marine resources and complying with fishery laws.

Gems and jewellery

Germany is Thailand’s major exporter in Europe with possibilities of further expansion. However, Thai exporters should follow market trends and changes in consumer behaviour closely in order to design new products that satisfy their requirements. They should also make the most of Thailand’s reputation for excellent craftsmanship and quality.

Meanwhile, some Thai products exported to Vietnam may also face tough competition from EU products that will receive tax benefits from the EVFTA, such as automotive equipment and components, as well as alcoholic beverages.

Prior to the signing of the EVFTA, the World Bank ranked Vietnam as a lower-middle-income country based on per capita Gross National Income (GNI), due to which it receives GSP privileges from the EU, which also allows foreign investors in Vietnam to receive tax privileges. However, a TPSO study on Vietnam’s per capita GNI found that with the EVFTA, Vietnam will become an upper-middle-income country in the next seven to 11 years, which means there is a possibility that it will lose its GSP privileges from the EU.

Statistics on Vietnam-EU trade from 2014 to 2017 indicated an increase in trade value. In 2017, Vietnam-EU trade rose 11.6 per cent from the previous year with the value standing at $50.42 billion. The value of Vietnam exports recorded a 12.55 per cent increase to $38.3 billion, while imports rose by 8.73 per cent to $12.13 billion. In 2017, Vietnam had a favourable trade balance of $26.16 billion.

Data on Thailand-EU trade from 2014 to 2017 also indicated an increase, though the value of trade began declining from 2015 after Thailand lost its GSP privileges. In 2017, the value of trade rose by 10.96 per cent from the previous year with total trade valued at $44.54 billion. Export value stood at $23.71 billion, recording an 8.04 per cent increase, while imports stood at $20.83 billion marking a 14.47 per cent increase. Thailand had a favourable balance of trade by $2.89 billion.

The Asian Development Bank, meanwhile, estimates Vietnam’s total GDP growth at 6.8 per cent this year, versus Thailand’s estimated GDP growth of 3.9 per cent. The Economist Intelligence Unit estimates Vietnam’s GDP growth in the production sector for 2019 as follows: 2.8 per cent growth in agricultural sector, 7.4 per cent in industrial sector and 7.9 per cent in service sector.

Thailand growth in the agricultural sector, meanwhile, was estimated at 1.8 per cent, industrial sector at 4.3 per cent and service sector at 3.2 per cent.

The Commerce Ministry’s Trade Policy and Strategy Office will continue monitoring the situation and analysing the impact these agreements will have on Thailand in economic, trading and export aspects so Thai entrepreneurs can prepare for upcoming challenges.

In terms of valuation, the SET Index at 1,680-1,690 points — the zone to prompt the market’s earnings yield gap to return to the long-term average — is the safe zone for buy.

Trinity Securities’ research department said last week that the Thai stock market has seen sharp rises without no new factors, while its valuation has been high. “Strategically, we will adopt a wait-and-see attitude. In terms of valuation, the SET Index at 1,680-1,690 points, the zone to prompt the market’s earnings yield gap to return to the long-term average, is the safe zone for buy. Our assumptions are the US 10-year bond yield at 1.95 per cent and this year’s estimated market earnings per share at Bt105.5,” the department said.

According to Trinity, when the SET Index retreats, the attractive stocks are:

1. Stocks with gains from the government policy to stimulate consumption — CPALL, BJC, ROBINS;

2. Big caps with low valuations and laggard prices — SCB, MINT;

3. Stocks with estimated interim dividend payment and expected outperformance in the third quarter of every year — LH;

4. Stocks with gains from estimated interest rate cuts — TCAP, S11.

Positive alpha with low beta: But if investors want to stay in the safe zone during market volatility, investors may focus on the said stocks with positive Alpha and Beta at lower than 1 time such as ROBINS, LH, TCAP, S11.

This week, the focus will be on the following issues.

1. Fed chairman Jerome Powell’s statement and explanation to the US Congress on July 10-11.

2. Dissemination of the Fed minutes on July 10 and European Central Bank minutes on July 11.

3. Announcement of Thai-listed companies’ earnings results.

Meanwhile, DBS Vickers Securities (Thailand)’s head of research Thanawat Patchimkul said that Japan’s decision to curb exports of high-tech materials to South Korea could have a significant impact on electronics supply chains, not only in Korea, but also the region.

Last week, the Japanese government said that it would curb the exports of high-tech materials to South Korea. Bilateral diplomatic ties have deteriorated over disputes regarding compensation for South Koreans forced to work for Japanese firms during World War II. Effective Thursday, Japan will require its exporters to seek approval when shipping three high-tech materials to South Korea, a process that will take up to 90 days.

The three high-tech materials on Japan’s restriction list are crucial for the manufacture of semiconductors and display screens. Japan currently dominates global supply of these materials. On the other hand, South Korea plays a key role in the global supply of memory chips and OLED screens.

A shortage/delay in component supply could affect the downstream electronics producers around the region. This could make the Thai electronic sector vulnerable.

Key financial institutions have been continuously lowering their GDP forecasts for 2019 as the economy looks to be decelerating faster than anticipated.

The National Economic and Social Development Council, Thailand’s top economic advisory body, has adjusted down its GDP forecast from 4 per cent made in February to 3.3 per cent in May. Kasikornbank (KBank) has also lowered its GDP forecast for 2019 from 4 per cent made back in December last year to 3.7 per cent in February and to 3 per cent last week.

The ongoing US-China trade conflict was unanimously cited as the key factor driving down growth, as Thailand is in the supply chain of goods that are impacted by the tariffs the US has imposed on China.

In May, the US raised tariffs from 0-10 per cent to 25 per cent on US$250 billion worth of goods from China. Many of these goods include electronic devices whose parts are manufactured in Thailand. This has led to a continuous drop in Thailand’s shipments to China, the Kingdom’s largest trading partner, since the beginning of this year.

From January to May, Thai exports to China declined by 8.7 per cent year on year with a value of $11.6 billion, reducing by over a billion dollars from the same period last year, according to the Commerce Ministry. The ministry has since reduced its overall year-on-year export growth target for 2019 from 8 per cent to 3 per cent, compared to last year’s 6.9 per cent growth.

However, the ministry’s 3 per cent target is still being viewed as optimistic by various institutions. Economic research units of various commercial banks have estimated that Thailand’s exports will be below 1 per cent. Krungthai Bank and Bangkok Bank predicted that exports would grow by merely 0.8 and 0.5 per cent respectively. KBank predicted that exports would not grow at all.

Another key factor contributing to the decline in exports is the appreciation of the baht throughout 2019. From December 31 to July 3, the baht appreciated by 5.2 per cent, making it the strongest currency to appreciate against the dollar in the Asia Pacific region, according to Siam Commercial Bank’s Economic Intelligence Centre.

The strengthening baht could wipe out as much as Bt66 million off the value of Thailand’s exports this year and cut companies’ profits by about Bt17 billion, according to a research by TMB Analytics.

The appreciation of Thailand’s currency is largely due to the country’s strong current account surplus, the high level of foreign currency reserves and arrival of foreign direct investments, said Jittipol Puksamatanan, chief market strategist of Krungthai Bank.

Businesses that distribute products locally and import raw materials are expected to benefit the most from the baht’s appreciation, said TMB Analytics. They will gain from an estimated reduction in import material of Bt62 billion, and an increase of 0.3-4.9 per cent in gross profit margin.

The final key factor that will negatively impact Thailand’s export figure is the establishment of the EU-Vietnam free trade agreement (EVFTA). Thailand’s trade with the EU has already declined by 7 per cent in the first five months of this year and will continue to decline further throughout the year due to the fact that Vietnam is a key trade competitor of Thailand, according to Aat Pisanwanich, director of the University of Thai Chamber of Commerce’s Centre for International Trade Studies (CITS)

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years.

To cope with these economic challenges, the Thai government is urged to stimulate domestic spending through various policies such as welfare card policies. Krungthai Bank’s Global Business and Development Group expects the incoming government to inject up to Bt100 billion into the economy to stimulate growth in the second half of this year.

“To boost spending, the government should implement immediate measures to stimulate the economy by targeting consumer spending directly,” said Nattaporn Triratanasirikul, Kasikorn Research Centre’s assistant managing director.

The incoming government is also urged to continue its investments in mega-infrastructure projects to boost investment sentiment throughout the rest of the year, said Siriporn Suwannagarn, managing director and financial advisory head of KBank’s Private Banking Group.

However, infrastructure investment is expected to face major delays in 2019, as hiccups in major infrastructure projects occur and the incoming government facing budget delay issues. For instance, the Transport Ministry plans to invest Bt200 billion in infrastructure projects throughout this year, however, Krungthai Bank’s assessments suggest that only Bt77 billion will actually be spent on projects mainly located in the Kingdom’s central region.

“Our assessments suggest that the Bt77 billion public investment, which accounts for only 0.1 per cent of Thailand’s GDP, will not be sufficient to offset Thailand’s slow economic growth in the second half of this year,” said Mana Nimitvanich, first vice president of the bank’s Global Business Development and Strategy Group.

Finally, Thailand should move swiftly to establish a trade deal with the EU, which accounts for up to 10 per cent of its exports. Thailand should also seek further trade opportunities by establishing new trade agreements and finishing the Regional Comprehensive Economic Partnership negotiations by the end of the year, according to the Asean Business Advisory Council.

Prinya, a technology and security specialist, said Libra proposed by Facebook and 27 other organisations will have far-reaching impacts around the world so it is necessary for the Thai central bank to commission a detailed study.

Earlier, Facebook had said it would form a consortium of 27 partners to launch Libra as a digital currency to serve an estimated 1.6 billion people worldwide who currently have no access to banking and financial services.

Mastercard, Paypal and Uber are among members of the Libra partnership, which is expanding and raising funds to operate the crypto-currency as a new alternative to fait currencies such as the dollar and baht.

According to Prinya, Libra is different from bitcoin as there will be hard assets such as gold backing the crypto-unit, providing stability to the currency’s value.

He said there was a strong chance that people around the world would turn to digital currencies like Libra since it would be more convenient and cheaper to use digital units, especially among those already on the Facebook social platform.

Facebook, the world’s largest social media platform, currently has more than 2 billion users worldwide, including about 50 million users in Thailand, which is ranked among its top-10 markets.

The Libra digital currency is expected to be operational in about one year, so the BOT is preparing to follow its development closely.

If operational, Libra, due to Facebook’s and its partners’ strengths as well as their global market reach, will likely have significant implications on the role of central banks around the world.

Interest rate and other monetary policies will likely be affected by the rise of crypto-currencies that have advantages over paper and fait currencies as evidenced by the rising popularity of fintech and other startups providing cheaper and faster cross-border money transfer services.

According to Prinya, the proposed Libra has the potential to be the new dollar of the Internet so every government and central bank is supposed to monitor its development closely.

Besides Libra’s huge implications on the global financial and payment system, Prinya said there are also privacy issues regarding the massive personal financial data that will be involved in the use of new digital currencies.

While many consumers around the world will like digital currencies due to their convenience and cheaper costs, policymakers and regulators will see new challenges arising from the use of digital currencies, especially if their value is as stable as traditional money and currencies.

“In olden days, we used traditional taxi cabs, today we have Uber or Grab as a new choice. It’s the same for Libra when compared to traditional currencies. It will be the new currency one way or the other for sure, even though its exact concept and format is still evolving,” said Prinya.

“The Red Line route will operate within 2020,” Arkhom said after a site visit to Japan on Saturday.

Arkhom also met with the management team of Hitachi to see the trains for the Red Line. The Hitachi management team confirmed delivery of the first two trains to Thailand in October this year. The Red Line route from Bang Sue to Rangsit will become operational in 2020.

Operated by the State Railway of Thailand, there will be test runs on the route in early 2020 before it opens for the public in the middle of the year. The trains are expected to carry 300,000 passengers per day.