Exports Need More than Depreciation

If exports rise and fall by dramatic amounts because of the appreciation or depreciation of the currency in which those exports are denominated, then it shows little customer loyalty to the products. Consequently, calls to keep the baht at an artificially low position are nearly always missing the point of the underlying weakness of the economy. In the first place, artificially restraining a currency is likely to provoke a trade war or, at least, repercussions from trading partners who feel they will lose out as a result. Secondly, the 1997 financial crisis should have persuaded most people that it is very dangerous to try to buck the market – that is, change the demand conditions for a currency when a strong sentiment is in action.

Perhaps more importantly, the attribution of currency changes to export rises and falls demonstrates the extent to which so many Thai exports are little more than commodities in nature. If customers want to buy shrimps, then they will buy the cheapest shrimps all other things being equal. However, if there are for sale branded Thai tiger prawns, suggesting prestige and superior taste, then customers may be persuaded to pay a little more for them and to be loyal to that product – in other words, to recognise the added value that leads to the reduction in elasticity for the product.

This is where Thai exports continue to be weak – it is neither a secret nor rocket science, people have been saying the same thing for years. Create brands, add value, foster loyalty and people will not treat Thai products like the commodities they so often do these days. Appropriate government support, especially for the Small and Medium Sized Enterprises sector, is also of considerable importance.