[APWSLMembers 24] The situation in Thailand

[parat Nanakhorn]

ECONOMIC PUMP-PRIMINGJ: Embattled PM throws caution to the wind
Published on July 13, 2005
Offensive stimulus measures, more populist spending announced as govt braces 
for impact of diesel float
Prime Minister Thaksin Shinawatra yesterday unveiled an economic-stimulus 
package highlighted by more populist spending schemes. The measures 
represent a major political gamble apparently aimed at arresting the slump 
in the prime minister’s popularity and cushioning the impact of the 
government’s decision to end the diesel-price subsidy yesterday.
Pay rises for state workers, new tax incentives and the direct injection of 
a huge budget into villages nationwide were among the measures that will 
likely shock economists, who have been advocating austerity from the 
government and calling for an official signal that all is not well in the 
country.
The announcement of the measures, which are sure to cheer some sections of 
the public, came against a backdrop of Thaksin’s lowest ever popularity 
ratings and fears of a crisis in consumer and investor confidence. 
Apparently, government economic advisers are afraid that the decision to 
float the diesel price, if coupled with traditional austerity measures, 
could wipe out confidence in the already wobbly economy and send it 
spiralling into a slump.
The package announced last night was brought on by the need for the 
government to address the impact of high oil prices.
The package included a 5-per-cent increase in salaries for public officials 
and retiring officials. A salary increase for civil servants was originally 
planned for October.
The pay increases would require about Bt20 billion in extra funds.
The prime minister said he would also allow increases in the minimum daily 
wages.
Further discussion would
be needed to settle the final increases.
The measures came as opinion polls showed the government’s popularity is 
slipping. Many economists oppose the stimulus package and have urged the 
government to focus instead on stabilising the economy. They said measures 
to increase growth would end up boosting inflation and would cause the 
current account deficit to widen further.
Among other measures, tax incentives would be offered to private companies 
to encourage them to raise salaries for skilled workers. The government 
would also extend firms a 200-per-cent tax deduction on training costs, up 
from 150 per cent currently.
The government will push for higher fringe benefits for company employees 
with monthly salaries of less than Bt7,000 in an effort to boost their 
incomes to at least Bt7,000. The costs to employers could be offset by 
claims for tax deductions of 150 per cent, up from 100 per cent at present.
Another 500,000 elderly poor would get Bt300 each a month from the 
government, in addition to the 500,000 who already receive the payments. 
There are about 6 million senior citizens in the country.
Public health volunteers would also get higher incomes, up from about 
Bt7,500 a month a present.
Additionally, the government would encourage businesses in rural communities 
to boost the incomes of local residents.
On Friday, the government will inject Bt20 billion into rural villages – or 
about Bt250,000 per village – under the SML project. Villages would be free 
to manage their own funds.
In August, the government will invite major rice-exporting countries to meet 
in Bangkok to form a loose cartel in a bid to boost rice prices.
Thaksin said he was hopeful the US would lift its anti-dumping measures 
against Thai shrimp products, allowing the country to export more of the 
products.
Towards the end of his speech, Thaksin urged Thais to buy farm produce, such 
as fragrant rice and shrimp, amid a glut on local markets.
Thaksin also reiterated he would speed up government spending.
The prime minster made his speech last night at the Navy Auditorium during a 
function to mark the 72nd anniversary of his alma mater, Chiang Mai’s 
Montfort College. The event was broadcast live on TV Channel 9 and the 
airtime cost was covered by the school.
Many TV viewers appeared to be satisfied with the measures announced by the 
prime minister, according to a survey by Suan Dusit Rajabhat University.
Almost 47 per cent of a focus group comprising 144 people said they were 
“rather satisfied” with the government’s short-term measures to boost the 
economy. About 40 per cent of focus group viewers said they were “rather 
confident” that the measures announced would be beneficial.
Wichit Chaitrong
The Nation

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