The Case Of The "shadow" Economy

[cclub75]

We have some -heated- discussions regarding the state of the thai economy, and its perspectives.

However, there is a factor totally forgotten : the black, underground, shadow economy.

We are baffled by the fact that people are still driving their cars, even with a surge in gasoline prices, we continue to see red plates on the road (people are buying cars), etc., among wages that stay low.

Eventhough there is a real crisis on the ground. But we can't deny that meanwhile there is a kind of resilience.

It is said that Italy's black economy is the equivalent of over 27% of GDP !

So what about Thailand ?

It can't be less, due to the widespread corruption in the country.

I agree this is micro economy, but at my level I see (because our company... pay them) production managers or purchase managers, like middle management, or even simple sales employees, who can double their official monthly salary, with "commissions" and other "combinazzione", gifts, kick back whatever you call it. And I don't even speak of the upper levels...

That's the reality on the ground. And I know other real examples in the thai administration. The problem is widespread at all the levels, all the businesses, private and public.

This is a system, more than a "national sport" (like in Italy).

So, without a doubt, the "shadow economy" must be taken in account, if we want to assess the state of the economy in a whole.

[qualtrough]

I totally agree, the underground economy must be immense, and trickles down to all those people who are living lifestyles that could never be supported on their salaries alone. One thing I have always noticed is the number of businesses that are open year after year, yet never seem to have enough customers to make them viable. I can think of one particular large hotel that I have frequented over the years (7 or so) that usually only has a handful of rooms occupied out of the 100+ available. Tax dodge, money laundering front, expensive hobby?? Whoever runs it must have an unlimited amount of money to keep what appears to be an unviable operation afloat.

[Mid]

[DragonQuest]

It does make me wonder why thai police men drive bmw and mercedes benz, have a house and drive these fast bikes when i thought the starting salary was only 8k per month? bull

[solo siam]

You could probably start with the fact that a lot of employees aren't registered as working, Pay NI or Tax etc...

[Prakanong]

There are a couple of books about the black economy by two Political Economists at either Chula or Thamasat - can not remember which.

My view is Thailand is even more corrupt than their placing with Transparency International

[plachon]

Try "Guns, Girls, Gambling, Ganja: Thailand's illegal economy and public policy" by Pasuk Ponpaichit and others, as a place to start researching the parallel economy. It's getting on a bit and the ganja should be replaced with yaa baa, but all the basic elements are still there, keeping the show afloat.

In fact, would be interesting to know if guns are now more prolific or less than 20 years ago, when Cambodia was a sink and source of weapons, vis a vis Burma and the South, these days? Any new research out there of the black economy I wonder?

[Heng]

The black economy is most certainly out there... and indeed immense.

Whether the economy is up or down though, those who are connected to it are a minority... although I do understand the psychological rationale that would lead people to overstate its importance: it's usually the same folks who think that their own part in the economy is more important than it actually is, and also those who have little contact with parts of society that don't live life hand to mouth or mortgage/credit card/etc. payment to payment (and incorrectly assuming anyone not treading water must be doing something bad or illegal).

...that said, in business, it's sometimes difficult to know where to draw the line. Most know of Bangkok Bank's shady origins, but are all of us who have interest revenues from BBL fixed accounts the recipients of laundered trickle down? What about those of us holding Exxon stock or those who buy/trade diamonds without fully researching their origins?

Edited June 18, 2007 by Heng

[Ski_Goong]

Of course the underground economy is immense. I know several people not very high up the food chain but makes 100,000 baht per month just on underground lotteries. There are also several people that makes 20,000-50,000 baht per month loan-sharking.

It's no wonder the poor, uneducated people of Thailand remain just that - poor, uneducated.

[blizzard]

as quite the selfish person i like thailand just the way it is.....................lol.

you educate the poor downtrdden los gonna become the land of expensive smiles.

[Heng]

It's no wonder the poor, uneducated people of Thailand remain just that - poor, uneducated.

What does the wealth of some have to do with the lack of education or poor status of others? One sees this blanket statement often on these forums. It echoes the (tunnel vision type) sentiments of minorities in the US along the lines of 'the man must be keeping me down... surely it can't be my own ignorance and life choices keeping me in the ghetto.

[Mid]

What does the wealth of some have to do with the lack of education or poor status of others?

I'll say it .................

it benefits the few to have a vast pool of cheap labour / factory fodder .

darn spell checker .....

Edited June 19, 2007 by Mid

[cclub75]

Of course the underground economy is immense. I know several people not very high up the food chain but makes 100,000 baht per month just on underground lotteries. There are also several people that makes 20,000-50,000 baht per month loan-sharking.

That's exactly my point. This is why we must be cautious when reading the official figures about wages for instance.

I see bad figures and stats (like oil prices, decrease of income taxes revenues, decrease of VAT revenues, a decrease of consumption etc.) regarding the official economy, but again the resilience of the people on the ground is impressive.

[ThaiGoon]

It's no wonder the poor, uneducated people of Thailand remain just that - poor, uneducated.

What does the wealth of some have to do with the lack of education or poor status of others? One sees this blanket statement often on these forums. It echoes the (tunnel vision type) sentiments of minorities in the US along the lines of 'the man must be keeping me down... surely it can't be my own ignorance and life choices keeping me in the ghetto.

My bar with 3 stools in Pattaya is losing money. So Thailand sucks and is a 3rd world hel_l hole.

[Heng]

What does the wealth of some have to do with the lack of education or poor status of others?

I'll say it .................

it benefits the few to have a vast pool of cheap labour / factory fodder .

Benefits are a two way street.

[Mid]

Benefits are a two way street.

That's a blatant fallacy as you well know ,

in fact , it's very close to a lie.

[Heng]

Benefits are a two way street.

That's a blatant fallacy as you well know ,

in fact , it's very close to a lie.

Nah, I disagree.

[samran]

can we agree on a definition of the "black economy" vs. "small, legit, but largely informal sector who are simply too small to come on the radar of the revenue department?".

[Mid]

Nah, I disagree.

change your bait ..................

Edited June 19, 2007 by Mid

[Prakanong]

can we agree on a definition of the "black economy" vs. "small, legit, but largely informal sector who are simply too small to come on the radar of the revenue department?".

Good idea - "Working on the black" in say Belgium or the UK does not mean you are involved in criminal money making activities although you may be breaking the law with regards tax etc.

There is adiference say in a builder paying cash in hand and somebody running illegal gambling, drugs or logging.

[blizzard]

got to agree. the last thing people with money want to see is everyone cumming up to their level.

[Heng]

Nah, I disagree.

change your bait ..................

Nah, works fine.

[Heng]

can we agree on a definition of the "black economy" vs. "small, legit, but largely informal sector who are simply too small to come on the radar of the revenue department?".

Agreement on this board? Unlikely. Although I think traditionally 'black' refers to gambling, drugs, prostitution, and people will often sweep in tax evasion, fraud, and all the other white collar crime into it as well. My point was that when this topic comes up, people ALSO want to include those that they have no idea about whatsoever... like people who run "seemingly" unprofitable businesses when in many cases, these folks are perpetually comfortable because of higher savings rates combined with legacy/inheritance of income streams over generations (which by no means is limited to the elites or top % well to do).

[Prakanong]

Hi Heng

"Although I think traditionally 'black' refers to gambling, drugs, prostitution, and people will often sweep in tax evasion, fraud, and all the other white collar crime into it as well."

I would differ in that - I would put the tax evasion, working off the books, cash in hand as the "Black Economy" as in "Working on the black" and the totally criminal economy og drugs, smuggling as something lse.

In my definition and that what is often used in the west the activities in the black ecnomy would not be illegal in and of themselves ie building, buying and selling car's etc but the evasion etcwould be illegal

In the other "Criminal" economy the acts in and of themselves are illegal ie drugs and smuggling etc.

Pedantic <deleted> that I am ;-)))