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Commerce Ministry mulls controlling profit margins

By Petchanet Pratruangkrai

The Nation

Published on July 25, 2008

The profit margins of consumer-goods manufacturers could be controlled if the Commerce Ministry gets its way as part of its plan to curb inflation and relieve consumers' cost burden.

The move followed requests by several companies' to raise prices. Internal Trade Department director-general Yangyong Phuangrach said the ministry was studying three scenarios for controlling goods prices. "Under the worst-case scenario, we would limit not only the price ceiling of essential products, but also profit margins, in order to ensure fair practice for consumers," he said.

Previously, the ministry calculated the price ceiling of essential goods but decided to leave profit margins intact.

He said the ministry would also introduce other measures to help reduce costs.

Unbelievable, well maybe not, this is Thailand after all.

This will only result in HIGHER prices. Why?

It will reduce competition, as nobody will want to invest in a business if the government controls profit margins. Without competition there will be a monopoly, the existing manufacturers will have no incentive to reduce costs and improve efficiency, as this would increase profits, which will be controlled. So prices will RISE.

Really, I wonder if anybody in the Commerce Ministry has ever studied economics?

If they were interested in reducing prices then they should stop all price controls and market distorting subsidies, and allow other companies to enter the market. However, this would be contradictory to the overall policies and planning in Thailand, which are to hinder competition and keep the wealth concentrated in the three dozen or so families at the top of the food chain.