Thai Govt Plans To Extend Cost Freeze

[webfact]

Govt plans to extend cost freeze

By The Nation

Crude oil rise, pay hikes raise alarm

The Abhisit government is hoping to maintain a price freeze on most essential goods beyond the end of the year in the face of a renewed spike in oil prices as well as a likely rise in inflation following increases in minimum wages and the salaries of civil servants.

Minimum wages will rise by between Bt8 and Bt17 next year, while civil servants' pay will be hiked in April. These moves are expected to drive demand and spending, which could push inflation next year above the 3-per-cent target.

Meanwhile, the Bank of Thailand has designated a team to assess the impact on inflation of the government's upcoming populist programme, under which 24 million grass-roots workers will benefit from various kinds of government assistance.

All these issues will be taken into consideration at the Monetary Policy Committee's meeting on January 12, when it next decides the appropriate level for the policy interest rate.

The baht dropped 0.2 per cent to 30.19 per US dollar yesterday afternoon. However, crude-oil prices are expected to rise further as temperatures in Europe and North America are lower than normal at this time of year. Crude for January delivery gained 63 cents to US$88.65 (Bt2,675) a barrel in trading on the New York Mercantile Exchange at 1pm yesterday.

At yesterday's meeting of economic ministers, the Commerce Ministry reported that manufacturers of some products had requested permission to raise prices.

While vegetable-oil producers demanded a Bt10 increase per litre bottle, makers of student uniforms claimed their labour-intensive costs would rise 20-30 per cent because of higher wages.

"The Commerce Ministry informed the ministers that the stronger baht might have weakened price pressure, as every 10-per-cent appreciation in the baht should reduce prices by 1 per cent," Tharadol Piempongsan, deputy secretary to Prime Minister Abhisit Vejjajiva, said after the meeting. "However, the fact is oil prices have appreciated recently and this has led to higher prices of raw materials. As such, some products' costs have not dropped but are tending to rise, though the ministry said the problem remained manageable."

Vatchari Vimooktayon, director-general of the Internal Trade Department, said that while the ministry needed to approve some price increases, such as for milk, it would be able to maintain a price freeze on 90 per cent of essential goods and foods until March to ensure a stable cost of living.

She added that among the 10 per cent of manufacturers of essential items with higher production costs were those in the automobile-tyre, electrical-wire and battery sectors. These manufacturers have, however, agreed to maintain their prices.

Since 2009, more than 300 items have been on the Commerce Ministry's price-control list, which is slated to end this year.

Federation of Thai Industries (FTI) chairman Payungsak Chartsutipol said goods prices should be allowed to move in line with the market mechanism, for the sake of free competition.

Higher oil prices are also prompting the government to subsidise the price of diesel to keep it below Bt30 per litre. The National Energy Policy Council, chaired by the prime minister, will meet on December 30 to approve the allocation of Bt5 billion from the Oil Fund for this purpose.

The council will also consider whether the price of liquefied petroleum gas (LPG) for non-household use should be floated, to limit the Oil Fund's losses from gas subsidies.

people's priorities

Abhisit yesterday evening called for a meeting with five business organisations involved in the manufacturing, trade, banking, capital-market and tourism sectors to discuss the government's new grass-roots programme, which has been dubbed "Pracha Wiwat" (Delivering People's Priorities) by Finance Minister Korn Chatikavanij.

The programme will include free electricity and the flotation of LPG prices for industrial and transport use.

Payungsak said these policies would drive up the private sector's manufacturing costs.

Meanwhile, the FTI sought a discussion with Labour Minister Chalermchai Sri-on on Thursday about the rationale behind the government's push for a hike in the minimum wage.

He said that while workers' living conditions would improve, the move would raise production costs at a time when the government is trying to maintain goods prices. "A continued price freeze in the light of higher costs will distort the market mechanism."

-- The Nation 2010-12-21

[Northman061]

If the huge low paid "cattle class" of Thais were given decent living wages, this old style communist idea of keeping "essential goods and foods" fixed via the Government ("Elites") would not be needed.

But as long as the many are held in thrall by the 10% who own and run 90% of Thailand and its Businesses nothing will change.:jap:

[gregb]

Subsidizing diesel prices is simply inexcusable. I know it is an election year, and this is nothing more than a political ploy, but a law should be passed making this kind of irresponsible pandering illegal. Thailand already has an option to diesel fuel. It is called NGV, and it is already being subsidized. This was done with a long term vision that oil will only become more expensive, and we need to give people incentives to choose alternative fuels.

Subsidizing diesel not only removes people's incentives to conserve, it simultaneously destroys the incentives to switch to alternatives, requiring even more aggressive incentives on that side.

Of course, Thaksin was even worse in this regard, so apparently there are no politicians in Thailand that are actually capable of acting responsibly. I would happily support a dictator at this point if he would simply force people to start preparing for a world where oil was expensive, and stop telling them lies like their lives are going to get better.

Subsidizing diesel prices is a crime, and people who support this kind of policy should be treated as criminals.