Populist dream is a nightmare
Governor of the Bank of Thailand, Prasarn Trairatvorakul, has good reason to be anxious about all the populist policies being presented by most of the parties contesting the July 3 general election. He warns that such policies, if actually implemented, could drive up inflation and worsen public debt to the point of derailing Thailand's economic recovery. The central bank governor's dire warning about the negative consequences of populist policies on the state of the national economy, reinforces the serious concerns expressed earlier by a host of economists, academics and business operators.
Finance permanent secretary Areepong Phucha-um, for instance, is so nervous he has ordered his officials to keep a file on all the populist policies presented by all the parties. Whilst not criticising any particular party regarding its populist policies, he has made a valid point worthy of consideration by all voters - before they cast their votes simply because they are "attracted" to such policies. Mr Areepong says none of the parties, including the Democrats and Pheu Thai, has spoken a word about "economic restructuring" which would drive the country forward in a sustainable fashion.
Day in and day out, voters are being bombarded by campaign promises of handouts and freebies from all the contesting parties, be it a cut in the value-added tax from 7 to 5%, an income tax waiver for first-time employees for 5 years, a minimum wage increase to 300 baht a day or an increase by 25% within 2 years, or the 20-baht flat rate fare for all the 10 electric train lines to be built in the future. Not once have we heard from parties or politicians - each trying to outdo the other with their own brand of fanciful populism - just how and from where they are going to get the huge sums of money needed to fund all their dream projects. It is very likely that none of them have any answers yet.
Take the case of value-added tax. Professor Veerasak Kruathep of Chulalongkorn University has noted that a 2% cut would reduce revenues from VAT by 150 billion baht a year, from a total of 537 billion baht collected each year, representing a drop of 28% in VAT earnings.
As for the 10 new electric train projects proposed by a major party, which would charge a flat fee of 20 baht for the entire trip, the question is where will the huge sums required to implement the projects come from, and which creditor banks would be willing to lend in the full knowledge that a 20-baht fare rate is unrealistically low, and that there is no way the agency operating the services can survive without being subsidised by the government.
The Federation of Thai Industries conducted an opinion survey among 200 business operators last week, about the possible impact on their operations if the minimum wage was set at 300 baht a day as proposed by Pheu Thai Party, or increased by 25% within two years as proposed by the Democrats. The findings show that, in the case of a 300-baht minimum wage, 68.5% of the respondents admitted this would have a very serious impact on their business, with 16.9% of them expecting to shut down operations. And if the minimum wage were to go up by 25% over two years, 42.7% of the respondents said the increase would seriously affect their operations, with 6.7% of them admitting they might be forced to cease operations.
Despite the negative findings and dire warnings, none of the parties seems ready to tone down the populist promises. So voters must ask these politicians to specify how these dreams will be funded.
0 comments:
Post a Comment