Thailand’s government will proceed with a plan to raise the minimum wage to spur domestic spending even as companies face the cost of rebuilding after floods devastated industrial estates and shuttered businesses.
The government is considering measures to help companies recover from the disaster, including requests for additional tax incentives and a waiver of import tariffs to replace machinery, Deputy Prime Minister Kittiratt.
Na-Ranong said in an interview Nov. 12 in Honolulu, where he is attending the Asia-Pacific Economic Cooperation forum. The floods may reduce economic growth by as much as 3 percentage points this year, he said.
“I don’t see the wage hike as a suffering” for companies, Kittiratt said. “It would help increase the purchasing power for the domestic market for their businesses in Thailand. For the government, when these people consume more, we get more tax.”
Thai workers and employers agreed last month to a government proposal to boost the minimum wage, fulfilling a campaign pledge that helped propel Prime Minister Yingluck Shinawatra to the role of the nation’s first female leader.
The agreement will increase wage bills for manufacturers that have seen output tumble as floods swamped about 10,000 factories and stopped production at companies including Honda Motor Co.
Wages in Bangkok and six other provinces will rise to 300 baht a day by April 1, Somkiat Chayasriwong, the labor ministry’s permanent secretary, said last month.
In the rest of the country, wages will rise an average of 40 percent by April 1 and then to 300 baht ($9.73) per day by 2013, with rates frozen at that level until 2015, he said.
Interest Rates
Thailand’s central bank kept interest rates unchanged at 3.5 percent for the first time this year at its October meeting.
It had boosted borrowing costs nine times between July 2010 and August this year, more than any other major Asian economy after India.
Thai rates should be lower than the current level, Kittiratt said, citing Bank Indonesia’s decision to cut borrowing costs as an example.
The Indonesian central bank reduced its benchmark rate by half a percentage point this month after a quarter-point reduction in October.
“I have all the reason to believe that the interest rate in Thailand should be coming down too,” Kittiratt said. “Even before the floods, I didn’t believe that the interest rate in Thailand had to be that high.
If the interest rate in Thailand were to come down 1 percent in the following year, I’m not going to go against it.”
‘Hold or Cut’
The Bank of Thailand will use monetary policy to help revive the economy from the nation’s worst floods in almost 70 years, which may trim 2011 economic growth to less than 2.6 percent, Deputy Governor Suchada Kirakul said Nov. 8. The central bank’s stance on its key interest rate “should be hold or cut,” Suchada said.
Thailand’s inflation rate held above 4 percent for the seventh straight month in October as the floods destroyed crops and stoked food costs, according to government data.
Yingluck has proposed spending 130 billion baht to help flood victims and rebuild damaged roads, bridges and buildings. She has also set up committees to develop a long-term water management plan.
More than 70 percent of flood victims blame the government for poor preparation and communication, compared with 16 percent who were pleased with the response to the disaster, according to a Suan Dusit poll that surveyed 1,454 people in evacuation centers in Bangkok and its outskirts from Nov. 1 to Nov. 5. The survey had a margin of error of plus or minus 5 percent.
Flooding this year has affected 64 of Thailand’s 77 provinces, damaging World Heritage-listed temples in Ayutthaya province, destroying 15 percent of the nation’s rice crop and swamping the homes of almost 15 percent of the country’s 67 million people, according to government data.
Although water is receding in northern provinces, floodwaters still threaten areas in Bangkok’s north, west and east, Yingluck said at the weekend.
“Thailand was not well prepared but now Thailand will be very well prepared because we can’t afford to see this repeated again in the following years,” Kittiratt said.
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