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Govt announces anti-poverty package


July 16, 2008

Thailand: Govt announces anti-poverty package

Thai Prime Minister Samak Sundaravej on Tuesday announced a 49 billion baht (1.46 billion dollar) raft of benefits to counter poverty caused by soaring living costs, reported AFP.

The anti-poverty scheme will provide tax cuts and free services for six months to Thailand's worst-off, Samak told a news conference broadcast on national television.

The measures for the poor include cuts in taxes on fuel, delayed increases in the price of cooking gas, as well as free tap water, free electricity, and free transport in non-air conditioned trains and buses, he said.

"All the measures will take effect from August 1, except excise taxes cut that will began earlier on July 25," Samak said.

Inflation in Thailand hit a 10-year high of 8.9 percent in June, driven by soaring food and fuel costs, and central bank officials have warned it could reach double digits this month.

Finance Minister Surapong Suebwonglee warned Monday that the country may not meet its growth target of 6.0 percent if global oil prices keep rising.

Samak blamed sharply rising oil prices for the country's economic difficulties.

"The price of oil is a key indicator for economic measures and it suddenly jumped from 100 dollars to 130 dollars recently -- now it has reached 140 dollars. Oil prices are the cause of the problems," he said.

Surapong said the anti-poverty drive would benefit 9.8 million households, saving them 1,000 baht (about 30 dollars) each month.

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Under the scheme, the government will subsidise 32 billion baht in tax cuts for diesel and ethanol-blended gasohol.

Around 3.93 billion baht will be set aside for free tap water for 3.2 million households.

The government will spend around 12 billion baht subsidising electricity costs for 9.85 million households.

A further 1.2 billion baht will be spent on free bus travel around Bangkok and the suburbs, while 16 million passengers will benefit from free train fares, costing the government 250 million baht.

Samak told a press conference the overall value of the package would be worth around 46 billion baht, but official documents show the cost is higher, at 49.40 billion baht.

In a related report from Thai News Agency, analysts were quoted as saying that the government's six new relief measures for the people -- particularly the reduction of excise charges for gasohol (a blend of gasoline and ethanol) and diesel - will not benefit Thailand's economic system.

Tienchai Chongpeepien, an energy affairs academic, however, conceded that low-income earners will gain some benefit from the measures, but said anything could not be gotten for free.

"Once the government reduces water and electricity charges, offers free rides on public buses and third-class trains, and cuts excise charges for fuel, it must finally seek tax revenue from other channels to offset the shortfall.

"Should tax collections be lower than targeted, the government will need to seek loans or issue bonds. That means that public monies will eventually be used to solve the problem," he said.

Dr. Tienchai said the measure to reduce excise charges for gasohol and diesel had not benefited the poor because most of them do not own vehicles or motorcycles.

The oil tax cut measure was issued only to please people in the urban areas, middle-income earners, and transport operators.

Now, it should be monitored whether transport operators would cut fares or transport service fees or not.

"The oil tax reduction benefits (no sector) but it will cost the government about Bt 40 billion. At the same time, the tax cut goes against the energy-saving campaign," he said.

Former Energy Minister Piyasawasdi Amaranant said it was useless to comment on the oil tax reduction policy because it had benefited none.

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