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NEWS UPDATES Asean Affairs        11  April 2011

Subsidy issues plague Thailand

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Concern is rising about the social impact of higher prices for many essential goods, the cabinet and Prime Minister Abhisit Vejjajiva may be asked to clarify what will and won't be allowed.

Keeping prices in line has become a major headache for the Commerce Ministry since a voluntary agreement by producers to freeze the prices of many goods expired two weeks ago.

Now, with an election imminent, no politician wants to be associated with unpopular decisions. Case in point: Commerce Minister Porntiva Nakasai's move to block an increase in fertiliser prices rather than risk the wrath of farmers.

But keeping prices capped for too long can backfire, as was evident with palm cooking oil, many trade observers say.

They said the government, needs to ensure that farmers can sell their products at reasonable prices. At the same time, manufacturers need a certain profit, otherwise there may be shortages, as was the case with palm oil.

The Commerce Ministry's Internal Trade Department was successful in persuading businesses to cap prices of many goods for 15 months to March 31.

Now producers, armed with data on rising costs, are lining up to seek increases. Makers of soybean cooking oil and UHT milk won approval last week. So did fertiliser producers, only to have Mrs Porntiva overturn the decision.

Vatchari Vimooktayon, the department's director-general, said the government had to take into account the impact of rising food prices on society, in addition to the economic impact. ''We need to accept the truth that prices have to rise if production costs increase. The government may help in some areas but consumers also need to adjust,'' she said.

The department has stringent measures to ensure that its price-regulation system works effectively to protect consumers, she said.

It has 204 products and services on its price-watch list, and 41 on its price-control list. The latter list includes many products that are highly sensitive to increases in diesel prices and thus transport costs. The department estimates that 10 more products could be added to the control list to protect consumers if diesel prices jump and costs of raw materials rise by up to 20%.

Diesel prices are currently capped at 30 baht a litre _ against a real market price of 35.90 baht _ under another government subsidy program that will soon run out of funds.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
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It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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