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How much should workers earn?

Posted by arnon_k On October - 11 - 2010 1 COMMENT

Most people agree minimum wages should rise but say a single nationwide rate is impractical and could have negative consequences.

Prime Minister Abhisit Vejjajiva’s proposal to raise the daily minimum wage to 250 baht nationwide – 21% higher than today’s rate in Bangkok – continues to provoke a lively debate among employers and economists.

Employers say it would be impossible to maintain one minimum wage nationwide, citing different wage structures in each province. Labour unions strongly support the idea, with some saying 420 baht would be a more appropriate rate.

The economic intelligence centre of Siam Commercial Bank (SCB) said that if 250 baht was the final rate, entrepreneurs in 39 of the 76 provinces would be hard hit, because they now pay their workers much less than that.

It said a rate of 250 baht would be 66% higher than the lowest daily wage now paid – 151 baht in remote provinces including Mae Hong Son and Phayao.

The centre’s labour force survey in the first quarter showed the average wage in Bangkok, Nonthaburi, Pathum Thani and Phuket was already higher than 250 baht. Thus, paying 250 baht a day would affect entrepreneurs in those areas only slightly.

Much more heavily affected would be entrepreneurs in Mae Hong Son, Phayao and Si Sa Ket, where the proposed rate would mean a wage increase of 99 baht per day per worker, said the research centre.

Mr Abhisit said that what he proposed was not yet final but insisted the minimum wage must increase. By how much is what agencies must study, and he has asked the Finance Ministry to look into the matter.

Mr Abhisit voiced concern about foreign labour being paid less than the minimum wage.

But critics say the prime minster’s idea of a flat 250-baht rate nationwide is merely another populist policy from the Democrat-led coalition government in case a general election is called. Fugitive former prime minister Thaksin Shinawatra also promised once that the minimum wage would rise to 300 baht if the Puea Thai party that supports him won an election.

“So whether it’s 250 baht or 300 baht, it’s just the same thing – a tactic to win popular support,” said one critic.

Payungsak Chartsutipol, chairman of the Federation of Thai Industries (FTI), said the circumstances in each province were different, such as the ability of employers to pay and the cost of living.

In the end, the issue is up to the tripartite Central Wage Committee, which includes government, employer and labour representatives, and this would depend on various factors, he said.

“People have been saying the rate could rise by seven to 10 baht in Bangkok, but it’s really up to the committee,” said Mr Payungsak.

“However, a single rate for the whole country is inappropriate. We need to consider both the employers and the employees – if employers cannot survive, then neither can their workers.”

The private sector has proposed a wage system based on workers’ skills.

Mr Payungsak said that not only should business operators improve their workers’ efficiency, workers should also improve themselves.

For the long term, the FTI plans to reach out to provincial areas and co-operate with various agencies, he said.

“We want to create a supply chain for business operators in regional areas and for different sectors. We could also provide them with technology,” he said.

Surapong Paisitpatnapong, spokesman for the FTI’s Automotive Industry Club, said labour-intensive industries would face a sharp increase in costs, in turn lowering their ability to compete with neighbouring countries.

“However, in the automotive sector we already provide a considerable amount of bonuses and overtime pay,” said Mr Surapong, adding that increasing workers’ skills is an important element.

Kampon Adireksombat, a senior economist at SCB, said not all occupations should even have a minimum wage, as that would distort the market. It should be left to the market to decide.

Sethaput Suthiwart-narueput, a chief economist and executive vice-president at SCB, called the move “too aggressive and inappropriate”.

He said growth in Thailand’s labour force averaged only one percent over the past decade, lower than for the region.

In the next 10 years, the average will drop to 0.2% due to the ageing population, said Mr Sethaput. “That would be okay if we upgraded skills [among the labour force], but we have not been doing that.”

Out of Thailand’s population of 67 million, 38 million are in the labour force – 17 million salaried workers and 21 million self-employed.

Dr Sethaput said 9 million workers are receiving daily wages, while 8 million earn monthly salaries.

“This way, the willingness of employers to invest in people is going to be quite slow for those receiving daily wages,” he said.

Labour Minister Chalermchai Sri-on said the wage committee had received proposals from each province and would finalise a decision this month, with rates to take effect on Jan 1.

He expressed hope for a “quantum leap” in minimum wages, not just a one- or two-baht increase.

Next year, wages will be based on skills as proposed by the private sector, said Mr Chalermchai.

“The most important issue will be development of human resources. Workers will have to pass a standard skills test,” he said.

Srithai Superware said an increase in the minimum wage to 250 baht a day would add to to its already heavy burden.

At a rate of 250 baht, Srithai would face an extra 2 million baht in salaries for monthly-paid workers or a 10.5% increase.

At a rate of 420 baht as proposed by some unions, the increase would be 41.7 million baht or 40% per month.

For daily-paid workers, the company would have to pay 2.6 million baht more or a 31% increase at the 250-baht rate and an additional 10 million baht or 122% more for the 420-baht proposal.

Srithai currently pays 8,000 to 8,500 baht a month for a 12-hour workday to low-income staff and more for skilled workers.

BoT: Market forces are still doing their job

Posted by arnon_k On October - 7 - 2010 ADD COMMENTS

Rate increase now less likely

The Bank of Thailand plans no extraordinary steps to arrest the rise of the baht, which broke the 30 barrier against the US dollar yesterday for the first time in 13 years.

Atchana Waiquamdee, an assistant governor, said regional central banks had so far adhered to conventional measures in handling strengthening currencies. Steps taken by the Thai central bank include intervention to reduce volatility, allowing the baht to appreciate and promoting outbound investment.

The central bank expects the market mechanism to weaken the baht eventually, she added.

Dollar depreciation was the key factor behind gains in currencies across the region. Dealers forecast the baht could reach 29 to 29.50 by the end of the year given the trend of dollar weakness.

Another dealer at a local bank said the baht was now up by 11.4% against the dollar for the year to date, compared with 10.8% for the Malaysian ringgit, 7.2% for the Singapore dollar, 6.1% for the Philippine peso, 5.4% for the Taiwan dollar and 12% for the Japanese yen.

“The main factor that drives baht appreciation is our surplus from trade in goods and services, rather than the interest rate differentials between local and overseas markets,” said Dr Atchana.

The central bank’s policy interest rate is now 1.75% against zero to 0.25% in the United States. India and Indonesia have higher interest rate differentials.

Dr Atchana said the strengthening baht would lessen the need for the central bank’s Monetary Policy Committee to increase interest rates to curb the inflation.

One factor causing the baht to strengthen rapidly has been the low price of equities, as the economy and the Stock Exchange of Thailand had underperformed regional peers during the past two years, she said.

Dr Atchana said the strong baht had not affected overall export trends yet, as the central bank found that trade partners’ economies were a more significant factor than the currency.

Parson Singha, a strategist with HSBC, said that at this point, whether the central bank issued bonds or not to mop up liquidity would make little difference in the baht. This was because the weak US economy was the main factor behind dollar weakness, he said.

“There are not many options for the central bank. If it imposes drastic measures, it would cause long-term negative effects. But if the central bank introduce light measures, the effectiveness would be low,” said Mr Parson.

Leaders call for currency action

Posted by arnon_k On October - 7 - 2010 ADD COMMENTS

Business leaders yesterday expressed frustration at the failure of the government and the Bank of Thailand to handle the baht’s rise and called for more measures to be taken, especially to help severely affected exporters.

“The continued appreciation of the exchange rate clearly reflects that measures introduced by the Bank of Thailand are not effective enough to stem its rise,” said Pornsil Patcharintanakul, deputy secretary-general of the Thai Chamber of Commerce.

“I think it is beyond the central bank’s capacity to prevent the baht to rise further as the inflows are so huge, while the dollar could depreciate for years as the US government wants to boost exports.”

He said the faster-than-expected baht appreciation would certainly dim the outlook for exports in the last four months of the year. In baht terms, the government’s target of 20% growth for exports this year looks unlikely.

Mr Pornsil said the private sector would like to see tax breaks for affected companies, especially those in the food and textile industries, which are losing competitiveness to regional rivals.

Payungsak Chartsutipol, chairman of the Federation of Thai Industries (FTI), said the strengthening of the baht to a range of 29 against the dollar was a bad level. “We have stated many times that the BoT should be responsible in making sure that the baht moves in line with other currencies in the region. But the central bank is not doing enough to help,” he said.

The FTI yesterday held talks with the Finance Ministry to propose measures to help exporters. These included soft loans, reducing time-charter rates and making it easier for exporters to trade in foreign currencies.

The ministry is expected to make a decision by the end of this week.

Commerce Minister Porntiva Nakasai said her officials would meet Finance Ministry and central bank officials this week to discuss more measures to assist exporters after receiving information from commercial advisers worldwide about the impact of the strong baht.

The Department of Export Promotion is planning to launch 200 projects to boost this year’s exports by 10% to 200 billion baht, she added.

Foreign businesses say they have been seriously affected by the strong baht.

“Foreign and Thai companies have been hurt, especially in industries using local raw materials. Mostly they don’t have profits left,” said Deepak Mittal, a member of the trade policy committee at the Board of Trade.

“I think it is difficult for the BoT to decide whether to introduce stronger measures that might result in harmful reaction. Let’s hope the government will find a solution that is win-win for all.”

Nandor von der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand, expressed concern that exports, which account for 70% of gross domestic product, might not be as strong as expected because of the baht’s rise.

Given regional competitiveness, Thailand has not been affected much as most regional currencies have gained as the dollar has weakened, he added.

PTT pressured to end Carrefour bid

Posted by arnon_k On September - 22 - 2010 ADD COMMENTS

Cabinet questions state enterprise role

PTT Plc may abandon its bid to purchase the assets of the Carrefour retail chain in Thailand in the face of pressure from cabinet members.

Ministers yesterday questioned whether it was appropriate for the majority state-owned oil company to bid against the private sector.

The issue arose after prime Minister Abhisit Vejjajiva asked Energy Ministry officials on Monday whether PTT had received approval from its board to pursue the Carrefour deal.

Vachara Kannikar, a deputy government spokesman, quoted Energy Minister Wannarat Channukul as telling the cabinet that PTT would scrap its bid because retailing was not a core business of the company.

Mr Abhisit said PTT executives should consider carefully whether to go ahead because its large capital and state enterprise status _ it is also the largest listed company on the Stock Exchange of Thailand _ gave it advantages over private companies.

“At a time when the economic structure is changing very fast, a state-owned enterprises should be very careful with any move as sometimes the investment may not be for the national interest but rather for the state enterprise itself,” said Mr Abhisit.

Also bidding for the French retailer’s 43-store network in Thailand, estimated to be worth 16-19 billion baht, are Central Group, the SET-listed trading group Berli Jucker (BJC), and the French retail chain Casino.

PTT executives declined to comment yesterday on the latest developments.

Mr Wannarat said that even though PTT had entered the second round of bidding for Carrefour, PTT’s board had yet to approve the bidding intention.

He said the board and not the Energy Ministry should have the final say on whether to proceed.

Another source quoted Finance Minister Korn Chatikavanij as saying that while PTT Plc was a listed company, it was still majority state-owned.

Since the 2007 Constitution prevents state enterprises from competing with private companies, PTT might be on shaky legal ground, Mr Korn said.

“Also, retail is not PTT’s core business and it also is not related to energy security. Thus PTT should not bid for Carrefour,” he said.

Mr Wannarat said PTT reasoned that it was interested in the retail business as a way to diversify risk away from heavy dependence on fuel.

Shares of PTT closed yesterday on the SET at 287 baht, up three baht, in trade worth 1.54 billion baht.