Govt may have to renege on controversial populist schemes
The Yingluck government appears to be facing increased difficulties in implementing several of its key economic policies promised during the July election campaign.
These policies include the Bt20 fare for all Bangkok skytrain and subway journeys, the nationwide Bt300-per-day minimum wage, and the support programme first-time car buyers.
During the election campaign, Yingluck's Pheu Thai Party promised that it would reduce all skytrain and subway fares to Bt20 per trip from the current Bt15-45.
However, ACM Sukumphol Suwannatat, the transport minister, said this week that this policy would not be implemented until the construction of another 10 new routes is completed.
This will take several more years, so it is unlikely that the policy will be implemented during the term of this government.
Regarding the Bt300 daily minimum wage, it is now clear that the Yingluck government will not push for a nationwide increase as promised during the election, but will try to enforce the crucial policy only in Bangkok and six other provinces, including Phuket.
This policy has faced strong opposition from the private sector because it will suddenly increase their labour costs by more than 40 per cent.
At present, the highest minimum wage is in Bangkok, at about Bt220 per day, while the lowest is in the northern province of Payao, at about Bt150 per day.
It will be a formidable challenge to enforce the uniform rate of Bt300 nationwide as pledged by Prime Minister Yingluck during the campaign.
Even in Bangkok and neighbouring provinces, many employers have said that their overall labour cost is already in excess of Bt300 per day per head when some welfare items such as free food and living quarters are included.
The government has also faced difficulties in convincing the private sector to increase the starting salary for new college graduates to a minimum of Bt15,000 per month.
However, it has already announced that public-sector employees will get a minimum income of Bt15,000 when allowances are added to the current starting salary of Bt8,000-Bt9,000 for college graduates.
Regarding the first-car buyer campaign, this measure has also faced a setback because financial institutions providing auto loans say they are not happy with the government's plan to return tax credits directly to buyers.
According to lenders, such a policy will increase the loan default rate, especially if tax credits, amounting to a maximum of Bt100,000 per vehicle, are given directly to buyers who have yet to pay back the auto loans in instalments, usually over a period of up to 48-60 months.
Instead, the lenders suggested that the tax rebates should be sent to them and passed on to buyers later to ensure the auto loans are fully paid back.
The government will part with an estimated Bt30 billion in tax revenues in this first-car buyer campaign. In return, the government expects to boost vehicle sales by 500,000 units in the first year.
In addition, the Yingluck government is facing a big financial burden in implementing the rice subsidy scheme, which needs massive state borrowing of Bt400 billion this year to ensure that farmers get Bt15,000 per tonne for rice paddy compared to the market price of less than Bt10,000.
