FTI urges govt to slash logistics costs while oil price is low

Meanwhile, improved domestic consumption backed by an increase in merchandise exports to Europe ahead of the imminent termination of Thailand’s GSP (Generalised System of Preferences) privileges contributed to an increase in the Thai Industries Sentiment Index (TISI) in November.

The FTI also believes exports could grow by 3.5 per cent in 2015 after a global economic recovery, while Thailand’s own economic recovery will be more apparent in the first quarter of the new year.

“The government should use this opportunity to truly ‘return happiness to Thai people’ by lowering logistics costs such as air freight, public buses, shipping and many other costs related to oil consumption, since oil prices have dropped to this level,” said FTI chairman Supant Mongkolsuthree.

“This is about fairness. Whenever oil prices go up, these providers always complain, and logistics and electricity costs are usually hiked almost immediately, but it always takes too long for these prices to come down when oil prices decline.” 

Supant said Thais currently paid around Bt3.96 for one unit of electricity, while the fuel tariff (Ft) on electricity has increased from 40 satang per unit in 2013 to the current 69 satang, the highest ever. If the government lowered the cost of electricity by only 10 satang per unit, or 3 per cent, that would be too little given that oil prices have been at the current low level for about a month now.

The cost per unit should be lowered by at least 20 satang or 5-6 per cent, he said. Logistics costs should also be 15-20 per cent lower. As for bus fares, they should be cut by more than 2 satang per kilometre, since the price of bus fuel has already been lowered by around 30 per cent.

“How can we increase the country’s competitiveness if we have a high Ft along with other charges that have kept our production costs at this high level? Lowering the cost of electricity is imperative if we want to increase the efficiency of the manufacturing side while helping households lower their living costs,” he said.

“If the government could provide clarity on how much these costs will be lowered, it would increase business confidence, which could spur economic growth next year.” 

The manufacturing sector accounts for around 44 per cent of Thailand’s total electrical consumption. The FTI is campaigning for industries to lower their consumption of electricity and for the government to rebalance the production of power, since 67 per cent is supplied by natural gas, which is mostly imported. 

The federation wants the government to increase the use of clean coal technology to produce electricity while encouraging industries to use renewable sources that are abundant in the country such as biomass, biogas, ethanol, biodiesel, and energy from waste.  

On a different issue, Supant said the government should provide farmers with information on agricultural prices next year to increase consumer confidence. It should also push for a free-trade agreement with the European Union and FTAs with Germany, Italy and France, since Thailand’s GSP privileges are about to expire.

Meanwhile, the TISI based on a sample size of 1,150 small, medium-sized and large companies increased from 87.5 in October to 89.7 in November on increases in orders, sales and production. Increases were especially significant in domestic sales of food, electrical appliances, and fashions. Exports to Europe were also up. The baseline for the index is 100.

Confidence for the next three months among industries that concentrate on exports also increased from 95 in October to 96.5 in November. The lower oil prices also contributed to the increase in the TISI, according to the FTI. 

Domestic sales of automobiles in November increased by 3.13 per cent month on month to 73,068, while the value of automobile exports increased by 6.96 per cent year on year to Bt47.83 billion.