SUNDAY, February 25, 2024

Experts warn populist election promises could wreck Thai economy

Experts warn populist election promises could wreck Thai economy

Thailand has shifted too far towards short-term populism while ignoring long-term development that secures higher income and living standards.

That’s the verdict of Somchai Jitsuchon, research director for inclusive development at the Thailand Development Research Institute (TDRI), as parties launch their policy platforms for the May 14 election.

"Thai political parties are too focused on offering subsidies to people instead of developing policies that lead to sustainable economic growth," said Somchai.

The expert singled out the Thaksin Shinawatra administration for launching the subsidy trend.

Subsidies have become widespread since Thaksin swept to power in 2001 with his 30-baht healthcare scheme and other social-welfare policies, he said.

Now, Thailand is at risk of chronic poverty because workers have not been reskilled, Somchai said, adding that poor people risk being left with nothing but government assistance.

"Political parties must ensure that they do not offer too many subsidies," he emphasised.

He also warned of parties’ campaign promises to raise the daily minimum wage, saying they could end up overburdening businesses, raising living costs and damaging the economy.

Experts warn populist election promises could wreck Thai economy

Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade Industry, is also critical of the wage hikes, pointing out that political parties and the government would not be the ones having to pay the higher wage bills.

Instead, businesses would be unable to absorb the cost of unrealistic wage increases and would have to pass it on to consumers, he said.

Wages should rise based on inflation not politics, Tanit said.


Experts warn populist election promises could wreck Thai economy

Yongyuth Chalamwong, a labour expert at the TDRI, said populist policies distort wage rates instead of letting them rise in line with economic growth.

The opposition Pheu Thai Party has pledged to raise the daily minimum wage to 600 baht, while Move Forward has promised 450 baht with a yearly increase. Pheu Thai is also promising a starting salary of 25,000 baht a month for university graduates by 2027.

Currently, the daily minimum wage ranges from 328 to 354 baht, depending on the province. These rates took effect last October.

The Election Commission requires political parties to implement their campaign pledges if they form a government, which means promises to hike basic wages could harm the country, Yongyuth said.

Unrealistic wage hikes will create costs that employers can’t handle, he warned.

Wages should be decided by the tripartite wage committee, he said, referring to the panel of business, worker, and government representatives.

Thailand’s addiction to populist policies contrasts with politics in other countries that focus on long-term development.

Experts warn populist election promises could wreck Thai economy

Taiwan and Japan focused on geopolitical issues

In November last year, Taiwan’s President Tsai Ing-wen resigned as Democratic Progressive Party leader after losing local elections to the Kuomintang Party.

She will remain president until her term expires next year but cannot participate in the next presidential election as she will have reached her two-term limit.

Last year’s election in Taiwan drew worldwide attention as it triggered geopolitical tension between the US and China over Taiwan's status.

The Democratic Progressive Party (DPP) campaign focused on protecting democracy in Taiwan.

However, Kuomintang criticised the DPP for focusing too much on confrontation with China. Kuomintang also accused the DPP of failures in handling the Covid-19 pandemic.

Kuomintang is often seen as friendlier to China, but the party has vowed to protect democracy and liberty in Taiwan, as well as maintain peace in the region.

Meanwhile, in Japan’s Senate election last year, parties focused on not just improving people's quality of life but also strengthening national security.

The Liberal Democratic Party (LDP) led by Prime Minister Fumio Kishida promised to boost the country's defences against a possible missile attack by North Korea.

LDP also pledged to allocate 1 trillion yen (260 billion baht) to mitigate impacts on people from inflation. The party also vowed to allocate more than 150 trillion yen (39.27 trillion baht) to promote trade and investment.

On sustainability, LDP promised to launch a net-zero carbon emission policy and promote the use of nuclear energy.

Experts warn populist election promises could wreck Thai economy

US and UK focused on tax reform

Parties in the United States and United Kingdom have shifted their focus on tax reforming as it causes direct impacts on people's lives.

Joe Biden campaigned for the presidency in 2020 on pledges to raise corporate tax to 28% and the top rate of personal income tax to 39.6%.

Funds from tax collected from the wealthiest Americans would be spent to help the poorest access medical treatment.

Biden’s Democrats also vowed to join trade partnerships with more countries in a bid to prevent China dominating as the most influential player in global trade. And the party pledged to improve domestic production and infrastructure to boost workers’ income in the post-Covid-19 era.

Republican Donald Trump launched his campaign with the slogans "Make America Great Again” “American First", pledging to create jobs, protect trade benefits, attract foreign investment and reducing tax on the business sector.

The Republican Party promised to raise import taxes, especially on goods from China, and boost US competitiveness while maintaining digital security. The party also promised to cut back healthcare programmes, so it could spend more cash on other aspects of national development.

In the UK, Conservative Party members Rishi Sunak and Liz Truss fought for the premiership in September last year after Boris Johnson resigned as PM.

Truss promised to reduce burdens on people’s expenses by revoking an increase in contribution to National Insurance and cutting corporate income tax. She vowed to extend debt repayment for people suffering financial fallout from Covid-19, and reform taxation to help people who stayed at home to take care of children or the elderly.

Sunak promised to reduce tax once inflation was under control. He also promised to remove the 5% tax on household fuel bills if the average yearly bill exceeded £3,000.

He said he would raise corporate income tax from 19% to 25% in April this year. He also vowed to raise contributions to National Insurance with the extra revenue to be spent on public health.

Truss won the contest but resigned after 45 days in office, to be replaced by Sunak.