Inflation tsunami : price of sugar to rise by 37 % !

Week after week, the events confirm my theory of “inflation tsunami“.

Consider this last striking news :

Retail sugar prices will soon rise by as much as 37% following the cabinet’s decision yesterday to approve an increase of five baht a kilogramme in the ex-factory price of the commodity.

The price increase was proposed by the Office of the Cane and Sugar Board (OCSB) in a bid to meet rising costs of cane production and cover a promised increase in cane prices to 807 baht a tonne for farmers.

The retail price with VAT will jump from 17.25 baht to about 23.60 baht per kilogramme, which is still almost 35% less than what consumers in many other countries pay. (Bangkok Post)

That’s indeed a hike of 37 % ! And it’s important to note… that even after this hike… we are still behind other countries… It means : further increases could be possible…

Prakit Pradipasen, chairman of the Thai Sugar Millers Corporation Limited, said the increase was very dramatic.

”The cabinet decision is a shock to me, though I have no problem with it as farmers will have more income,” he said. ”But the move will definitely reduce domestic sugar consumption and indirect effects will be seen through higher production costs among food and soft-drink producers.”

That’s really interesting : the guy who is supposed to defend the interests of his corporation… complains !

And to finish, the last straw if I may say, that confirms my theory :

Prangnee Chaipidej, advertising and PR manager of Serm Suk Plc, the local bottler of Pepsi, Mirinda and 7-Up, said the company would be severely hurt by the 30% rise in sugar prices as it was one of main ingredients in carbonated drinks.

”The sugar price rise will cause more trouble for us since we were dealing with the impact from oil prices, which have been surging for months. Moreover, labour wages are likely to increase as well,” she said.

The price of soft drinks… will increase. That’s a certainty. The thai government can bark, cry, ask the companies to postpone, or whatever… the prices of all the soft drinks will increase in Thailand. Soon.

And that will put more pressure on thai consummers… Who will ask for higher wages… And all this will fuel… the inflation rate.

This is the inflation tsunami on the move.

Live and direct.

The Samak’s Lunacy of the Day : be careful when showing thai flag

Samak had a very busy day yesterday.

First, he received at home his very good and old friend the PM of Burma (you know the country where the government shoots the monks in the streets like rats)… He even cooked for him a good dinner.

And then, Samak (who is looking to break the world record of the number of Lunacy Per Day), spoke firmly about a new and very important national matter (even national security, we could argue).

Many Thais, including Prime Minister Samak Sundaravej, were upset for another reason _ seeing a national flag bearing his name hanging at the stadium.

The flag with Mr Thaksin’s name on it became a hot topic yesterday after a picture of it appeared in the Matichon newspaper. The focus was on whether it was appropriate. The prime minister felt it was not and called for an explanation from Mr Thaksin.

”It is inappropriate,” Mr Samak said at Government House.

”It must not happen again.” (Bangkok Post)

Bravo to our Prime Minister. Once again, Thailand looks… ridiculous.

I really do hope that the supporters will show more thai flags during the next match, so Mister Samak can understand -once and for all- that no one is giving a rat shit about what he thinks is “appropriate” or “inappropriate“. Particularily : outside Thailand. 😉

Oil crisis : public transport companies threaten to go on strike

Economy 101 here we go again.The governement, constantly, refuses to allow the transport companies to increase their fares.

Even if you are a public company, you can’t operate… for ever… loosing money day after day !

But the government has absolutly no alternative (or creative) answers to address this problem. It just says no.

Meanwhile, prices of gasoline continue to go up…

Now it’s back fire time… The companies threaten to go on strike !

Public bus operators are demanding another price hike. This time they’ve also threatened to go on strike if the Transport Ministry doesn’t approve the fare hike request.

Public transport operators are also looking to request for another fare hike.

Thai Bus Business Association president Pichet Jiamburaset reveals the association will submit an official petition for a fare hike today. Pichet says this will be the last time the association will ask the government for help. If the Transport Ministry fails to give the go ahead for the fare increase, Pichet says the association will be forced to stop operating because they are not making enough money to buy fuel.

Transport Company Limited is asking for a raise of 9 satang per kilometer, while the Bangkok Mass Transit Authority is asking for 1.5 – 2 baht per kilometer raise.

Transport Company Limited provides intercity bus services, in coordination with private entrepreneurs nationwide.

Meanwhile Vice President of the Thai Boat Association, Parinya Rakwa-thin says he will submit a petition for an increase in ferry fares to the Transport Ministry on behalf of other Thai ferry operators. Parinya says the government had promised to allow ferry operators to raise fares by 2 baht if diesel exceeds 31 baht per liter. Parinya calls for the government to provide ferry operators with sources for cheap fuel if they won’t give the green light to the price hike. (TO)

Rice : gvt to buy directly from farmers and to sell subsidized rice

The government yesterday announced a new measure to buy rice directly from farmers, to ensure that they benefit from skyrocketing prices for the product.

The measure is aimed at not only maintaining the government’s working rice stockpile, but also alleviating the burden of the rising cost of living on the common man by selling 5-kilogram packs of rice directly to consumers.

Commerce Minister Mingkwan Sangsuwan yesterday said some of the government’s 2.1 million tonnes of rice would be released. The selling price would be at least 15-per-cent lower than the current market price of Bt160 to Bt190 per 5kg pack of white rice.

As the fears of exporters and rice millers will exert pressure on the prices, the government will purchase paddy rice directly from farmers. The government will offer farmers the market price, which will also enable it to maintain the government stockpile of 2.1 million tonnes at all times.

The first stocks should be released within the next two weeks.

The ministry did not say how many volumes it would release but said the government would buy enough rice to replenish whatever was released from the government’s security stocks. (Nation)

Okay, now it’s official.

2 importants points :

-the government is going to use its security stock (within 2 weeks), in order to sell rice at subsidized price (-15 % compare to full retail prices).

-meanwhile the government will buy directly from farmers (at full price), in order to replenish its security stock

The key question, and of course the Minister remains silent on this issue, is : what quantity ?

My point : is it a mere public relation decision (with symbolic quantities), or is it a real program with real quantities of rice ?

This kind of policy, that can have a direct effect on the market (supply-demand), kept in secret, is likely to be a failure.

The government refuses to play the transparency card… It’s a wrong signal sent to the market.

Inflation : civil servants demand 5 % raise

The Civil Service Association of Thailand has demanded that government give civil servants a five per cent raise to match the rate of inflation and help them shoulder higher living expenses.

He pointed out that civil servants play an important role in easing the public’s troubles so the government should take actual economic situations into consideration and give them a raise.

A source within the Finance Ministry reported that the Civil Service Commission Office and the Public Sector Development Commission Office have reported to the Finance Minister that an annual budget of 20 billion baht is required for a five per cent raise.Thus, the raise is likely to be postponed so as to not add any more financial burden on the government. (TO)

It’s important to note that civil servants already got a raise of 4 % last october.

They might have it or not. The point is : pressures over wages are mounting. In public and private sector as well.

This “secondary effect” of prices increases, will fuel of course further inflation. It’s Economy 101.

After pubic hairs, the Democrat now are speaking about… a website

It’s a perfect illustration of what the Democrat Party is doing : nothing.

After a story of… pubic hairs, some conspiracy against General Prem (who cares ? !)… now they are talking about… a website supporting Thaksin, soon to be closed.

I mean, the story is so thin... that I even refuse to copy it here. 😉

On one hand, the Samak government is doing… not much (sorry, the Prime Minister is going to cook tonight for the burmese PM… an old friend)… but on the other hand the Democrat Party (allegedly leaded by a young and brillant politician, educated in the UK)… is doing EVEN LESS.

Every day, they try to make the headlines with some really stupid and ridiculous stories, very far away from the people’s concerns.

I really start to believe that the Democrat Party is preparing, with an astonishing dedication, its next electoral defeat.

Oil crisis : “to cut excise tax on diesel would be a waste”

At last ! It’s good to see that some thai officials are not afraid to fight for… common sense.

Since last week, the Finance Minister is “toying” with a new and brillant idea (to help people) : to cut the excise tax on diesel (there is already a subsidy on diesel, read here).

The government currently earns 3.45 billion baht a month in excise taxes on diesel.

Cutting the excise tax on diesel, as Finance Minister Surapong Suebwonglee has proposed, is a bad idea and would just waste taxpayers’ money for nothing, says a senior Energy Ministry official.

“For every one-baht excise tax cut, the state would lose 1.5 billion baht a month which is equivalent to the cost of building new hospital or public library,” said the Energy Ministry official. “The government’s effort should be directed at alternative fuel development – don’t think just about subsidies.” (Bangkok Post)

But because politics is not economy… I bet that the government will continue on the -expensive- path of subsidy.

They have no choice. At least, on the short term.

It’s vital for them in order to secure a victory at the next general elections (after the Constitution is amended).

Gasoline price in Thailand is an explosive issue.

UPDATE
Good news.

“The Finance Minister has decided not to cut the diesel excise tax as the world oil price is still unstable and the tax cut will not help alleviate the burden on consumers by much. However, he is considering other measures to help the problem. (TO)

Rice crisis : the next mistake of the gvt

It’s coming.

The Commerce Ministry will seek Cabinet approval to repackage some of its 2.1 million tonnes of rice sitting in warehouses into five-kilo bags for sale to consumers after the domestic price of jasmine rice surged to over Bt30,000 per tonne.

“Local rice prices now are quite high. The ministry has already prepared measures to tackle the problem. However, we don’t want to implement any that interfere in the market mechanism,” Commerce Minister Mingkwan Sangsuwan said last week.

He declined to reveal how much stock would be released and how much the packed rice would sell for at retail. (Nation)

How can we describe this operation ? Market manipulation. Nothing less, nothing more. What is the usual outcome of such policy ? Failure.

First : it sends a very bad message to the market. Basically : you foreigners are stupid enough to buy rice at very high price, but us in Thailand we need lower prices.

Second : it’s going to help people, sure, but temporarily, and meanwhile it’s a fabulous opportunity for scams and business !

We can be sure that a lot, and I mean A LOT, of those special “bags-to-help-poor-people” are going to be… resold to make a profit, quickly !

IP rights : Thailand is “disappointed” to stay on the US priority watch list

Thailand is ‘disappointed’ with Washington’s decision to retain the kingdom on its “priority watch list” (PWL) this year due to charges of taking little action to protect US intellectual property rights (IPR), Thai Foreign Minister Noppadon Pattama said on Sunday. (TNA)

It’s rather surprising to see that the government is surprised… The government apparently was stupid enough to think that the compulsory licences (breaking IP rights of europeans and US pharma companies) was an excellent way to be removed from the “priority watch list” ! 😉

As usual, it defies the most basic common sense.

It’s time to come back on earth, on the ground.

Promoting a state policy to break the IP rights of US companies is not, I repeat, is not a good way to solve the issue.

Thailand is one of nine countries on this year’s Priority Watch List, which was announced in Washington on Friday. The others are China, Russia, Argentina, Chile, India, Israel, Pakistan and Venezuela.

Only Egypt, Lebanon, Turkey and Ukraine moved to the Watch List from the Priority Watch List.

The government’s reaction to the USTR decision will be conveyed to Washington through US Under-Secretary of Commerce Christopher Padilla today, when he meets the foreign minister and Commerce Minister Mingkwan Sangsuwan.

One of the reasons Thailand is on the list is because of the impact of compulsory licensing on medications, which has upset the pharmaceutical industry in the US.
(Bangkok Post)

Inflation : pressures on wages

“Secondary effects”… here we come.

Prices are rising… therefore wages are supposed to follow (in the mind of people).

It’s exactly what the BCE in Europe for instance wants to avoid… But here in Asia, it’s difficult to challenge this common view.

Of course people do have problems to cope with the inflation of prices… but any salary hikes will be absorbed by further inflation. It’s like adding gasoline onto a fire.

The government is going to increase -again- wages of state’s employees… By ricochet, that’s going to put pressure on private companies. They will have to follow. Their costs will be higher… therefore the temptation to increase their selling prices will be strong.

Ready for another round of inflation ?

State employees’ salaries and minimum wages are expected to be raised across the board soon amid rising fuel and food prices.

Rungson Sriworasart, deputy comptroller-general at the finance ministry, said his department was preparing options for increasing salaries of permanent government employees.

The raise is expected to take effect from October instead of April next year as planned earlier, he said.

Rungson’s comments came after Deputy Finance Minister Ranongrak Suwanchawee had pledged that government employees would be given a pay raise to cope with the rising cost of living.

The Finance Ministry also plans to raise the salary of 2.7 million state officials after the previous Surayud government granted a 4-per-cent raise last October.

State-enterprise employees also got a 4-per-cent wage hike last year.

Meanwhile, blue-collar workers are negotiating with the government and their employers to raise the minimum wage by about 5 per cent next month. (Nation)

Rice crisis, pick one : “supply is adequate” or “unbalanced supply-demand”

The Thai Rice Packers Association said yesterday that orders for 5-kilogram packs from the modern trade had soared by 43 per cent from 1.98 million bags last month to 2.84 million this month.

Tesco Lotus demanded the most at 1.2 million packs, followed by Big C at 600,000, Carrefour and Makro at 350,000 each, and Tops Supermarket 150,000.

Robust demand among modern retailers is one of the major factors roiling the market, as well as driving the rice price up because of unbalanced supply and demand.

As usual, the gvt misses… a factor.

Rice is much cheaper since a few weeks in supermarkets… compare to the small shops up country.

So it makes sense for people to rush in Tesco and to buy and stock.

The Commerce Ministry has urged consumers to moderate their purchases as prices should settle down and domestic supplies are adequate. (Nation)

Since the beginning of the rice crisis, the authorities send conflicting signals : one day it’s the fault of the speculators, or the people hoarding, the day after it’s because of unbalanced supply and demand.

The outcome is easy : people don’t trust what the governement says…

They trust what they see on the ground : prices are going up.