“We should shift focus to agriculture and tourism”

Nation publishes an article with quotes from the permanent secretary at the Finance Ministry.

As my readers already know : the government is broke (read here and there).

It’s good to see an official speaking openly about this issue. But what is even more interesting are his suggestions to solve the problem.

First the admission.

Suparut expressed concerns over the government’s income, as consumption and corporate earnings nosedive. Revenue might be more than Bt130 billion behind budget this year, which is in line with some economists’ forecast for a Bt200-billion shortfall.

Plunging value-added tax collections is the first warning sign
. In the first two months of this year, VAT contracted by over Bt10 billion each month against the targeted shortfall of Bt5 billion, due to lower imports for local manufacturing and lower domestic consumption.

Corporate income taxes for last year, to be paid in May, would be worrisome, but the Finance Ministry expects worse when corporations pay taxes for the first half of 2009 in August, he said.

Adding more gloom to the revenue picture are zero withholding taxes from deposits as interest rates fall and a drop in personal income taxes as people lose their jobs.

Given the downsizing of the economy and need for upsizing borrowing, public debt could soar 5 percentage points per year, he said.

Yes VAT is plunging, as the other revenues (see my chart). And he’s right to speak about the coming disaster of corporates taxes in august… that will cover the very bad results of companies during the first half of 2009.

Korn, the alleged Finance Minister, was still dreaming less than 2 months ago of “huge amount of cash” coming… from corporate taxes… He was unable to understand that with lower profits… will come lower taxes. Automatically.

We should start asking ourselves if we should shift focus to agriculture and tourism. When we put 100 per cent in the electronics industry, we gain only 5 per cent.

But in agriculture and tourism, we gain 100 per cent and with proper know-how, it could be 200 per cent,” he said. “Agriculture could be the buffer against future shocks.” [added Suparut, the permanent secretary at the Finance Ministry]

Astonishing. In line with the “self sufficiency” theory. But he’s not totally wrong. Electronics (as sub contractor for the chinese IT industry for instance, itself being sub contractor of US companies, and low margins), electric appliances (very low margins) and of course the famous car industry that makes Thailand so proud (the car hub of Asia)… are not automatically a good deal.

Businesses know how to send profits outside the country, and they enjoy huge privileges (BOI, tax cuts, etc).

However, the money spend by tourists… for the most part, stays in Thailand.

However, there is a big flaw in his idea : due to global crisis, there will be less tourists coming to Thailand !

13 Responses to ““We should shift focus to agriculture and tourism””

  1. 1 Lloyd 15 March 2009 at 10:30 pm

    The immediate effects of the financial markets turmoil and airport closures in late 2008 have nearly run their course, however with the imminent restructuring within the travel industry, low oil prices and possible devaluation of the baht tourism is an unknown. My personal belief is that Thailand needs to change to market more to its fellow Asian neighbours and the high end luxury market.

    Agriculture is also an unknown as the current strength of the baht is causing many buyers to look elsewhere, the Government has struck some deals for rice however Thailand has the ability to recover some of its lost trade to the Asian and European markets with higher quality rice, tapioca, rubber and livestock.

    It will be an interesting time ahead!

  2. 2 Prokster 16 March 2009 at 6:57 am

    Firstly, with the likes of CP and other agro monsters, agriculture in Thailand is directed by them, not Gov policy. They just screw things up and dissapear huge amounts of imaginery stock-piles of rice etc etc.
    Tourism can not be developed much from here for a multitide of reasons, including the relative strength of the baht, well used product (and little new offerings) huge global competition, and a pretty bad image that doesnt help.
    What we need here is a complete change in business laws, licensing….err…everything that Thais have gamed over the years.

  3. 3 Lothar 16 March 2009 at 9:21 am

    @Lloyd: Everybody whats high end luxury market because there is a huge profit. But it’s luxury that made thailand a great destination it is cheap middle to lower class market.

    Thailands tourist destinations are a shithole in the 3rd world when you compare it with other high end destinations.

  4. 4 fall 16 March 2009 at 12:53 pm

    “We should start asking ourselves if we should shift focus to agriculture and tourism. When we put 100 per cent in the electronics industry, we gain only 5 per cent.

    But in agriculture and tourism, we gain 100 per cent and with proper know-how, it could be 200 per cent,” he said. “Agriculture could be the buffer against future shocks.”

    OH… MY… GOD…
    Does Korn know anything at all about ECONOMICS?
    What we are experiencing isnt scarcity of human resources, but an over supply of it with lower global demand. Much less the fact that we cant put every-frigging-one of worker to farming nor tourism.

    From highschooler, that kind of sentence is acceptable. From Finance Minister… god help us!

  5. 5 ThaiCrisis 16 March 2009 at 1:02 pm

    This statement is from the permanent secretary at the Finance Ministry, not Korn. I’ve added something to clear the misunderstanding.

  6. 6 fall 16 March 2009 at 1:13 pm

    My apology to Korn.
    And sack that secretary.

  7. 7 ThaiCrisis 16 March 2009 at 1:27 pm

    Anyway, Korn is hopeless. However, I still think that the permanent secretary has a (theorical) point with the industry for exports versus services issue.

  8. 8 Lloyd 16 March 2009 at 1:59 pm

    Lothar: “Thailands tourist destinations are a shithole in the 3rd world when you compare it with other high end destinations.”

    I would agree with you on an “average” but there are some remarkable resorts, spa’s and restaurants in Thailand that can compete with other 5 star facilities around the globe.

    The profits are not so much higher for the operators of high end resorts, simply because the costs of building and running a high class establishment are considerably higher. However there are far more benefits to the town, island, or resort area where the holiday makers spend there money provided they can also raise their standards to attract the holiday maker, this is one area Thailand always fails for a multitude of reasons.

    Prokster: “Tourism can not be developed much from here for a multitide of reasons,”

    Dont take this the wrong way but I would hate to say but with a comment like that you sound like you either do not travel much or have a shallow understanding of the tourism market.

    Tourism by its nature is cyclical, be it on a seasonal or “flavour of the month” basis, what people enjoy now they will not like next year, and so the world goes round. Trying to please everyone all the time will only make the cycles shorter and on a diminishing scale. Where the returns are is to stick with what you have and do best and market it to different regions for different reasons also on a cyclical basis.

  9. 9 fall 16 March 2009 at 2:05 pm

    Yes, “theoretically” electronics industry contribute a low yield on export due to it get only labor fee, with the fat-juicy profit goes to HQ corporation. But for the lack of better sector, these industry does provide a large quantity employment and contribution to GDP.

    I still dont get it, with so much car factories and self-proclaim Detroit of Asia. Why do Thai do not have their own brand of car?

    Alas, reality is a bitch…

  10. 10 ThaiCrisis 16 March 2009 at 2:31 pm

    Speaking about cars… The latest news :

    Chery vehicles are to be imported into Thailand and local production may follow, depending on negotiations with Chery Automobile Co of China.
    Thai Chery Yarnyon Co, the authorised importer and distributor, held a press preview Monday for three imported Chery models:


    ouch. 😉

    And another one, this time about… “commitement“.

    Ford of Europe is cutting production at two factories in Europe after its new-car sales dropped sharply this year.

    The automaker will cut one of the three shifts at its Valencia plant in Spain starting on May 1.

    The Saarlouis factory in Germany will continue with four-day production weeks, Ford said today.

    Ford declined to reveal how much production was being taken out, but said the move was to balance its output with “significantly decreased” industry demand.

    Ford of Europe CEO John Fleming said the carmaker could make further cuts.

    “Ford of Europe must return to sustainable profitability as soon as possible. We will do whatever it takes to ensure the continuing viability of our business and further actions can be expected,” Fleming said in a statement.

    Ford’s European sales fell 21.7 percent to 220,000 in the first two months of the year, the company said last week.

    “Cutting capacity, reducing costs and safeguarding our future product plans are essential actions for Ford of Europe to sustain a viable business for the future,” Fleming said.

    Fleming said Ford is rearranging where it built its cars because of the market downturn. “We considered all the options but decided the best approach in the present circumstances was to re-balance production across our plants in line with the market decline,” he said.


    Indeed… “re-balance” is the key word. 😉 And this key word is more powerful than… “commitement“.

    It’s funny to see that Fleming is using the same phraseology (doublespeak ?) than GM : “sustainable“.

    And what about “profitability” ? Yep that’s a nice one too… 😉

    Welcome to the Matrix. Welcome to the Potemkin Village.

  11. 11 fall 16 March 2009 at 3:12 pm

    To continue on car,…

    IMO, oil-driven car is dead or dying. After the last oil price hike orgy, consumer felt how oil price can actually turn their wheel around. The writing is on the wall.

    So I would expect to see more Ford repositioning and “re-balancing” their production line to more hybrid and fuel-cell…

  12. 12 World Citizen 16 March 2009 at 5:28 pm

    For Tourists:

    Welcome to the clear air of Northern Thailand, where you can exacerbate your heart problems, respiratory diseases, and other conditions such as asthma and bronchitis.

    Maybe the authorities should hand out free surgical masks to tourists planning to visit Northern Thailand which is currently shrouded in brown haze and with air pollution 4 to 5 times that of the Bangkok?

  13. 13 ThaiCrisis 16 March 2009 at 7:16 pm

    Yes, it’s a big problem. I was in Chiang Mai last year, mid march, it was hell. Feeling to be in huge… barbecue.

    Each year, people talk about it, complain about it, each year the authorities make some… wind (?). And each year… it starts again.

    I think it’s hopeless. It will take long time to change the habits.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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