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Six-point plan gets generally high marks from economists
Parista Yuthamanop
Nobody earning the minimum wage of 203 baht a day could find living in Bangkok easy - especially when struggling to keep afloat from one day to the next.
Take Jamnien Kampornpim, a 36-year-old cleaning lady in Bangkok, receiving the first batch of subsidies for the bills now due for her electricity and water usage in July.
Spartan living conditions qualify her family of three to free electricity. In her case, staying under the benchmark 80 units of power has meant no air conditioning and no rice cooker.
"My expenses on transport and meals are very high," she says. "Free buses do not cover my route and I spend 70 baht every day getting to work and back. We eat processed foods and their prices have increased tremendously. One pack of rice has gone from five to seven baht."
Critics have said food coupons would be more effective than the government's 46-billion-baht six-month six-point measures to help the poor, due to run until January.
In fact, the government had earlier considered a food coupon scheme but abandoned the plan because it lacked the necessary database.
Critics also suggest that the current measures have been crafted primarily to meet political objectives.
As well as an electricity subsidy, the measures include free water usage for the first 50 cubic metres; 3.50-baht per litre excise tax exemptions on gasohol and 2.50-baht exemptions on diesel; a price cap on cooking gas; free travel on buses and non-air-conditioned trains.
Commuters queue to board a bus at Victory Monument. |
The government claims these initiatives will also stimulate the economy and curb inflation - even if the excise tax reduction is under attack now the oil price has fallen.
Dr Somchai Sujjapongse, an adviser to the Fiscal Policy Office (FPO), said the measures were likely to cut inflation by 0.7% to 7.2% in the second half of 2008. The FPO forecasts inflation to average at 6.7% this year.
"We estimate that the measures will help save 1,242 baht per month for a household with four members that owns a car, and 2,012 baht per month if it relies on buses," Dr Somchai said.
He added that the FPO assumes that each month a four-member household would save 350 baht on gasohol (on consumption of 100 litres), 202 baht on water (15% of the total bill), 160 baht on electricity, 40 baht on third-class train journeys and 540 baht through LPG subsidies of 36 baht per kilogramme.
Households without cars are expected to make four bus trips a day, which leads to an additional 1,120 baht in saving from subsidies of 4.50 baht to 8.50 baht per trip, said Dr Somchai.
The National Economic and Social Development Board reported that in 2006, 6.1 million Thais lived under the poverty line of 1,386 baht per month. Another 5.2 million lived within 20% of the line (on 1,763 baht per month or less).
Two million of those below the poverty line were children under 15. In poor households, half of expenditure went on food, 16% on accommodation, 8% on household appliances and 6% on transport.
However, Somchai Jitsuchon, an income distribution expert from the Thailand Development Research Institute, believes that - except for the gasohol tax cut - all six measures could benefit the poor directly.
"I like the coupon measure more because it directly reaches the poor, but it could be problematic to implement. Many poor stay off the official record. Funds could easily be misallocated," he said.
"The six-point measures have a better concept. But the excise tax reduction has already cost the government 30 billion out of the total 49-billion-baht package."
Dr Somchai said the government should have an exit strategy for the tax exemption, now that declining oil prices could cause it to waste its income.
"I give these measures eight out of 10. I will give them 10 out of 10 if [the government is] willing to lift the excise tax reduction. The benefit for the economy and political gains come together."
Nitinai Sirismattakarn, an independent economist, said the government's six-point measures would be more effective to help the poor than its previous low-priced Blue Flag food outlets.
"The poor cannot benefit from such measures because they don't have cash to buy many packs of rice and they don't have pickup trucks to transport them," he said.
"I think the rule of the game of the [six-point] measures is good. In general, it won't allow the rich to benefit from free electricity and buses."
Free rides on 800 of Bangkok's fleet 3,600 of buses will not be an incentive for the rich. However, the excise tax reduction on gasohol and diesel could set back the government's promotion of energy conservation, Dr Nitinai said.
"The excise tax reduction is unlikely to affect the fiscal position, given that public debt currently stands at just 37% of gross domestic product. There is around 1.3 trillion baht in spending room under the fiscal sustainability framework," he said.
"But the question is whether using tax money for subsidies is right."
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