Price controls deemed 'awful' [Low-income vendors said to suffer worst]

27/06/2012 at 02:25 AM by

Narongchai: Lower quality will affect all 

The government's plan to control the price of cooked foods will badly hurt low-income vendors already suffering the double whammy of being left out of the rise in the daily minimum wage and facing pressure from economic monopolies, says former commerce mi Dr Narongchai said 10 million nationwide are estimated to earn their living in the retail trade as small vendors. They are unregistered workers and have not benefited from the state's measure of pushing the daily minimum wage up by 40% and setting the minimum monthly salary for new state officials at 15,000 baht. Such income-boosting policies benefit only the 15 million registered workers in the country. "These vendors feel their wages should increase too along with the daily minimum," Dr Narongchai told an economic forum yesterday. "They have no alternative and stand to be hurt by the price-control measures. The price controls on low-income vendors is one of the government's most awful policies." He was criticising the Commerce Ministry's price controls on seven types of cooked food. Limiting prices to 25-30 baht in 38 provinces on foods such as fried rice, noodles and khao kaeng, the controls were instituted on the grounds that the cost of fresh food has been declining. The law sets a fine of 140,000 baht and seven years' imprisonment for those violating the price controls. But the ministry has been delaying the plan while it seeks cabinet approval. Dr Narongchai said the measures would also affect consumers in general, as portion sizes will have to be reduced and quality could suffer. "The right way to combat expensive goods is to remove monopolies at the corporate level as well as influential gangs in the retail market. The Commerce Ministry should instead deal with these mafias," he said. Dr Narongchai, who is on the Monetary Policy Committee, said core inflation _ the consumer price index minus fuel and fresh foods and now the monetary policy target _ will be slightly higher than 3% year-on-year this year, within the traget range of zero to 3.5%. He said inflation picked up in the first half of this year as a result of wage and salary increases and high oil prices but could ease in the second half. "The expected inflation rate is supportive of economic growth. Should the impact from the euro-zone crisis be worse than expected, we stand ready to cut the policy interest rate," said Dr Narongchai. Supavud Saicheua, the managing director of Phatra Securities, said inflationary pressures in the global economy have remained high, as developed economies have been forced by the slow recovery to maintain their loose monetary policies. "A small economy such as Thailand's is usually a price taker. Thai inflation is 80% correlated to world inflation. The low inflation of the past decade may be the result of low inflation in the world," he said. Dr Supavud said the Thai economy's openness to exports and imports, at a combined 140% of gross domestic product, is the reason why it's tied to world inflation. Paiboon Nalinthrangkurn, the chief executive Tisco Securities, said the projected inflation will not weaken the performance of the Stock Exchange of Thailand, but investors should focus on the long term. "Even though the US Federal Reserve is unlikely to extend its quantitative easing measures, I believe there will be a reversal of foreign fund flows this year. But the market may fluctuate depending on foreign investment sentiment," he said. Longlom Bunnag, the chairman of Jones Lang LaSalle (Thailand), said foreign property has become a good inflation hedge, as the weakening of major currencies make them more attractive. He said office buildings in the US have become attractive due to the economic downturn. The increase of tourism in London has made the hotel sector there particularly sought-after.
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