The business sector, in recent months, is expressing higher confidence with the return of foreign tourism at critical levels but is expecting to be left reeling by a 21% hike in electricity tariffs due to kick in from January 2023 at the same time as interest rates are rising with supplies and other costs all on the up. It comes as energy officials juggle the books with a bill of ฿122 billion still owed to the Electricity Generating Authority of Thailand (EGAT) and which must be paired down.
Pheu Thai has promised to immediately correct rising electricity costs due to hit business and industry in January if the main opposition party forms a government after next year’s General Election. This news comes as Kriengkrai Thiennukul, Chairman of the Federation of Thai Industries (FTI), has criticised the government’s approach in prioritising the freezing of residential power costs after a 21% hike in tariffs was confirmed this week by energy officials for the business sector as they desperately try to juggle the costs and protect the Thai economy from the same sort of energy price shocks that have been seen in Europe, the United Kingdom and other western countries this year.
Pheu Thai has promised to act immediately to bring down spiralling electricity costs if it is elected to form a government after the 2023 General Election.
The promise comes from the Chairman of the party’s policy committee Prommin Lertsuridej and comes as electricity charges for Thai business concerns are set to rise by 21% from the beginning of next year with the average cost of electricity per unit scheduled to rise from ฿4.72 to ฿5.69 per unit from the start of the year.
The current government has asked regulators, however, to put a freeze on the price charged for small users of less than 500 units within the residential sector.
Pheu Thai policy committee chairman highlights the opposition party’s commitment to enterprise in order to bring about a new ฿600 a day minimum wage
On Thursday, the Pheu Thai Party policy chief described the proposed rise in electricity prices in January as a significant burden on Thailand’s economy with 64% of the country’s GDP generated by exports.
Mr Prommin said that while Pheu Thai had proposed a ฿600 a day minimum wage by 2027, a policy pledge criticised by employer groups and also by leading economists.
He said the party was committed to assisting the country’s business sector and promoting a higher growth rate over the next four years to achieve the target.
War erupts over Pheu Thai’s ฿600 minimum wage plan with the economy as the key election issue
He said ensuring stable and lower energy costs was essential to create the environment for the party’s plan to return Thailand to higher rates of growth. He emphasised this would be a priority from day one in office.
‘Ms Paetongtarn Shinawatra, the head of the Pheu Thai family has announced this as one of ten important measures to implement as the reduction in the cost of oil, electricity and gas immediately after becoming the government. This is a commitment to take care of entrepreneurs and employers as well as employees. In this way, the minimum wage can be increased to ฿600 per day by 2027 according to the target,’ he outlined.
New tariff confirmed this week by the Office of the Energy Regulatory Commission (ERC) due to higher fuel costs with declining Gulf of Thailand gas flows
The new electricity tariff was confirmed by Mr Komkrit Tantravanich, the Secretary-general of the Office of the Energy Regulatory Commission (ERC), on Thursday.
He blamed the rise on a reduction in gas supplies from Myanmar and a decrease in natural gas flows from the Gulf Of Thailand necessitating the purchase of imported gas.
The energy official also revealed operational manoeuvres to maximise the amounts of natural gas available for electricity production in the coming months are underway as officials try to find ways to keep electricity costs at manageable levels.
Mr Komkrit revealed that as part of such efforts already, the Electricity Generating Authority of Thailand (EGAT) has extended credit of over ฿122 billion which also must be repaid, an additional consideration for energy officials tasked with managing the country’s electricity costs.
So far, this has been the price to be paid for helping to protect the kingdom from a rapid rise in electricity costs such as that seen in western countries this year.
Chairman of the Federation of Thai Industries (FTI) says Thailand’s policy is sharply different to Vietnam which puts industrial energy needs first
The proposed hike has been criticised by the Federation of Thai Industries (FTI) Chairman, Kriengkrai Thiennukul, who warned that the increase now coming into force could see a 5% to 12% rise in product prices which will negatively impact both the country’s efforts to tamp down inflation and its competitiveness abroad.
He said that government policy in Thailand passing on the added costs to the business sector while protecting residential electricity prices contrasted sharply from that of Vietnam where the government instead was focused on getting householders to cut back on usage while protecting industry.
‘The government should accelerate the promotion of power generated from solar energy at all levels for immediate use, and the rest to be sold into the system, by making it more convenient. It should also promote biofuels such as ethanol. The use of gasohol E20 will help to reduce oil imports,’ the FTI chairman said.
Business confidence is currently high driven by foreign tourism earnings which lift the entire economy but economic storm clouds beckon
The industry leader, at the same time, highlighted that confidence in his sector continued to rise through November with the industrial confidence index hitting 93.5 up from 93.1 in the previous month.
He attributed this to an improvement in foreign tourism arrivals as the government this week passed 10 million visitors for the year with the arrival of a Saudi family at Suvarnabhumi Airport while Tourism Authority of Thailand (TAT) Governor Yuthasak Supasorn is now projecting 11.5 million visitors in total for 2022.
Mr Kriengkrai said that the improvement in foreign tourism has led to a rise in domestic consumption which has also helped the country’s industrial base.
However, firms were apprehensive about what 2023 has in store including rising interest rates on loans, increases in the cost of raw materials and this latest hike in electricity costs.
‘Entrepreneurs are still concerned about rising operating costs. Including the increase in electricity prices, raw material prices, labour costs and the increase in loan interest rates. As a result, financial costs increase. On the export side, there are risks from lower external demand due to the global economic slowdown. China also continues to maintain zero COVID measures as well. The appreciation of the baht also results in the price competitiveness of exporters being reduced.’
Pheu Thai’s ฿600 a day minimum wage requires growth over the next 4 years of 7% to 10% to make it affordable for the already challenged private sector
Mr Thanawat Phonwichai, the President of the University of the Thai Chamber of Commerce (UTCC), on Thursday, also revealed that consumer confidence was now at a 20-month high driven by the improvement in foreign tourist arrivals.
At the same time, he warned that consumers are apprehensive about rising prices, interest rates and the uncertain outlook for 2023.
Commenting on the proposed ฿600 a day minimum age proposed by the main opposition party to be implemented by 2027, Mr Thanawat warned that this represented a 40% hike in wages and would necessitate annual growth rates of 7% to 10% to realise.
He underlined that this money would have to be paid by the private sector and the same business concerns that currently driving the economy thereby running the risk of employers being forced into making further use of robots or machinery.
He said it may lead to some employers being forced to shed workers.
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