AXE TO FALL ON DUTY-FREE ON ARRIVAL SHOPS: Finance Minister Pichai Chunhavajira orders duty-free concessions at Thailand’s eight international airports to shut down, aiming to boost the economy and expand the tax base amid dire warnings from business leaders about the country’s economic outlook.
Thailand’s Finance Minister moved on Tuesday to begin to bring the shutters down on duty-free on-arrival shops at the country’s eight international airports. Pichai Chunhavajira has urged the concession holders to suspend operations. He touted the move as a filip for increased economic activity. At the same time, he emphasised the government’s determination to expand the tax base. The move is coming as Thai business leaders gathering in Bangkok warn that the economy is in ‘bad’ shape and the World Bank further downgraded the kingdom’s growth prospects for 2024.
This week, the Minister of Finance, Pichai Chunhavajira, submitted a proposal to close Thailand’s duty-free shops on arrival. 74 years old Mr Pichai is closely associated with ex-Premier Thaksin Shinawatra.
The plan, according to the minister, would mean a further 0.012% to the country’s annual GDP. In short, an extra ฿570 per visitor at Thailand’s international airports.
Existing concession holders at eight international airports have agreed to suspend their existing visa-on-arrival operations at the government’s behest
The decision was made at a cabinet meeting on Tuesday, July 2nd, at Government House. It comes as economic indicators have darkened further.
Afterwards, officials briefed reporters on the plan. Presently, there are three firms in Thailand that operate duty-free retail concessions on arrival. These are located within eight of the country’s international airports.
Indeed, the annual turnover of these outlets is ฿3 billion or $81 million.
The Minister, it was emphasised, had already obtained approval from the firms to suspend the operations. In the meantime, legal measures will be processed to bring an end to duty-free regulations and policies governing such facilities.
In turn, the Finance Minister is confident that the move will translate into greater turnover within the economy. This was estimated at ฿3.46 billion or $94 million.
In addition, the change will help extend the country’s tax base, a top priority for this government.
Industry and business leaders met in Bangkok. Submissions underlined the ‘bad’ nature of the economy and the escalating threat of the US-China trade war
The news comes as the Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB) held a meeting at the Queen Sirikit National Convention Centre on Ratchadapisek Road in Bangkok.
The meeting heard significant submissions from the Federation of Thai Industries (FTI) and the Thai Chamber of Commerce.
In short, the country’s business leaders expressed fears that a further deterioration in relations between China and the United States threatens the Thai economy. Certainly, this appears to be well-founded.
Both former President Donald Trump and incumbent Joe Biden have promised to ramp up tariffs on Chinese firms.
Indeed, the incumbent administration has already launched additional tariffs, particularly on computer equipment and EV cars.
Impact of the US General Election already being felt with the prospect of raised tariffs on future Chinese imports being anticipated with ramped-up orders
The impact of the US General Election is already being felt. This is because many large firms are stocking up on products from China. In turn, this has aggravated already elevated shipping costs caused by hostilities in the Middle East.
The meeting in Bangkok heard that rates are up 95% compared to April.
Certainly, while Thailand may benefit in the short term, the medium-term future is bleaker.
The meeting of industrial, banking, and commercial leaders heard that 19.5% of Thailand’s manufacturing base was part of China’s supply chain.
‘Exports face risks from all sides. Although there are short-term positive gains from many countries rushing to order goods from Thailand, which may cause exports for the whole year to move in the range of 0.8-1.5%, the US blocking goods from China has a direct impact on Thailand because we are in China’s production chain, up to 19.5%. China cannot export, so Thai orders shrink,’ explained Phongsak Srivanich, who chaired an FTI meeting.
The meeting heard that conditions for exporters are expected to worsen in November and December.
Urgent action demanded from the government
Tawee Piyapatana, a senior vice president of the Federation of Thai Industries (FTI), urged the attendees to face up to the ‘bad’ state of the economy. He called for urgent government action.
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‘It is not just at the provincial and regional levels, but Bangkok is still quiet. If the government does not have additional measures to support the economy, we may be in a more difficult situation.’
World Bank downgrades growth outlook to 2.4% as business leaders hear that auto sales fell by 24% while the property sector sees sharp falls in activity
At the same time, this week, the World Bank warned of headwinds for Thailand’s exporters. Consequently, it downgraded the country’s growth projection to 2.4%.
At the Bangkok summit of business leaders on Wednesday, there were fears that the growth rate could be as low as 2.2%.
The committee members heard that auto sales were down by 24% in the opening five months. At any rate, this has been caused by lower purchasing power and reined-in credit.
Nonetheless, it is also linked to disruption and confusion caused by a push towards EV cars. At the same time, this government policy is becoming increasingly controversial.
Meanwhile, Thailand’s property industry is also in the grip of a crisis. Sales of housing units were reportedly down 11.8% while consumer outlets were down 7.4%.
Certainly, Thailand’s largest property developers, particularly the large Bangkok-based firms, are in an unprecedented tight situation.
Calls for wage hike to be postponed
Therefore, business leaders agreed to call on the government to postpone a proposed third increase in wages this year. This is planned in the coming months to bring the minimum salary to ฿400 a day.
While the business leaders pointed to higher energy costs and a darker export environment, the Pheu Thai Party is determined to deliver on a key election promise. However, the result is a further lack of competitiveness for Thailand’s embattled manufacturing sector.
Significantly, however, the JSCCIB backed the government’s controversial plan to join the BRICs community of nations.
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Presently, the Bank of Thailand is predicting 2.6% GDP growth in 2024. This is based on 36.7 million visitors. The World Bank now predicts 36.1 million.
Minister Pichai pushes for 3% growth. He wants to see up to 37.7 million foreign tourists and has announced an increase in borrowing to 65.05% of GDP this year
At the same time, the Minister of Finance, Pichai Chunhavajira, is still gunning for 3% growth. He plans to achieve 37.7 million foreign tourists. In addition, he set out to prime the pump in relation to government expenditure.
This week, the government announced a restructuring of its finances. In short, the budget deficit will be raised by ฿275.87 billion. The plan will see the deficit rise to a total of ฿1.03 trillion. In effect, overall debt will rise from 61.29% of GDP to 65.05%.
At the same time, the government insists that its controversial Digital Wallet giveaway will emerge as a reality in the fourth quarter of the year. At this time, this is not factored into various projections.
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