Thailand's new Commerce Minister Mingkwan
calls industry meeting on price cuts
By Jon Fernquest |
The front page of the Bangkok Post business section has an article on meetings today called by the newly appointed Commerce Minister Mingkwan Sangsuwan that aim to cut prices on a wide range of important products.
[Mr Mingkwan will meet with]...executives of 250 manufacturers of 33 product items in an attempt to persuade them to cut prices....Participants at today's meeting will include major players such as the CP Group, Saha Group, Betagro, Unilever, Procter & Gamble, rice packers, major retailers and trade associations.
Since taking office earlier this month, Mr Mingkwan has been making daily pronouncements about high prices and the need to do something about them.
The goods include packaged rice, dairy products, instant noodles, wheat flour, many ready-to-eat foods, pork, detergents, shampoo, soap, toothpaste, sanitary napkins, batteries, pulp, kraft and corrugated paper, car batteries, passenger cars, small trucks, motorcycles, cooking gas, cement, electric wire, steel, fertiliser, pesticides, animal feed and mobile-phone fees."
The manufacturers attending the meeting hope to reach a compromise and avoid mandatory price controls being forced upon them by the government:
"We don't want to see the Commerce Ministry come up with any mandatory measures that force manufacturers to cut unreasonable product prices," said Boonchai Chokwatana, the chairman of Saha Pathanapibul Plc, the trading arm of the Saha Group, the country's biggest consumer-goods conglomerate.
Manufacturers say they have shouldered rising costs recently:
Piyakorn Kalantanapan, senior director of Thai Olympic Fibre Cement, said the production cost of his company's lightweight roofing products had increased by about 10% as high oil prices had pushed up transport costs."But so far we have shouldered the rising cost without asking the Commerce Ministry [for permission] to raise the price," he said.
One goal of this meeting is for producers to reveal the production costs they face:
Somchai Pornrattanacharoen, the president of the Wholesale and Retail Association, said the government should also encourage manufacturers and operators to reveal their production costs and other relevant costs to check whether retail prices of each product are reasonable....Yanyong Phuangrach the director-general of the ministry's Internal Trade Department, said he hoped participants at today's talks could reach a good understanding on the real costs both of domestic and imported raw materials, energy prices, management, administrative and marketing costs.
Producers believe that higher prices are necessary to cover increased costs that all producers face and that these price increases won't reduce demand much:
Even though the roofing product market remained sluggish, any price increase was unlikely to affect demand, he added."The market dropped by as much as 10% last year due to the political situation. This year we expect growth of 2-3% or it could be flat at worst," he said.
"If we have to hike the price, it would not affect competition in the market because everybody is in the same situation. The increase reflects the actual higher cost we have shouldered."
Many different industries report rising costs of doing business, the cement industry being one example:
Thongchai Sopon, marketing director of Siam Fibre Cement, a Siam Cement affiliate, said his company had also kept a lid on prices despite higher costs for fuel and raw materials, notably cellulose which is 100% imported."We will keep the price unchanged at least within the first quarter. As the economy improves, we hope that consumption will grow to offset the rising cost we have shouldered," he said.
Pork production is another industry facing rising costs:
Nopporn Vayuchote, executive vice-president of Betagro Group, a major pork producer, said pork prices had risen because of higher production costs and low supply following a diarrhoea outbreak that killed 500,000 piglets.He said swine raisers had been losing money for two years, prompting them to cut production.
"Sumeth Laomoraphorn, president of the rice packer C.P. Intertrade Co, said prices of packed rice had risen in line with strong world rice prices."
Some are pointing the finger at big retail chains and marketing costs:
If the government is serious about curbing high consumer product prices, it needs to overhaul an unfair trading structure involving large retailers and manufacturers and look at hidden costs such as advertising and merchandising expenses that are passed on to shoppers, says a wholesale business spokesman....the ministry would be better off looking at the relationships between suppliers and big retailers, including entry fees charged by big retailers, the huge advertising budgets of manufacturers, and merchandise costs.
"If those costs could be reduced, the product costs would more reasonably reflect the raw material costs," he said.
In breaking news today, Supavud Saichu, president of Phatra Securities, sounded a warning on price controls: "The government should not attempt to have producers peg or reduce product prices, because such action distorts the market and discourages investment by the private sector."
State intervention in product prices "could make producers feel their profits would be cut and they woud be reluctant to invest more."
He recommended the government "simply prevent monopolies and price collusion, in order to encourage liberal market competition."
(Source: Bangkok Post, business section, page B1, Phusadee Arunmas & Nareerat Wiriyapong, 22-02-08, temp-link)
Vocabulary:
reach a compromise - two people agree when each gives up a little for the other
mandatory - required
mandatory price controls - price controls are by law and required in all stores
mandatory measures - rules to solve a problem that all must follow
unreasonable - not fair or sensible
unreasonable prices - prices that are not fair or sensible
the trading arm of Y - the part of company Y that trades in goods (another part of the company probably manufactures them)
a conglomerate - a large company that owns many smaller companies doing a wide range of businesses
should a responsibility - accept the responsibility as your responsibility
shoulder the blame for a problem - accept the problem as a problem that you have caused
shouldered rising costs - pay these rising costs yourselves in the formk of reduced profits, rather than passing them on to the consumer
X is relevant to Y - X is important and significant for Y
relevant costs, costs relevant to Y - costs for producing, marketin, and distributing product Y
market remained sluggish - very little buying and selling
flat growth - not growing at all, zero growth
hike the price - raise the price
the increase reflects Y - the cause of the increase is Y (can be seen in the higher price)
kept a lid on prices - keep prices from rising
cellulose - a material mainly obtained from wood pulp and cotton. It is mainly used to produce cardboard and paper; to a smaller extent it is converted into a wide variety of derivative products such as cellophane and rayon (See Wikipedia)
offset - move in the opposite direction, reducing something that has risen (See glossary)
offset the rising cost - reduce the rising cost
a diarrhoea outbreak - when everyone (or every pig here) suddenly gets diarrhea [Thai: Tong Sia]
piglets - baby pigs
prompting them to cut production - causing them to produce less than they did
curbing high consumer product prices - preventing consumer prices from rising
pointing the finger at Y - blaming Y for the problem
overhaul an unfair trading structure - make big changes in the way that goods are sold
