Call to relax post-coup price controls
By Jon Fernquest[Introduction | Vocabulary | Article | Reading Questions | Answers]
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After the coup, the military junta (CDR) issued price control orders that froze prices.
Some businesses are now finding it difficult to adapt to changing market conditions with these inflexible regulations still in effect.
Organisations representing Thai businesses have called for these laws to be withdrawn and the 1999 Goods and Services Price Act, which usually governs price controls, to be reinstated. This act is usually only selectively applied to certain critical prices.
Both the approval of the cabinet and the National Legislative Assembly are needed to withdraw the junta's price control order.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What action did the junta (CDR) take on prices after the coup?
2. How would local manufacturers and financial institutions like the price control order to be changed?
3. How can the price control order issued by the junta be withdrawn?
4. What kind of harm can price controls do to the economy?
5. What other economic policy changes is Thailand's business community calling for?
6. How is the Thai banking industry working with the government to alleviate the economic impact of flooding this year?
Bangkok Post Article: November 7, 2006
POLICY POST-COUP EDICTCompanies seek lifting of price-freeze order
DARANA CHUDASRILocal business leaders yesterday called on the government to scrap an order made after the Sept 19 coup to freeze product prices. The Council for Democratic Reform under Constitutional Monarchy (CDR), shortly after the political takeover, ordered private companies to freeze product prices.
Members of the Joint Standing Committee on Commerce, Industry and Banking, an umbrella group of local manufacturers and financial institutions, yesterday said the CDR order should be scrapped in favour of the 1999 Goods and Services Price Act, which gives the Commerce Ministry the authority to set price controls on different products.
Pramon Suthivong, the chairman of the Board of Trade, said the joint standing committee would submit a formal petition to the Commerce Ministry later this month.
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Mr Pramon said the stronger baht had affected profit margins and export revenue, and that price flexibility was needed to allow manufacturers to adjust to market conditions.
''While the private sector can adjust to a stronger baht and guard against exchange risk, I wouldn't want to see the currency strengthen so much that the private sector can no longer compete,'' he said.Members of the joint committee, including the Thai Bankers' Association and the Federation of Thai Industries, will meet with Prime Minister Surayud Chulanont and other key ministers today to discuss economic trends.
Local business groups last month voiced support for the sufficiency economy model promoted by Gen Surayud, and also called on the new government to revise the Foreign Business Act, strengthen the country's logistics and power networks and push forward with trade liberalisation under bilateral and multilateral agreements.
Businesses also want the government to accelerate disbursement of the fiscal 2007 budget, strengthen the competitiveness of small and medium-sized enterprises and promote stability along the southern border.
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Low-interest loans, made with financial support from the central bank, would help affected businesses reduce operating costs and rebuild operations.
Khunying Jada said local banks wanted to help consumers as well as flood-affected businesses.
''We will try to give equal assistance to companies as well as the public,'' she said.
Vocabulary
in effect - a law is active and can be applied
National Legislative Assembly - the legislature appointed after the coup (not democratically elected)
an edict - a command or order issued by someone with authority
freeze prices - fix prices, stop merchants from changing prices of the goods they sell
Council for Democratic Reform under Constitutional Monarchy (CDR) - the formal name of the military junta which seized power with the coup
joint - combining two separate groups
a standing committee - a permanent committee
umbrella group - a group of groups (a group that unites several separate groups in one group)
1999 Goods and Services Price Act - the law giving the government authority to control prices, even at the provincial level, has only been used for select important goods (See explanation)
Board of Trade - an organisation formed in 1955 to: 1. provide policy advice to the Thai government on business, trade, and economic development, 2. promote economic cooperation between Thailand and other countries, and 3. provide economic and marketing news and make academic research work on the economy, trade and investment available (See website)
petition - a request signed by many people asking the government (or another organisation) to do something
profit margins - profits
Thai Banker's Association - an association of the leading bankers in Thailand formed in 1958 (See website)
Federation of Thai Industries - an association that represents Thai manufacturers at the national and international level which goes back to 1967 (See Wikipedia)
Foreign Business Act - the laws regarding foreign businesses or people doing business in Thailand, effective since 2000 (Read the act online, read an introduction and explanation).
logistics networks - transportation lines and facilities for distributing goods (for example roads, railroad lines, and container ship ports)
power networks - electricity distribution lines and facilities
bilateral agreements - agreements between two governments (for example an FTA between two countries)
multilateral agreements - agreements between many countries (for example the WTO)
disbursement - (formal) payment of money to many people
soft loans - loans with easy terms (such as lower interest rates or easy conditions for paying the loan back)
Answer Key:
1. What action did the junta (CDR) take on prices after the coup?
They issued a price control order.
("ordered private companies to freeze prices.")
2. How would local manufacturers and financial institutions like the price control order to be changed?
They would like it to be replaced by the 1999 Goods and Services Price Act. This act doesn't directly control prices. It delegates authority to set price controls to the Commerce Ministry.
3. How can the price control order issued by the junta be withdrawn?
Any withdrawal or cancellation has to be approved by the cabinet and the National Legislative Assembly.
4. What kind of harm can price controls do to the economy?
Firms must adjust prices in response to the stronger baht to remain competitive as well as maintain profit margins, and export revenue. If businesses lose money this can affect the health of the economy.
5. What other economic policy changes is Thailand's business community calling for?
a. Revise the Foreign Business Act.
b. Strengthen the country's logistics networks.
c. Strengthen the country's power networks.
d. Advance trade liberalisation using bilateral and multilateral agreements.
e. Accelerate disbursement of government's 2007 budget.
f. Strengthen competitiveness of small and medium-sized enterprises.
g. Promote stability in southern Thailand.
6. How is the Thai banking industry working with the government to alleviate the economic impact of flooding this year?
They are offering low-interest rate "soft" loans made with the support of the central bank to businesses affected by flooding to help rebuild their businesses and meet operating costs.
