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Now this is where the buck should stop

 

Thailand should use every means possible to reduce dollar demand in the economy, writes Thanong Khanthong.

IT is time all Thais shared the pain of the sharp economic downturn, which warrants a closer look at the broad menu for measures to reduce demand for dollars.

Since the government has fired its last volley by agreeing to cut the 1997 fiscal budget by Bt99 billion, the private sector should resort to the same belt-tightening by drastically cutting back any dollar-sensitive imports to improve the current account deficit, which must be narrowed significantly to restore Thailand's international credit standing.

A local mutual fund manager has come up with the idea that eventually the government must do something about the huge bills Thailand is paying for imported oil, which are costing the country more than Bt30 billion in annual foreign exchange.

''Thai drivers are wasting fuel in Bangkok traffic," he said. ''The government should hit the top-end of the market by raising the excise tax on premium gasoline."

This might encourage Bangkok residents to ride in car pools or spend less on fuel. Diesel oil may not be touched because it might ignite broader political repercussions such as raising transport costs or harming the fishery industry and low-end consumers.

However, raising the excise oil tax will mark the government's adoption of fiscal consolidation at a time of dwindling tax revenue and economic slowdown.

In the first two months of fiscal 1996/1997, the government ran a Bt21.2 billion budget deficit due to lower tax collection and large carry-over expenditures from the Banharn government.

An excise oil tax increase might trigger heavy lobbying from powerful oil companies, yet these companies are enjoying a wider marketing margin of Bt1 per litre compared to 20 to 30 satang per litre before the Anand government's oil industry liberalisation programme.

Yet it is something worth considering if the government needs to bring its fiscal position into shape and curb over consumption. Oil companies should bear at least some of the responsibility by accepting lower profits.

A Barings report showed particularly heavy consumption of energy in the Thai economy, estimating that for every rise of one per cent of the gross domestic product (GDP), the Thai economy consumes an increase of 1.5 per cent in energy in relative terms. ''We're quite wasteful with energy consumption," said the mutual fund manager.

The fund manager had an idea for reducing traffic congestion: charge Bt100,000 for every new car registration. This might make potential car buyers think twice.

Whatever the method, however, measures must be put in place to limit the number of cars plying Bangkok's streets, maybe along the lines of what the Singaporean government has done for that island nation.

There are ten thousands of cars in Bangkok that leasing companies have confiscated from owners who have failed to pay their monthly installments.

If the no-new car registration policy or a hefty fee of Bt100,000 per registration is adopted, the market will find a way to give these second-hand cars some value, in effect reducing the number of new cars on the streets.

The market must be disciplined one way or another, otherwise Bangkok cannot move ahead as a regional commercial or financial centre. Already the car market has made the necessary adjustments, with people climbing down the lifestyle ladder by snapping up Toyota Solunas and Honda City's rather than Mercedes or BMWs as they have over the past few years.

 

 

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