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Sep 28, 2011

Doing Business in Thailand May get a Little more Expensive

Thai Finance Minister, Thirachai Phuvanatnaranubala, has reported to the local media that Thailand and others ASEAN countries decided to create a common fund in fear that investors will avoid developing countries until the end of the European crisis.

A lack of confidence from bankers, arising from the European debt crisis, in addition to sudden capital outflows, are likely to put the Thai and other developing economies in a precarious financial state.

The fund is expected to be around USD500 million. Thailand will contribute approximately USD 15 million to the fund if the plan is passed by the Thai parliament.

A lingering issue is the recent promises by the government.  The present Thai government made numerous populous promises to win the recent elections including:
  • Raising the minimum wages THB300 (around USD10) a day for laborers;
  • Raising the starting salary to THB15,000 (around USD480) a month for graduate students; 
  • Lowering the corporate tax rate to 23% from the present 30%;
  • Raising the price of rice for farmers.
The Federation of Thai Capital Market Organizations has demanded that the Government gradually increase wages in order not to harm competitiveness, while vociferously noting that an increase in the cost of rice will decrease exports.

The government has backpedaled on most of the promises because of the strong opposition of industry, but for the stability of the economy, hopefully, some of the fund will be utilized to satisfy the often fickle population.

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SeanHayes@ipglegal.com