Riding out hard times

Many analysts have begun to single out Vietnam as the weakest link as its headline inflation hit the 25-per-cent mark in May.

Vietnam is by no means alone in this mess. Neither is the situation in Vietnam likely to have a strong spillover effect on the rest of the region.

In fact, what Vietnam is experiencing now is no different from what the rest of Asia and most countries in the world are experiencing. The only difference is the scope and depth of the way the impact is felt. That differs from country to country, depending on their economic, social and political fundamentals.

For many Asian countries, after months of battling with rising inflation, the new battlefront is now the sudden and rapid fall of their currencies. Thus far, the region's worst performer is the baht, which has lost 11 per cent against the dollar since the beginning of the year. As their currencies continue to plunge, Asian central bankers are placing their bets on policy interest-rate increases as a certain cure for both the runaway inflation and the depreciating currency.

The monetary-tightening solution, however, is not without risk. Although raising policy rates may be effective in arresting excessive currency fluctuations and rising inflation, it may also lead to a decline in borrowing for investment and consumption. What this means is that the measure may result in a slowdown in production, less consumer spending and eventually, fewer jobs.

This is why some analysts argue that, instead of resorting to policy-rate increases, policy-makers should instead rely on fiscal measures to ensure that people's incomes and purchasing power are brought in line with the higher cost of living. This is perhaps the reason why the current Thai government has announced that it has every intention of spending 100 per cent of the 2007-8 national budget of Bt1.84 trillion by the end of the fiscal year in September.

Whatever the approach, the result is unlikely to be felt within a short period of time. The current political instability and uncertainty is unlikely to speed things up either. Therefore, in the meantime, what business-owners and consumers should rely on are self-help measures. For business-owners, the most effective measures would be increased efficiency and cost saving. Work processes should be reviewed and streamlined. Spending should be prioritised and rationalised. For consumers, it's all about belt-tightening and pursuing a simpler lifestyle to ensure that their hard-earned money goes as far as possible.

Business-owners reducing costs and consumers tightening their belts need not lead to a zero-sum or a mutual-destruction situation. Businesses should not be forced to close because of higher operating costs and lower demand and consumption. Wage-earners need not lose their jobs because there isn't enough business for their employers to survive. Consumers should not be forced to buy products that compromise quality for lower price.

Business-owners and consumers can actually work together to ensure their continued survival and growth. Hard times are actually the best time for businesses to initiate campaigns to win the hearts and minds, and ultimately the loyalty, of their customers. Consumers should take advantage of quality products and services at the lower prices that these businesses have to offer.

Things will tend to get worse before they get any better. The only way for everyone to get through this difficult period is to ride through it together in a spirit of mutual help.

DARMP SUKONTASAP is senior vice president of Tesco Lotus. He can be reached at darmp.sukontasap@th.tesco.com