TDRI supports govt plan to up public spending

The Thailand Development Research Institute (TDRI) supports the government's plan to increase public spending to shore up the economy but opposes tax cuts.

Fiscal expansion is a better solution than interest-rate or tax cuts, Ammar Siamwalla, a prominent economist at the TRDI independent think-tank, said yesterday

The government plans to increase its supplementary spending by Bt100 billion for the current fiscal year and is currently working out the details of the projects. The Finance Ministry is also considering whether to cut corporate and personal income tax.

"Corporate tax cuts would not stimulate the economy, since they do not target those who suffer," Ammar said yesterday at the TDRI's year-end conference entitled " Sustaining Long-term Growth." Nor did he agree with a proposal to cut value-added tax to 4 per cent from 7 per cent.

He urged the government to accelerate pending mega-project investment such as extending the mass-transit system in Bangkok.

He also asked the government to renovate social infrastructure such as school buildings, public libraries, hospitals and educational materials. Tourism sites and nature should be rehabilitated, he said, and the government should provide more money to support schools to ensure free primary and secondary education.

Ammar urged the government to produce more personnel for the public health services, such as nurses, to lessen the impact of unemployment.

He said it should extend social programmes to ease the cost of living for the poor, such as free public buses.

He opposed the government price-support schemes for farm products and instead proposed price-risk insurance via farm options.

Ammar said the government should not inject money to encourage the poor to become new entrepreneurs during a sharp economic downturn because it would burden them with more debt.

Due to the slowdown of the world economy, the TDRI projects that Thailand's economic growth in the first quarter next year will be only 0.1 per cent, said Somchai Jitsuchon, a research director. The sharp drop in growth will result in unemployment of 2.38 per cent, or about 880,000 persons, up from 1.65 per cent in the first quarter this year, he said.

Those who work in tourism machinery and steel production, electrical products, electronic parts, rubber products, jewellery and auto parts will suffer most, he said.

To lessen the negative impact of unemployment, the TDRI urged the government to increase spending on student loans to encourage students to enter universities and to delay their entry into the labour market.

The government should also keep an eye on employers who may try to pressure labourers to leave their jobs without paying adequate compensation, the TDRI said.

The government was also asked to contribute Bt25 billion more a year to the social-security fund for health care and unemployment compensation.