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As a basis for further analysis, I would propose two principles.

Firstly, the budget deficit should be for stimulating consumption and increasing the ability to consume rather than providing assistance to production units, as demand has slowed down and stock has accumulated due to the oversupply situation. Providing assistance to production units might help reduce operating loss but it will not help increase sales, and cannot help stimulate the economy at all. However, stimulating consumption would increase sales of products and services, which in turn would increase demand for the supplying industries. As a consequence, employment would be maintained.

A case that shows a good understanding of the Minister of Finance of this principle is when he maintains that he will not reduce the income tax rate for business entities from 30 per cent to 25 per cent at this moment. The Minister also said the additional budget deficit would be in the form of an increase in the expenditure budget that will be used to increase people's incomes to help stimulate consumption. It can also be argued that the higher net profit of business entities as a result of the lower income tax rate will not be ploughed back into the economy in the form of any investment these days when the economy is slowing down.

Secondly, the budget to stimulate consumption can also be divided into two groups - an investment budget that creates jobs, and a budget that hands out cash to consumers.

The cash handout budget does increase the cash income of the recipients without anything in return while the job-creation budget is an investment to construct things that are in need of the people in the localities. Such building work would provide job opportunities for those who might be laid off from export and manufacturing industries. These workers would receive additional income that would be used for additional consumption. The additional benefit of the job-creation budget is that the public will be left with infrastructure they need such as roads, school buildings, hospital buildings and water reservoirs etc. Furthermore, the construction work would generate demand for construction materials and thus other supplying industries. It can be seen that the job-creation budget has a deeper impact in economic stimulation rather than the cash handout budget.

Though the job-creation budget would generate more economic benefit than the cash handout budget, the cash handout budget would be more popular among the recipients.

A government that wants to gain the popular vote would be inclined towards setting up a cash handout budget. Examples of the cash handout are a one-time stipend of Bt2,000 for 9 million people, monthly allowances of Bt 500 per month for 3 million senior citizens etc. The job-creation budgets are: the development of water reservoirs for farmers, the construction of roads in villages, the improvement of local health centres, for instance.

Which of the measures offers long-lasting benefit to public is not too difficult to judge. One particular budget that I would like to criticise is the cash handout to those who were laid off for 6 months while also receiving further training. This is payment is quite redundant as the laid-off workers, by law, get 3 to 10 months' salary as compensation from their employers. It is even more worrisome when the training is said to have the aim of turning them into entrepreneurs. Normally, it is next to impossible to train someone to be an entrepreneur within a period of six months. Even though it can be done for some people, it is risky to start a business by investing their savings in a new business when the economy is slowing down, especially in cases where they may have to compete with existing entrepreneurs.

I am of the opinion that if this salary for the training budget is switched to job-creation projects that would provide jobs for these laid-off labourers and they would secure a stable income without any risk during an economic slowdown.

The project to train entrepreneurs should be done when the economy is growing steadily and should not be an intensive project during the period when the economy is slowing down.

I was asked about the effectiveness of the measure to stimulate the economy, which does not use any government budget, such as the introduction of mortgage insurance service. This is an effective measure as it would help low-income home-buyers to borrow up to 100 per cent of the price of the land and house. This measure would help stimulate demand for houses, which is needed during the slowdown of demand at the moment.

Concisely, any effective measure to stimulate the economy in the meantime should be on the demand side and not on the supply side. Among the demand stimulation measures, the job-creation one would generate deeper economic benefit than the cash handout programme.

Unfortunately, out of the Bt115-billion economic stimulus package approved by the Cabinet, only Bt7.1 billion are allocated for the five job-creation projects. Then how can we have enough jobs for the large number of unemployed labourers projected to be laid off from the industrial sector.

Until next Monday.