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Debt is always unwelcome, but sometimes necessary

There was an adage very popular before Thailand ignited the "Tom Yum Kung" financial crisis in 1997: "Only those with 'creditability' can borrow."

Well, that needs no explanation. Sometimes, people would borrow just to show others that they could get a loan. Well, they learnt a hard lesson. But 16 years on, some people are doing the same thing again; many borrow money on the basis of good job security, oblivious of hard times ahead.

The movie "The Company Men" reflects this. Bobby Walker (Ben Affleck) buys a big house and a Porsche, pinning his hopes on his job at GTX continuing. During the 2010 recession, he was among the thousands laid off. With compensation of two months' salary, he couldn't decide what to do. He still went to the golf club and drove his Porche. As the truth sank in, he cut out all the luxury and became a construction worker to prevent his mortgaged house being foreclosed.

It must be tough for many people in the US, the world's biggest economy, which is yet to rebound from years of economic uncertainties. It is extremely hard for the indebted. According to TransUnion, as of the fourth quarter of 2012, the average amount of credit-card debt per borrower was US$5,122, 1.58 per cent up from the $5,104 in the same period a year earlier. (You may be surprised to know that Alaska had the highest debt per borrower, at $7,012, followed by Connecticut at $5,820).

These are huge amounts, 9.9 times the average in Thailand (at Bt15,471) - based on the total of 16.87 million credit cards at the end of the year against outstanding credit-card debt of Bt261 billion. But taking into account the fact that the United States' per capita income is 11 times higher than Thailand's $4,420, and the fact that the number of merchants accepting credit cards in the US is far higher, Thailand's figure is frightening.

Googling credit-card debt in the Thai language, you will find many websites offering consulting services, and sites where many debtors share their painful experiences. It surprised me a great deal to know that so many people out there owe huge amounts on their credit cards, even though they know the penalty rates. For most salarymen, it will take them years to clear their debt.

Yes, some use their cards for cash advances. In theory, you should not use credit cards unless the money in your bank account is adequate enough to cover the monthly payments. Yet, in the case of emergencies - like accidents or illness - you have to use your card.

About 20 years ago, going to a pawn shop prior to the start of a new school semester was common in Thailand. Now, with many credit-card issuers out there - including foreign and Thai banks and non-bank institutions - parents do not need to pawn TV sets or jewellery to pay for tuition fees and other expenses. With credit cards they can withdraw cash. With a car, they can tap money through the car-for-cash service. All that comes at a cost, but the loans are necessary for the future of their children.

Some students whose parents do not earn a regular income have to borrow to fund their studies. Come graduation day, they are indebted and must be very disciplined with their spending after that, in order to clear the debt.

Yes, sometimes we do need to borrow, if it is to pave the way for a better future. For that reason, the government has every reason to promote its Bt2 trillion borrowing plan for infrasructure developmnt. Out of 144 economies, Thailand's infrastructure is ranked 46th in the World Economic Forum's "Global Competitiveness Report 2012-2013". In the sub-categories, road quality is ranked 39th, while railway quality is 65th.

Comparatively, while the score for overall infrastructure quality has improved from the previous year, only the quality of roads showed a higher score. The scores for ports, airports and railways are worse than the previous year.

New investment is necessary for improvement. It is necessary also because Thailand is an open economy. We have to compete with so many countries in the region and world, and some have shown great improvement. Notably, the Philippines' competitiveness ranking jumped 10 notches to 65th in the WEF survey.

Yet, like individual debtors, the government must strictly uphold discipline. While individual debtors can't afford luxury dinners for a while, the government must not include bad projects or cloud the transparency of the spending.

In the car-for-cash loan, individuals need to take the best care of their cars, which are used to guarantee a loan. Similarly, the government has to make sure that public funds are wisely spent.

Prime Minister Yingluck Shinawatra should not mind being called "Madame Googoo" (a coy reference to a "borrowing queen"). Fifty years from now, she will get many new nicknames. But if she means well, as she promised, some of them will certainly have a positive connotation.


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