Yingluck: No Plan to Change Foreign-Exchange Regime

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Yingluck: No Plan to Change Foreign-Exchange Regime

Ungelesener Beitragvon KoratCat » Mi Jul 06, 2011 10:44 pm

Yingluck: No Plan to Change Foreign-Exchange Regime

BANGKOK—Thailand's Prime Minister-elect Yingluck Shinawatra said Wednesday that her incoming government has no plans to change the country's existing exchange-rate system and that it would be best to let market mechanisms run their course.

"We will continue to let the baht float freely," Ms. Yingluck said in an interview with The Wall Street Journal, adding that there would also be no move to implement capital controls.

Her comments come after Suchart Thadathamrongvej, the economics guru of Ms. Yingluck's For Thais Party, told Reuters that Thailand should move to a managed exchange-rate system for the baht, perhaps setting its value against a basket of currencies. He cited Singapore and China as examples of foreign-exchange regimes Thailand could emulate, according to the Reuters interview.

Ms. Yingluck said that capital inflows are still crucial for the recovery of the Thai economy and that the new government would like to keep Thailand on foreign investors' radar screen after years of political instability had prompted some companies to rethink investment plans in Southeast Asia's second-biggest economy.

The For Thais Party clinched a majority of the 500 parliamentary seats in Sunday's election, securing 265 seats while also reaching an agreement with four other smaller parties to form a more stable 299-seat coalition government. During the election campaign, For Thais pledged a series of populist policies including an aggressive increase in the minimum wage and corporate tax cuts.

Ms. Yingluck said her government aims to increase the minimum wage to 300 baht, about $10, a day in 2012, a steep rise from current levels, which range from 159 baht to 221 baht, depending on location. The radical move on the minimum wage has been largely criticized by business owners and economists who worry that it might fan escalating price pressures.

However, Ms. Yingluck said that the wage move may raise inflation only 'a bit' in the first year and that the government will try to limit the impact by imposing measures to reduce prices of crucial products such as oil and sugar.

Among the first tasks of her government is the termination of the state Oil Fund contribution, which will bring down retail prices of premium gasoline by around 7.50 baht a liter, regular gasoline by 6.70 baht a liter, and diesel by 2.20 baht a liter, Ms. Yingluck said.

A portion of domestic fuel prices paid by consumers currently goes toward the Oil Fund, which is used mainly to subsidize natural gas for vehicles and liquefied petroleum gas as well as subsidize diesel and gasoline when the global oil price spikes.

However, the termination of the Oil Fund contribution will be only temporary and the government will look to recollect contributions to the fund once economic conditions improve, Ms. Yingluck said, without elaborating.

In an attempt to help business operators cope with the minimum-wage increase and at the same time enhance Thailand's attractiveness as an investment destination, the new government is aiming to cut the corporate tax rate to 23% in 2012 from the current 30% and trim it further to 20% in 2013, she said.

Ms. Yingluck said her cabinet list hasn't been finalized, adding that for the finance portfolio the party would consider candidates from within the party as well as external experts.

Wall Street Journal
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