Rising costs: 4-month retail price freeze - The Nation

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Goods prices

Petchanet Pratruangkrai
The Nation May 16, 2012 1:00 am

Commerce Minister Boonsong Teriyapirom's presence in a consumer product shop

The Commerce Ministry yesterday successfully pushed for 200 manufacturers to maintain retail prices on goods for another four months - but without any supporting measures when this period expires.

Commerce Minister Boonsong Teriyapirom met yesterday with representatives of businesses that cover 90 per cent of the country's goods trading. During the meeting firms complained that the price freeze policy undermined business growth. They said it would also affect future expansion, as the policy has hit their profit margins.

Boonsong convinced businesses to freeze the price of goods and food from May 15 till September 15. However, the ministry did not promise any measures to offset producers' burdens that would stem from the price freezing policy.

The ministry simply urged companies to adjust their operations and boost management efficiency. It said people should look to use more coins rather than banknotes.

This met some reluctance, with manufacturers sharing similar views and commenting that the government should allow retail prices of goods to be more flexible, in line with market mechanisms instead of using a policy of freezing prices. Otherwise, the market would be distorted.

"Without any approval for price increases, consumers will have to shoulder all burdens because manufacturers will find ways to increase the price by [either] reducing quantity or producing higher quality goods to adjust the price," a leading manufacturer said.

Business reps said the rising price of goods and production costs they now face stemmed from populist policies launched by the government. The increase in the minimum daily wage to Bt300, as well as pledging policies on many farm goods had driven the cost of raw materials up.

A representative from one of the country's largest soft drink producers, said enterprises would face difficulty expanding as their revenue would shrink.

The source said there was no need to tell businesses to adjust themselves as they always do this. The need to be competitive ensured that price increases were their last option. However, the beverage industry had gradually faced higher costs of production, mainly from higher costs for labour, logistics, packaging, utilities, fuel, and the high subsidy price for sugar.

Increased wages had not only marked up production cost by 0.25 per cent, it had largely affected transport as labour costs accounted for 40-50 per cent of logistics, the source explained.

Chen Namchaisiri, vice chairman to the Federation of Thai Industries, said the government should review some of its populist policies, as they had caused higher burdens for businesses - while the government wanted them to freeze the price of goods.

"Some of the government's policies have hit manufacturers' costs. The wage hiking measure has mainly created higher costs of production and resulted in higher prices of goods," he said.

Vichai Assarasakorn, secretary-general to the Board of Trade, questioned whether the government had any measures to handle cost of living rises instead of calling for manufacturers to freeze prices for four months.

He said the government should have more clear-cut measures to assist small and medium-sized enterprises to adjust operations as they would be affected by the price freezing demand. Vichai said traders trusted market mechanisms as they were free to compete with each other to maintain their market share.

"The price freezing measure should [only] be done for a short period as every government has imposed the same measure during the past few years," Vichai said.

Prapot Nanthawatsiri, president to the Thai Soap, Detergent, and Personal Care Manufacturers Association, said producers would cooperate in freezing prices for four months. However, prices could change, if firms faced unpredictable fuel or raw material costs.

Burin Tanatavornlap, honorary president to the Thai Rice Packers Association, said the price of packed rice would not increase largely because of the ceiling price imposed by the government. However, the retail price of packed rice would increase in line with higher costs for rice and production.

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