Thailand raises minimum wage as firms struggle with floods

BANGKOK (Reuters):  The Thai government is pushing ahead with a big rise in the minimum wage despite appeals from industry to shelve the plan to help companies cope with financial losses after the worst floods in half a century devastated parts of the country.

 Flooding has killed at least 297 people since late July and caused damage that could reduce output in Southeast Asia’s second-largest economy by 1.7 percent after two more industrial estates north of Bangkok were engulfed over the weekend.

At a meeting of a tripartite wage committee on Monday, employers were outvoted by government and worker representatives and a minimum daily wage of 300 baht ($9.70) was approved for Bangkok and six other relatively well-off provinces, although the start date has been pushed back from Jan 1.

 “This will be effective on April 1, 2012 because of the flooding,” Labour Ministry permanent secretary Somkiat Chayasriwong told reporters.

 The rest of Thailand’s 77 provinces will get an increase in their minimum wage of 40 percent, but that will leave the amount below 300 baht.

 A rise in the minimum wage to a uniform 300 baht around the country was one of the main policies of the party of Prime Minister Yingluck Shinawatra in July’s election. It would have meant an increase of as much as 90 percent in some poorer areas.

 A 300 baht daily wage is five times higher than the minimum in Vietnam and 2.5-4.6 times that in Indonesia, according to Kasikorn Research Center. A rice-based meal for one person costs about 37 baht at a Bangkok street-vendor.

 Former Prime Minister Thaksin Shinawatra, brother of Yingluck and seen by many as the person really running the government from self-imposed exile in Dubai, had argued for the full increase to go ahead.

 “If you think it will cost businesses more, slashing their profitability, that is the one-dimensional view,” he told the Bangkok Post in an interview published on Monday. “But for me, the policy will reallocate resources in society and is also a good way to boost productivity.”

 He saw a rise as part of the government’s aim of ‘rebalancing society’, after a destabilising political crisis that has pitted the rural and urban poor against Thailand’s traditional elites over the past six years.

 Yingluck’s Puea Thai Party broadly represents the rural and urban working classes.

 Thailand’s minimum wage has risen by an average of 2.3 percent a year over the past 10 years but annual inflation has averaged 2.8 percent over the same period, according to the National Economic and Social Development Board.

 

 FLEXIBLE CENTRAL BANK

 After a separate meeting on Monday between officials and business leaders, the central bank said it was ready to be flexible on monetary policy.

 It has raised its policy rate to 3.50 percent from 1.50 percent over the past year but, even though inflation is near the top of its target range, economists expect it to hold rates at a meeting on Wednesday to help industry.

 “Before the floods, our economy was growing close to its potential. We have to look at how far monetary policy can be flexible,” Bank of Thailand Governor Prasarn Trairatvorakul  said after the meeting called to discuss flood losses and relief measures.

 The Finance Ministry has cut its GDP growth forecast for this year to 3.7 percent from 4.0 percent.

 It could be even lower if Bangkok, which accounts for 41 percent of GDP, is hit by floods.

 A combination of monsoon rain, high estuary tides and water flowing down from reservoirs in the north had threatened the capital at the weekend but its defensive system of dikes and canals held.

 However, the provinces of Ayutthaya, Pathum Thani and Nakhon Sawan north of Bangkok have been devastated and the floods have forced a series of industrial parks to close, including the Factory Land estate in Ayutthaya at the weekend.

 Most of its 93 factories make electronic components and car parts, so this will add to the problems of the international firms that use Thailand as a regional production hub.

 On Monday, the government asked firms at another big estate north of Bangkok, Nava Nakorn, to halt operations. It has 270 plants with around 270,000 workers.