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20 November 2013
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TDRI: Income gap widens despite populist outpouring

Thailand’s current fiscal policies have failed to address income inequality and should be redirected from populist schemes to improving social welfare for the poor, says the Thailand Development Research Institute (TDRI).

Even after the Finance Ministry’s restructuring of personal income tax brackets, the gap between rich and poor will not be reduced, said Somchai Jitsuchon, TDRI’s research director for inclusive development.

The rich-and-poor gap in Thailand is bigger than in similar-sized economies such as Colombia, Brazil, Malaysia and Indonesia.

In fact, Thailand is the only one of the above to see an increase in inequality in recent years, whereas the others saw a narrowing of the gap, said Mr Somchai.

Thailand, he said, is among the top countries in the world in terms of income disparity, with money concentrated in the hands of a small, wealthy group.

One problem is the misconception that all farmers are poor, resulting in policies catered to the wrong people,Mr Somchai said as part of a panel on the role of government in allocating financial resources.

According to TDRI research in 2011,out of 17.6 million farmers, only 7.7 million were considered poor.

Since then,35 billion baht from the current government’s rice-pledging scheme has benefited poor farmers, while 85 billion went to rice mills, exporters,politicians and large farms, said Mr Somchai.

Instead of subsidies, the budget could go to poor students, the elderly, children,worker training and increased social security benefits.

“So the belief that policies aimed at helping farmers will benefit the poor and eventually lower income inequality is an illusion,” said Mr Somchai.

He said populist policies, which are often seen in countries with high income inequality, are an obstacle to escaping the middle-income trap.

The TDRI yesterday proposed a new economic model based on improving innovation, technology, education and labour skills.

Thammasat University economics lecturer Pawin Siriprapanukul agreed with the TDRI, saying Thailand’s spending has not paid off in economic growth as much as it should have.

Though policies such as 30-baht health care and the village fund were effective,the first-car scheme and rice pledging were not, said Mr Pawin.

He suggested forming a Parliamentary Budget Office (PBO) as an independent and non-partisan group charged with analysing the government’s budget and financial policies and issuing economic forecasts.

The PBO would help reduce public debt and boost efficiency in spending.

Sasatra Sudsawasd, a lecturer at the National Institute of Development Administration, said the proposed PBO would improve transparency in official data and support development.

He said the emerging trend of public debt increases and out-of-budget borrowing would affect Thai economic growth in the long term.

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Source: Bangkok Post, 19 November 2013

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