The stock market appears to have disregarded the policy recommendations to combat monopoly and market dominance stated by the new coalition anticipated to form the next administration.
Recently, the SET Index traded beneath 1,600 points, a crucial threshold, and the bond market experienced large capital outflows.
The coalition led by the Move Forward Party, which is attempting to create the next government, has pledged to overhaul the energy industry, which is largely to blame for the high cost of electricity.
The party wants to change government subsidies for renewable energy supplied to big businesses like Gulf Energy Development Pcl, which is listed on the local stock exchange.
Even some investors asserted that the party platform does not support market liberalization.
The party is also considering imposing a capital gains tax on stock trading, which has investors worried that it may discourage share trading and make the SET less desirable.
The financial establishment was vehemently opposed to the current government’s past attempts to collect a tax on stock transactions. The previous administration postponed its intention to enact a financial transactions tax as a result of the opposition.
Political unpredictability
After the general election, political ambiguity is a concern for investors as well. The leader of Move Forward, Pita Limjaroenrat, who ran for prime minister and won the most seats (151), runs the possibility of being disqualified by the Election Commission (EC) for allegedly owning stock in a media company that has since gone out of business.
Pita will find it difficult to gain the backing of senators chosen by the military junta that seized power in 2014, even if he avoids disqualification.
The premiership may be made available to candidates from the Pheu Thai Party, the second-largest party in the coalition led by Move Forward, if he is unable to garner a total of 376 votes from 500 members of the lower house and 250 senators.
There have also been rumors of a frustrated Pheu Thai abandoning the coalition led by Move Forward to create a new government with the departing administration’s parties.
Because of his party’s position on amending Article 112, which imposes prison terms of three to fifteen years on individuals found guilty of lese majeste, some senators have already stated that they will not vote for Pita to become prime minister. The punitive rule has come under fire from progressive groups, while the conservative party sees it as a necessary safeguard for the president.
Move Forward has reneged on its promise to uphold the lese majeste amendment in the memorandum of understanding (MoU) to establish the government in order to reach an agreement with the seven allied parties. However, the party is continuing to advocate for a legislative change in Parliament, claiming that doing so will strengthen the bond between the populace and the monarchy.
Earlier, the party’s backers demanded that the statute be changed as part of royal reforms. The party stood out from other political parties because of its campaigning for changing the divisive Article 112.
The creation of a new administration may be hampered by legal obstacles brought on by the anti-democratic measures imposed by the previous junta. And their effects can result in a tumultuous political game. Some even assert that conservative forces would use the Constitutional Court to dissolve the Pheu Thai Party or the Move Forward Party.
Many detractors have urged the EC to hastily ratify the election results, in less time than the legally permitted 60 days.
Anusorn Tamajai, executive committee of Pridi Banomyong International College of Thammasat University, said: “Should the EC swiftly endorse the election result, then Parliament could open immediately to choose the House Speaker and then pick the prime minister.”
The confidence of investors and consumers is anticipated to increase once it is obvious where Thai politics are headed.
Increasing self-assurance
The Joint Standing Committee on Commerce, Industry, and Banking recently hosted a meeting with Pita and his economic team. A few of the new coalition’s economic policies were discussed by the two sides.
The business community is in favor of energy reform since it has the potential to reduce both household and commercial electricity costs. Business executives have expressed dissatisfaction with Thailand’s high electricity prices relative to Vietnam, claiming that this reduces their ability to compete on the international market.
Business leaders are also concerned about a proposal to raise the daily minimum wage from its present level of over 300 baht to 450 baht. It is anticipated that the significant increase will raise manufacturing costs for firms, particularly small and medium-sized organizations (SMEs).
The Move Forward Party has pledged to give SMEs some cushion by granting them extra tax breaks to counteract rising labor costs.
Liberalizing the sale of alcohol
The Move Forward Party seeks to weaken corporate monopolies and give small businesses more negotiating leverage. The apparent issue is to further liberalize alcohol production, which is currently controlled by a small number of enormous companies.
“The move should benefit agricultural cooperatives, as they would be able to increase the value added to their farm products,” said Somporn Isvilanonda, an economist and senior fellow at Knowledge Network Institute of Thailand.
Using welfare to reduce inequality
The policy of the Move Forward Party is centered on inclusive growth, which should benefit a significant portion of the people, not just the wealthy. The party’s goal in implementing this policy is to increase welfare spending on the elderly and children while also raising taxes on the wealthiest.
The Thailand Development Research Institute’s research director, Somchai Jitsuchon, expressed his overall support for the organization’s economic welfare program. The common prosperity policy, which focuses on wealth redistribution to people in rural areas and restricting major enterprises, was put in place by the Chinese government under President Xi Jinping. Move Forward’s strategy is comparable to this policy.
Unstable markets
It might not be accurate to say that the domestic political climate and the Move Forward Party’s ad hoc economic policy are to blame for the turbulence in the stock and bond markets. The first US debt ceiling impasse as well as the US’s ongoing high inflation rate have also been cited as causes of Thailand’s financial market volatility.
“Both domestic and external factors contributed to capital outflows from the bond market,” said Ariya Tiranaprakij, senior executive vice president of Thai Bond Market Association.
Economic difficulties
According to a report released by the Commerce Ministry on May 30, Thailand’s exports declined 7.6% in April, marking the seventh consecutive month of decline.
Due to sluggish global economic development, exports declined by 5.2% in the first four months of the year. Experts predict that the slower global growth would make it difficult for the next government to manage the economy.
