Cheap Russian Diesel? Nyet!

No sooner did PM Samak Sundaravej announce his plan to import diesel from Russia at eight baht per litre cheaper than normal than people have been running around to say how impossible this would be. The high transportation costs, they cry, the high sulphur content, they opine, the limited refining capacity, they etc and so forth. Well, we will see if it occurs – meanwhile, later today, the Finance Minister Surapong Suebwonglee is due to announce an economic stimulus package of around 40 billion baht which is expected to reduce excise taxes on (some types of) petrol, bus fares, electricity and a variety of other things. There is certainly a need for strong governmental leadership at this time, since consumer confidence is low and the SET index is dipping dramatically. The ability of the government to do this is being significantly damaged by the dangerous antics of the anti-democracy mob PAD and its supporters in the so-called Democrat Party.

The international credit crisis is contributing to the economic problems brought about by high oil and food prices, which have led to the highest rate of inflation in a decade and the threat of stagflation. The Governor of the Bank of Thailand Tarisa Watanagase has said the bank has not invested in securities issued by either of the two large American mortgage providers (‘Fannie Mae’ and ‘Freddie Mac’), only in US Government bonds. However, there appears to remain a problem of excess liquidity in the Thai (and the region’s) money markets. Money from commercial banks is being placed increasingly in government bonds and in short-term money market deals and this, the governor said, increases the risk of capital flow volatility – i.e. all the money could swiftly disappear overseas if better opportunities suddenly emerge and in any case the Thai economy is subject to what economists call ‘distortions’ because of this volatility.

Perhaps it is not surprising that drug use is on the increase.  

Cheap Russian Diesel on the Way as People Adapt to Economic Crisis

Low quality diesel is to be imported from Russia and sold at 8 baht per litre less than the normal market price. As much as 25% of total diesel could come from Russia, our new friend in the north – Russians are also interested in building many of the possible new nuclear power plants governments are thinking of building in several Southeast Asian countries. The first supplies of this diesel should be available within 60 days and it will be distributed at 200 garages across the country. In the meantime, do avoid using kitchen liquid gas containers for your cars, since these are being called ‘ticking time bombs,’ on the basis that they are likely to explode sooner or later, leaving drivers either seriously injured or looking rather embarrassed.

A second policy to deal with the economic crisis caused by high oil and food prices is the distribution of coupons for low income families – that is families with monthly income of less than 6,000 baht, which is currently around US$180. The coupons can be used at participating shops around the country to buy necessities including fish sauce, other food items and soap. The government is, it says, doing what it can to counter the problems of inflation and stagflation, without actually saying what it will do – let us hope they are receiving sound advice.

Still, it is an ill wind etc and so forth. Wholesale centres are enjoying the downturn, so to speak, since people are preferring to switch to local, low-cost options in terms of fashion and consumer goods. This is something we found in our research on Bangkok street vendors, who have since the 1997 crisis created and managed increasingly sophisticated businesses on the pavements of Bangkok. I particularly liked the woman who had fashion items from Korea shipped to Thailand in crates stamped ‘charity donations’ to avoid paying tax (not that we condone avoiding tax). Others have created their own brands and contract with factories to produce small runs of a range of products, based on their close understanding of their customers.