Handouts not the solution

As doubts persist over whether the 1,000-baht cash-handout and 15% cash-rebate schemes will boost local tourism, the government has hinted that it is considering a “second phase” of this splurge. This shows just how much the administration of Prime Minister Prayut Chan-o-cha is reliant on shortterm “populist” measures to boost the sluggish economy. More importantly, it also raises the question of whether the government should scrap many populism platforms and focus more on sustainable measures and radical reforms to build economic muscle.

On Wednesday, Finance Minister Uttama Savanayana said the tourism cash handout project may be extended until the end of the year if economic conditions mandated continued stimulus. His remark came at a time when Thailand’s GDP growth for this year was downgraded for the third time to a range of 2.7%-3% from an earlier projection of 4-4.3% back in January.

The generally positive response that this cash giveaway scheme has received from millions of people is a sign of how bad the economy is. According to news reports, people who registered for the scheme have spent the cash on grocery shopping at supermarket chains instead of actually travelling to other provinces.

The scheme has drawn criticism from observers who doubt whether it will benefit local tourism and community shops as planned. It is part of the government’s 316-billion-baht stimulus package to boost economic growth. Other measures include living allowances for the poor and the elderly, farm subsidies and lowinterest loans. It is understandable that the government needs to launch such packages to shore up the economy in the short term. Although the administration said the measures are aimed at cushioning the external impacts of global economic fluctuations on the Thai economy, some economists have pointed out that the economic boost may be less than hoped for.

The tourism handout itself will have only a short lifespan, prompting many to question whether the government should instead spend the money on something more sustainable such as investment.

For a government whose prime minister was a staunch critic of populist policies of the civilian government he ousted during the 2014 coup, many wonder why it has adopted similar approaches. Additionally, Gen Prayut’s cash-handout schemes are seen as a less productive form of populism.

It may be time for Gen Prayut to review the effectiveness of the cash handouts initiated by his previous and current governments over the past few years and decide whether it is time to move on to something more productive and sustainable.

For instance, the government should focus more on policies like the promotion package it approved last month to mitigate impacts of the ongoing US-China trade war on the economy, as well as encouraging relocation of foreign manufacturing firms from China to Thailand. The package covers tax incentives, special investment zones for individual countries and changes to the Foreign Business Act to ease foreign investment.

Analysts have warned that the government will need a more radical reform programme to address longerterm constraints on growth. Some suggest that the country should create a level playing field for economic competition, concentrate on addressing its structural economic problems and bolster job creation. That means the government should start focusing less on splashing money around indiscriminately as it may not help much when it comes to strengthening economic muscle over the long run.