atans1

Thailand, harbinger of problems in M’sia, S’pore

In Malaysia, Public Administration on 08/02/2014 at 4:56 am

(Asean round-up)

But before I go into what I mean here’s something on how Thailand’s woes are benefiting S’pore: Singapore Institute of Purchasing & Materials Management ‘s executive director Janice Ong said (according to BT) that there has been anecdotal evidence that the political turmoil in Thailand is diverting orders to Singapore’s manufacturers. But economists believe that the impact would be slight at best.

UOB economist Francis Tan said that the clusters in which such diversion may occur, such as hard disk drives, make up only a small proportion of Singapore’s manufacturing sector.

Divine compensation for Temasek’s purchase of Shin?

Now back to the subject matter of the title. One aspect of the crisis is the sense of entitlement by the Opposition. It was explained by this analysis

[P]olitical power and economic power no longer coincide in Thailand. The parts of the country that generate most of Thailand’s GDP do not ally with the ruling party, which commands most of the vote. That simple fact no doubt explains some of the bitterness of the country’s crisis. In the chart below, we try to quantify this simple insight.

Thailand’s redshirts back the government and most of them look forward to the election on February 2nd. They support Pheu Thai, the third incarnation of a political party founded by Thaksin Shinawatra, a tycoon and former prime minister whose sister, Yingluck, now heads the government. The protesters, on the other hand, want to derail the election and rid Thailand of the influence of the Shinawatras, whom they accuse of rapacious corruption and ruinous populism. They tend to support the opposition, led by the Democrat Party. 

In the last general election in 2011, Pheu Thai won 48% of the votes cast for the national political parties*. They were the leading party in 46 of Thailand’s 76 provinces, helping the party and its allies take control of Thailand’s National Assembly. But, according to calculations by The Economist, the party’s political strongholds account for only 38% of Thailand’s GDP.

The opposition Democrats, by contrast, polled 35% of the party votes. They were the leading party in 30 of Thailand’s 76 provinces and also its capital city. Added together, these territories account for 62% of the nation’s GDP. Bangkok alone accounts for about 30%**. In Thailand, in short, domestic power and domestic product reside in different parts of the country.

the chart illustrates the enormous gap between the Democrats’ political power and their economic clout. This gap may help explain both their feelings of alarm and their sense of entitlement. It shows the enormous scope for redistribution from Democrat-ruled provinces to those dominated by Pheu Thai. This redistribution, which has been taking place for decades, accelerated in 2001 when Thaksin first became prime minister. Back then the Thai state spent 16% of the national budget on the provinces. Today, under his sister’s government, their share has increased to a quarter.

The figures may also shed light on the opposition’s sense of entitlement. Some in the old Thai establishment no doubt feel that they make a disproportionate contribution to the country’s prosperity and development. To them a constitutional arrangement that gave them about 62% of the political power might feel about right. It would represent a realignment of domestic power with domestic product.

 This situation could be replicated in M’sia. Selangor is biggest contributor in GDP terms to M’sia (as of 2013)  and Penang is 5th based 0n 2010 data. Both are controlled by the Opposition. Attempts by BN to buy votes need money, and taxes can only come from the richer states. You can guess the rest …

Even in S’pore, such entitlement is not absent. I came across this comment: [O]nly 40% of the population are paying income tax to support 60% of the population. Increasing revenue from direct taxes will penalise the very people who have been contributing to the nation’s coffers. With countries in the region cutting their corporate taxes, Singapore has to rely on higher indirect taxes and reduce the proportion of revenue arising from income and corporate taxes. Otherwise, the minority tax payers can very well vote with their feet and offer their investments and skills to someone else.

Fortunately, this is rubbish. because (based on last yr’s Budget estimates only 14% (third largest) of govt revenues come from personal income tax. The largest contributor is corporate tax (17%). GST at 17% is the second largest contributor.

 

 

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  1. There are no free and fair elections in this world,the top country USA has 100% free but probably 60-70% fair elections,like wise for many other OCED democracies,Singapore was having 100% free but 0% fair elections since 1959,under PAP,thanks to internet,it is now probably 100% free and 45% fair?For my humble opinion,the first test for PAP is whether they can stick to their own rule of “Only elected MPs to be PA grassroots advisers” but yesterday report from Dr Tan,the last presidential candidate,leave no room for Optimism and still democracy will not solve the problems of our world.
    Yes,indeed,Thailand is harbinger of problems in M’sia, S’pore.

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