In a beacon of change, Thailand has made headlines again as Kriengkrai Thiennukul, the Vice Chairman of the Federation of Thai Industries (FTI), criticizes the government’s power tariff strategy. This episode follows close on the heels of the country’s Energy Regulatory Commission nodding to a revised power tariff of 3.99 baht per kilowatt-hour from September to December. Yet, the winds of change continue to gust with a recent proposal for potential tariffs scaling up to 6 baht per unit in the upcoming quarter.
This electrifying situation took the center stage at the FTI monthly’s Industry Sentiment Index pushed out in October. Kriengkrai, stepping into the spotlight, highlighted the inefficiency of reviewing the tariff every four months. In his view, this shifting landscape undermines the confidence of Thai entrepreneurs, particularly the small and medium-sized enterprises (SMEs) and deters foreign investors from pouring capital into the country.
In an era of comparative costs, the disparity between Thailand’s tariffs and those in Vietnam or Indonesia is impossible to ignore. With electricity prices at 2.70 baht per kilowatt-hour in Vietnam and hovering around 3.30 baht in Indonesia, the gap is positively striking.
“Thailand urgently requires a solid price structure able to dispense electricity at a fair price,” Kriengkrai stated, taking a stand on the issue.
In his visionary roadmap, this would entail collaboration with key stakeholders, including the Electricity Generating Authority of Thailand (EGAT), to reform the pricing model. While Thailand doesn’t aim to be the cheapest market, they do want competitive rates that sit between 2.70 and 3.30 cents per kilowatt-hour. Kriengkrai left the room with a lingering question: How could Vietnam and Indonesia offer such affordable rates, while Thailand lags behind?
He was clear that the hurdle to cheaper electricity was not the cost of generating power, emphasizing the urgent need for structural reform sans further specifics. But the warning bells are tolling as Kriengkrai cautioned EGAT and similar organizations not to block the government’s policy to lure foreign companies and innovators to Thailand’s shore.
Meanwhile, seeds of collaboration are being sown in San Francisco where Prime Minister Srettha Thavisin is attending the Asia Pacific Economic Cooperation (APEC) Summit and CEO Summit, capitalizing on opportunities to communicate with leading American enterprises. Since assuming the PM’s mantle two months ago, PM Srettha has been a zealous ambassador, promoting Thailand as a lucrative hub for foreign investors and manufacturers internationally.
However, the FTI chairman decried that these endeavors would bear no fruit if the nation’s energy prices alienate foreign interest, relegating Thailand on investors’ priority list. Also, the latest Thailand Industry Sentiment Index for October 2023 was cause for concern as it fell, registering the lowest level in the last 16 months.
This change swept through various sectors such as purchase orders, sales, production volume, and turnover. On a brighter note, lower fuel and energy prices have offset production costs. Despite this silver lining, the sentiment index is projected to plummet further, threatening production costs with rising electricity prices and minimum wage.
The federation advocates speeding up economic stimulus measures implementation by year-end. These actions include the implementation of an e-refund initiative moved up to December 2023 instead of January 2024 to urge Thais to spend more. It also addresses loan repayment deferment measures for SMEs, suggesting a tripartite board’s approach to set the minimum wage, keeping the regional economy in focus.