Government Stimulus Packages Help Boost Retail Sector

October 26, 2012

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Government Stimulus Packages Help Boost Retail Sector

After nearly six years of political unrest it may be that citizens in Thailand are now so used to the situation they have become blasé about it. Even foreign tourists and expats probably stifle a yawn or three whenever the subject of political mayhem raises its head. The present government introduced a series of stimulus packages at the beginning of 2012 following the disastrous floods of late last year.

According to the Thai Retailers Association (TRA) these measures have not only boosted retail turnover they now claim the sector is on track to break its previous forecast growth for 2012 by a massive 50 percent. At the start of 2012 the TRA believed retail growth for the year would come in at around eight percent. Market expansion in the fi rst six months of the year reached this figure and so the TRA now thinks they are on track to achieve growth of 12 percent instead. This fi gure, if indeed it is achieved, more than compares with the growth numbers seen in 2009 (nine percent), 2010 (11 percent), and 2011 (8.5 percent). Part of the reason for the better than expected growth fi gures centres around the money being spent on repairs and reconstruction in flood damaged regions.

The TRA also notes that the rise in the minimum daily wage has put more money into consumer’s pockets and this added purchasing power has been refl ected in strong retail sales. Strong tourism numbers have also been important in the retail bottom line, with specialty stores showing especially strong growth. The TRA claimed the value of the retail sector in 2011 was 2.18 trillion baht.

There are some concerns within the industry however. Primary among these is the claim the government is yet to properly address the direction the retail industry should be taking in the lead-up to the Asian Economic Community (AEC) in 2015. They are concerned the government has not amended outdated laws or, more importantly perhaps, introduced new legislation designed to smooth the transition to the AEC. The TRA has asked the government to establish a one-stop service centre to help in the facilitation of business registration as well as being able to offer advice and help for local retailers to expand into the AEC region.

Another issue for the TRA involves Thailand’s relatively high rate of tax on imported luxury items vis-à-vis neighbours such as Malaysia. While Thailand imposes rates between 30 and 40 percent on luxury imported goods, Malaysia has set a rate of just five per cent. Part of the reason for the low Malaysian rate is to prepare for the AEC and the TRA clearly thinks the Thai government needs to start considering similar policy adjustments.