BIG problems require big ideas to fix them and, in Asia, few problems are bigger than the red-yellow divide that bedevils Thailand.
Now four years old and no closer to resolution, the discord has been a huge problem in Bangkok: six governments in four years, hundreds dead as the military turns on civilians, crippling transport blockades, tourism in turmoil, a self-inflicted recession and a bitter billionaire hurling bile from exile.
At the core of the red-yellow political division is deprived and cranky Thais who feel the country’s tigerish vault in recent decades to become one of Asia’s more successful economies may now be over. Manning the barricades of the Bangkok blockades earlier this year were the reds – they call themselves ”prai”, which is Thai for serf – disenfranchised rural poor reduced to cheap factory fodder for the wealthy Bangkok elite, the yellows.
So Thailand’s Finance Minister, Korn Chatikavanij, has come up with a very big idea, albeit a simple one – raise workers’ salaries. ”What’s the cost to the country to significantly increase this minimum wage?” he posits during our recent interview.
In Bangkok, this is a shocking notion. There’s a lot at stake, and not just for Thailand. A defining factor in Asia’s economic success so far has been a cheap and docile labour force. Thailand has emerged as south-east Asia’s Detroit, one of the world’s biggest car makers, with multibillion-dollar investment in plant from Ford, General Motors, Mazda, Toyota, Volvo and the Koreans. It is also a big furniture and textile producer and its food industry is one of Asia’s most advanced. Much of this would not be possible without cheap labour, usually one of the lowest considerations in a multinational’s budget.
Those people most likely to oppose Korn’s suggestion are his own supporters. Korn is a senior figure in Thailand’s oldest political party, the Democrats, whose heartland is Bangkok’s conservative business elite. Many of their number are rich and yellow-inclined, regarding their privilege as a birthright endorsed by the semi-divine monarchy.
They tend to do business with the foreign business community, another lobby that wouldn’t much like Korn’s idea. For years, as Thailand developed, the message from foreign business has been: keep wage costs low and we’ll continue to invest with you here, but never forget that China and Vietnam want our investment too, and they are cheaper.
Now, he says: ”Maybe we’ve been conned all this time here by employers as regards our minimum wage, which we all know to be low but have been told is necessary.”
Korn rejects a fashionable notion that Thailand is plagued by poverty and income disparity. ”There is poverty, yes, but over the past 25 years the statistics are clear. Then, 45 per cent of Thais were below the poverty line, now it’s 8 per cent, so absolute poverty has been improving. They have mobile phones, they have televisions, and have more than enough to eat. This is not the poorest country in Asia, and the living conditions are better than in other countries.”
The reds argue that’s easy for a multimillionaire, 40-something former investment banker (Mr Korn used to run JPMorgan in Bangkok) to say.
He adds: ”There is a problem [that] people have moved from farms to factories. The rural poor have become the urban poor and in my opinion being urban poor is much worse, the living conditions are worse and your relative wealth is worse, cost of living – exposed to the attractions of wealth, which is a psychological issue.”
Business likes cheap labour but it also abhors political turmoil. The irony of Thailand’s wave of protests is that the protest that caused the most economic damage – the 2008 transport blockade – was led by many in the current government, whose actions plunged Thailand into recession.
The most shocking of the protests, the recent Bangkok blockade that ended in the bloodiest political violence in decades, had limited economic impact. As Korn explains, the problem was confined to downtown Bangkok, where tourists couldn’t get to glitzy hotels and shopping malls. Outside this zone, Thailand’s economy proceeded apace, there were no strikes or man hours lost. Indeed, as the government stared down the reds’ violent uprising, Korn brought in a stunning 12 per cent expansion of the Thai economy in the first quarter – the fastest growth in 15 years. The second quarter will be affected by the so-called
two-month Battle of Bangkok but, kick-started by huge discounting, the tourism industry has quickly bounced back. Korn expects gross domestic product (GDP) growth of 6-7 per cent this year.
He has shown particular interest in the Foxconn crisis in southern China. Several workers at the Taiwanese-owned factory that produces for Apple, Hewlett-Packard and Microsoft committed suicide and the company is fending off claims of abusive work practices. Korn says he sees a lesson in the company’s reaction to the deaths.
”The most significant thing about the Foxconn matter was that overnight the owner was able to double salaries. That means he could afford to do it,” he says.
As for the cost to business of higher wages, Korn says: ”I would reduce their tax, that’s the quid pro quo, and then I pick it up through higher consumption. But I need to do more work on how this would impact on costs and competitiveness.”
Korn’s thinking betrays not just his own government’s immediate dilemma but a longer-term Asian leadership conundrum – how to confront unexpected political and economic challenges as working-class aspirations and education rise.
”I’m thinking, what’s the cost to the country to significantly increase this minimum wage, by order of the Ministry of Labour? If there’s a time to do it, it is now.”