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Finance: Exchange rate rigmarole

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PHUKET: An issue most Phuket expats deal with in one form or another is exposure to some risk of fluctuations in currency exchange rates. Many earn money outside of the country and then need to convert that to baht for spending purposes.

Offshore oil workers are a good example of this, and how best to deal with this situation can only ever be determined after the fact. That said, the best way to approach most things is to reduce the risk as much as possible.

During the past decade, the Thai baht has behaved exactly as one would have expected: unpredictable and volatile. This makes planning much more important than for example, a US expat living in Canada, where the rate doesn’t move enough to seriously alter your standard of living or totally trash your budget.

The great news for most expats in Phuket is that it is still relatively cheap to live here when compared with the places most of us have come from.

Unfortunately, many retirees have moved here to stretch their smaller retirement pots, so every time the baht advances, they feel the pain.

Having a fixed income from another country leaves expats and retirees fairly helpless in terms of having tools to deal with the risk. It is not practical for most retirees to use derivatives on exchange rates to hedge their future pension payments.

The fact that there are cheaper alternatives in the world means that going home isn’t always the only ‘Plan B’ if the baht strengthens to levels that, when combined with local inflation, makes it too expensive to stay here. Northeast Thailand is still cheap, and if living near the ocean is important, the Philippines still has some rock-bottom-priced areas.

However, those earning enough to not worry about those sorts of issues, the question becomes how much cash to keep in which currencies? The ideal mix is to balance the risk of the baht strengthening and the cost of living increasing, against the risk that the baht weakens and costs money upon repatriating the money when leaving the country.

Obviously, long-term plans make an enormous difference in the way any particular person should approach handling this risk.

If an expat intends to stay in Thailand permanently, a good way to balance out the risk is a pure 50:50 hedge. It might seem to make sense to bring the whole pot of funds into the country if the expat intends to retire here, but remember that if the baht tanks, then local inflation would eat away purchasing power.

The cost of living in Thailand over the long run in baht terms would increase if the currency collapsed, so keeping half of total amount of funds available abroad would help maintain purchasing power in that event.

If an expat intends to stay here only temporarily, it is best to bring in only enough funds to cover living expenses for six months to a year at any one time.

If the expat is not sure where in the world he or she will end up, keeping their funds spread across the major currencies makes sense, but if they know that they will return home sooner or later, they should keep the bulk of their savings in their home currency – unless that currency is unstable.

For people earning baht and saving, and intending to repatriate these funds at some point, the timing of when to do it becomes a little more tricky and in the end luck will play a big role.

Transferring savings out once every six months will give some sort of an averaging effect and minimize luck somewhat, but not entirely.

David Mayes MBA resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached by e-mail at david.m@faramond.com or by calling 085-335-8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

— David Mayes

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Governments & old media versus social media – who will win? | VIDEO

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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