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Phuket Business: The not-so-hidden cost of inflation

Legacy Phuket Gazette

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Phuket Business: The not-so-hidden cost of inflation | The Thaiger

PHUKET: If you are an expatriate living in Thailand or considering relocating here, high inflation might be a distant memory from as far back as the late 1970s. However, Thailand has much higher rates of inflation than is seen in most developed countries, and you will need to consider that when you invest and prepare a budget for your Thai living expenses.

When I moved to Phuket in 2008 I did not expect to see such extreme rising prices. In 2008 I could find fresh coconuts at Tesco Lotus for 5 baht, now in 2013, 15 to 20 baht is the lowest I can find. While Phuket can still be less expensive than the US or Europe, prices continue to increase here at a rapid rate.

Understanding Thailand’s rate of inflation

The Ministry of Commerce, which calculates Thailand’s inflation rate, found that from 2000 until 2012, the annual rate has averaged 2.66%. However, during that period, inflation in the Kingdom has ranged from an all time high of 9.2% for the month of July 2008, to a record low of -4.4% in July 2009. Those all time highs and lows corresponded with political disturbances within Thailand as well as the impact of the global financial crisis on the country’s economy.

Back in December, inflation in Thailand also hit a 13-month high of 3.63%, in part due to minimum wage hikes along with the implementation of a diesel-tax subsidy to boost consumption after the 2011 floods hit the economy.

The diesel subsidy has since been extended until the end of January, plus there was another round of minimum wage increases at the start of the year. Moreover, such subsidies and wage hikes can vary from province to province – meaning accompanied price hikes leading to inflation would vary around the country.

Be aware of double standards

To further complicate matters for expatriates, Thailand is really two countries, one that is “first world” or well developed (areas like Bangkok, Phuket and Chiang Mai frequented by tourists where the local middle class is concentrated), and one that is much less developed.

The cost of maintaining a middle or upper class lifestyle in “first world” Thailand is not only rising because of large numbers of expatriates and retirees moving to the country, it’s also rising as more and more Thais join the ranks of the middle and upper classes as the economy grows.

That means expats living in Thailand who expect a high standard of living may have to contend with a rising cost of living that is much higher than the official inflation rates.

Finally, large numbers of tourists tend to visit Thailand at certain times of the year – usually after the rainy season ends in late November with their numbers peaking around the holidays and remaining high into the early months of the new year, before the weather gets too hot or wet again.

This annual high season brings about its own inflation as “foreigner” prices for accommodation, food, entertainment or transportation, in major tourism destinations such as Phuket, can rise significantly before falling back down when the high season ends.

Investment strategies for inflation

Given the above inflationary environment, many expatriates living in Thailand may find themselves in a situation where their living expenses are rising at a much higher rate than their net worth or cost of living adjustments to their pensions. Fortunately, there are investment strategies that can help your net worth keep pace with inflation.

For starters – and over the long term – investing in equities will usually be a better strategy for keeping pace with inflation than investing in fixed income investments or certificates of deposit in your home country. Moreover, large cap stocks with global operations that give them exposure to much higher growth rates in emerging markets could help your portfolio’s long-term returns.

Finally, Exchange Traded Funds (ETFs) not only offer investors a good way to invest directly in faster growing emerging markets, they usually come with much lower fees than mutual funds or the offshore investment products that are often marketed to expatriates.

After all, given how high Thailand’s average rate of inflation has been over the past decade, you will want to seek out investments with the lowest possible commissions and annual expenses to help ensure that their returns will keep pace with the rising cost of living in the country. In my opinion Thailand has the world’s best coconuts. Enjoy them while here but expect to pay more in the next few years due to inflation.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand.

He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com.

— Don Freeman

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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.

Keep in contact with The Thaiger by following our Facebook page.

Never miss out on future posts by following The Thaiger.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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Turbulence ahead for Thailand’s aviation industry | VIDEO | The Thaiger

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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