The fast-approaching Christmas and New Year celebrations are supposed to ignite a sense of joy among the public, but such enthusiasm has long been curbed by the pandemic crisis that has sunk economies and hopes around the globe.
With a feeling of unease in the air in Thailand, the government has been attempting to soothe the public through several financial assistance measures, with the co-payment scheme taking the spotlight.
The goal of this measure is to increase sales through small merchants and reduce the cost of living. However, the extent of its effectiveness remains uncertain as swelling household debt and a streak of income losses overshadow hints of optimism.
SUBSIDY DETAILS
Endorsed by the cabinet in September, the co-payment scheme allows 10 million registered people to shop for food, drinks and commodities at small shops, with the government subsidising 50% of the payment, up to 150 baht per day and no more than 3,000 baht from October to December.
The government will cover spending of up to 30 billion baht, with another 30 billion coming from the 10 million registrants.
The objective is to stimulate consumer spending in the final quarter after sentiment was gutted by the pandemic crisis.
Funding for the co-payment scheme comes from the 400-billion-baht budget designated for economic and social rehabilitation in the 1-trillion-baht emergency loan decree.
Eligible registrants are Thais aged 18 and older, and online registration started Oct 16.
Once registered, participants have to identify themselves via the Pao Tang app, while registered shops must install the Tung Ngern app to receive the scheme's privileges.
The scheme's conditions stipulate spending by registrants must be completed within 14 days from the first day of registration.
The co-payment scheme runs from Oct 23 to Dec 31.
Despite being met initially with a lukewarm response, the scheme's popularity started to yield results later on and a second round of registration for another 2.3 million people reached full capacity on the morning of Nov 11.
As the policy continues to gain momentum with the public, the government approved a second phase of the scheme on Dec 2.
The second-phase scheme aims to register an additional 5 million people, with subsidies raised from 3,000 to 3,500 baht per person.
The 10 million people who are part of phase one are eligible for an additional 500 baht.
Implementation of the second-phase scheme is scheduled for January to March 2021, with the rights of those already registered extended to March.
CASHLESS INITIATIVE
The co-payment scheme promotes the government's goal of a cashless society through apps, even though the use of digital money has progressed slowly in recent years, said Pornchai Triraveja, policy adviser at the Fiscal Policy Office (FPO).
Digital monetary transactions jumped by 47% year-on-year in August, an auspicious sign for e-payment services as retail merchants and even street vendors are not hesitant to let customers pay for goods digitally, even if they cost only 10 baht.
A smartphone displays the Pao Tang app. (Photo by Apichit Jinakul)
E-payment transactions in August tallied more than 1.18 billion, with average daily transactions of 39 million, according to Bank of Thailand data.
That amount was a significant leap from 803 million transactions in August 2019, with average daily transactions of 26 million.
The national e-payment initiative, a collaboration between the Finance Ministry, Bank of Thailand, Thai Bankers' Association and other related agencies, has been in operation since 2015, said Mr Pornchai.
This collaboration is the starting point for building up important financial infrastructure in Thailand such as PromptPay, the national e-payment and money transfer system, an e-tax system, and payment of welfare benefits electronically, he said.
Despite receiving criticism regarding the inconvenience of the registration process and using installed apps, government stimulus measures embedded with an e-payment system facilitate the notion of learning by doing, said Mr Pornchai.
Despite initial concerns, registrants and small merchants realised after a week of use processing transactions on the Pao Tang and Tung Ngern apps is simple, done by scanning a QR code, he said.
"The government supports the full use of e-payment, laying the foundation for Thailand to become a cashless society and transform into a digital economy, along with developing e-government services," said Mr Pornchai.
"The co-payment scheme can increase sales for retail merchants and reduce the cost of living for people, while injecting capital into the economic system."
Accumulative spending for the co-payment scheme was logged at 31.5 billion baht as of Nov 29, with 16 billion attributed to government subsidies and the rest spent by registrants, according to the FPO.
Registrants that have exercised their rights total 9.51 million, and 980,274 people have used up their 3,000-baht quota.
Regarding allegations that low-income citizens who do not own smartphones cannot access the government's financial assistance schemes, Mr Pornchai said there are a number of state programmes designed to help affected citizens in different segments of society.
For example, the 500 baht disbursed between April and June for 14 million state welfare cardholders was designed for low-income earners, he said.
But Mr Pornchai conceded other government initiatives, such as the tax rebate scheme for shopping for goods and services, is designed for taxpayers with sufficient purchasing power.
MUTED EFFECT
The co-payment scheme is expected to help support retail sales in the final quarter to a certain degree, with total retail sales projected to contract by 7.2% year-on-year, up from a 8.9% contraction previously projected, said Kasikorn Research Center (K-Research).
But such support depends on several variables such as the quantity of retail merchants registered for the programme, the cash disbursement ratio and operating hours, said the think tank.
The Finance Ministry is planning the second phase of the co-payment scheme to stimulate spending after the New Year.
Based on a K-Research survey conducted on Sept 11 and 18, 64% of respondents suggested they would spend the 3,000-baht subsidy, while 36% did not plan to spend the full subsidised amount.
Most of the products purchased are personal items for daily use, along with food and beverages.
Taking the spending pattern of the two surveyed groups into account, 56% of respondents said they would spend close to the value of their normal spending habits, while 44% indicated they planned to spend more thanks to the government subsidy.
This means the effect of these stimulus measures could be muted because household purchasing power has weakened based on higher unemployment and income losses, said KKP Research, a research unit under Kiatnakin Phatra Financial Group.
The ratio of household debt-to-GDP in the second quarter ballooned to 84%, an 18-year high, representing a value of 13.6 trillion baht, according to central bank data.
The ratio increased from 13.5 trillion baht or 80% of GDP registered in the first quarter.
Around 11.4 million households are at risk of falling into poverty from the economic crisis caused by the pandemic, with the unemployment rate rising to 1.9% in the third quarter, according to the National Economic and Social Development Council.
KKP Research estimates capital circulating in the economic system stimulated by the three measures, namely the co-payment scheme, the tax rebate scheme and state welfare card benefits, is 107 billion baht, lower than the 200 billion estimated by the FPO.
In terms of GDP contribution, these three measures are forecast to shore up Thailand's GDP by 0.17%, lower than the FPO's estimate at 0.54%, according to KKP Research.
Some 30% or around 10.9 million of Thailand's workforce can be categorised as unemployed, underemployed or temporarily suspended from work as of June, said the think tank.
Although the ratio reduced to 22% in August, the figure remains at a high threshold, indicating the fragile condition of the domestic labour market and income losses in accordance with reduced working hours, said KKP Research.
If the economic downturn is prolonged, business operators may opt to reduce working hours instead of laying off staff to sustain their operations.
Eventually, these businesses could shutter their operations given the protracted economic slump, said the think tank.
"It is difficult to stimulate consumer purchasing power with such uncertainty regarding employment conditions and income for both entrepreneurs and employees," said KKP Research.
STARTING POINT
Piyachart Ratanaprasartporn, chief executive of 2C2P Thailand Co, a digital payment gateway provider, said the government's co-payment scheme is a boon for cashless payment in Thailand because it familiarises people with e-payment via QR code.
With the scheme, local small and medium-sized enterprises (SMEs) are getting used to e-payment and users are keen to subscribe to gain benefits, said Mr Piyachart.
"In 2021, we will see more smartphones that can serve as point-of-sale devices, which makes it inexpensive and convenient for merchants to accept cashless payment from customers," he said.
2C2P serves as one of the five payment service providers (PSP) under the government's "We Travel Together" tourism campaign.
Qwik, a peer-to-peer payment platform developed by 2C2P, gives merchants options to send links to their customers for QR code payment, said Mr Piyachart.
"We expect to see cashless payment gain momentum in Thailand in 2021," he said.
Former finance minister and Kla political party leader Korn Chatikavanij, responding to the co-payment scheme on his Facebook page, agrees the programme allows 12 million users and 600,000 merchants to become familiar with cashless payment.
What the government gains is data, he said.
In the future, if the government allows merchants to present their products directly to customers through this database, with delivery provided by Thailand Post, this might be "a starting point for the Thai e-commerce platform we have been waiting for," said Mr Korn.
A new Thai platform would ensure data on the behaviour of Thai customers would not flow into foreigners' hands, he said.
Voralak Tulaphorn, chief marketing officer of The Mall Group, said the co-payment policy and tax rebate scheme for shopping are better stimulus packages than any launched by the government the past few years.
The periods of the campaigns are long enough for retailers and consumers to prepare to exercise their rights, she said.
"The new economic stimulus packages have benefited most groups of consumers," Mrs Voralak said.
However, spending by local shoppers has not been able to revive the retail market because their outlay per bill is relatively lower than that of foreign shoppers, she said.
"We want to see fresh and healthier measures to attract foreign shoppers to Thailand," said Mrs Voralak.
"We believe whenever the country reopens to tourists, the retail market, which contributes a healthy portion of the country's GDP, will recover accordingly."
Additional reporting by Pitsinee Jitpleecheep