In debt Print E-mail

 

Earlier this year a financial adviser was appointed to help the government with more than 173 billion baht of teacher debt. In a recent Bangkok Post article, it was reported that more than 1 million teachers are in debt.

 

 

This debt is not just to formal institutions, but also to money lenders. How can this situation continue to exist?As more than half of the teachers’ debt is held in some kind of informal debt, the government believes that the way to solve the problem is to convert the informal debt into formal loans. Unfortunately, I believe that this will help no-one except the new agencies managing the debt and the money lenders who will get paid off.

 

Another government solution is to extend the loan repayment period, thus reliving some of the burden every month. In my opinion, this is just another excuse to prolong the agony. It may help in the short term; however, the debt still has to be repaid.

 

The government also believes that the key to solving the debt problem is to enforce financial discipline and foster changes in spending patterns. Easy to say from the back seat of your Mercedes Benz, however, not so easy to stomach when you are waiting for a bus.

 

In my opinion, the reason why so many teachers are in debt is because their salaries are so low and when they asked the government for cheap loans, they were made easily available. The loans were used to start up second businesses, which then failed and teachers borrowed more money to try to keep the businesses alive.

 

The only people who would lend money to a dying business would be an illegal moneylender who charges an extortionate amount of interest and will disfigure you when you default on payments. And so the story continues.

 

I am not making it up. All you have to do is listen to what teachers say. Of course, they are not going to shout this information from the roof-tops as it is quite embarrassing; however, over the years I have listened to many stories and the same pattern emerges.

 

To face up to the truth, there will not be any huge payday for teachers and the debts they have incurred will not go away. Under a new management system the debt may be transferred somewhere else and the outstanding funds owed to someone else. They won’t just disappear without trace.

 

Last year, a year before their election, India announced that the government had decided to cancel farmers’ debts to act as a stimulus to the economy. Of course, the vast numbers of farmers did not forget what happened at election time, so it was no surprise that the present Indian government appears to be in a position to continue.

 

At the same time, the government announced that they were to increase education spending by 20% and healthcare by 15%. Populist measures by anyone’s standards; however, it does have the effect of stimulating the economy, especially at this time of crisis, whilst relieving the debts of their farmers.

 

What is the chance of something like this happening in Thailand? If not the farmers, what about the teachers? It might be possible to kill two birds with one stone, by relieving teachers of some of their debt and giving a sitting government in Thailand time to effect change by having a second term in office. What are our chances?

debt
 

 

There are so many ways to borrow money that banks are lining up next door to each other.
(Unedited article published in the Bangkok Post 30th June 2009)

 
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