Thailand: ATMS and price discrimination

Like Bali, Thailand’s economy is often associated with tourism. In actual fact, the sector makes up about 9.3% of Thailand’s GDP, with manufacturing eclipsing it by quite a bit, along with the financial services industry (Thailand is a stable Southeast Asian economy whose currency, and probably their banking system, is well-regarded regionally, possibly explaining why that sector is doing well). Still, Thailand knows that the travellers from Britain, Australia, Singapore, the US, and other East Asian countries are an important resource, and it’s developed a very decent infrastructure to welcome them. Getting around can either be very easy (for a price) or moderately easy (for very cheap).

One thing that does not come cheap, however, is money. I don’t mean in the traditional economic sense of opportunity cost (you have to give up time to get money), but in the literal sense, that if you want to get money from your bank or credit card, you will have to pay for the privilege. As of October 2017 the exchange rate is roughly 30 baht to the dollar. An ATM withdrawal at any ATM in Thailand, regardless of bank, will run you 220 baht, or about seven U.S dollars.

How do the Thais afford these ATM fees? 220 baht is the cost of four or five meals, seven rides in a songthaew (bus-taxi pickup truck that is actually a great idea), a motorbike rental for a day–it’s a fair bit, especially if you’re earning a median Thai income, which is about 237 USD, or about 8000 baht per month. Two withdrawals would be about 5.5% of your income.

The answer is simply that the Thais do not pay these ATM fees–extra fees are charged only for foreign cards–any nationality. My American and Korean cards were both met with the same charge, and the ATM openly tells you that the fee is for foreign cards. This is a perfect example of…

 

Price discrimination!

An economic phenomena where businesses charge customers different prices for the same good, dependent on their willingness to pay. Usually it’s hard to pull off, because supermarkets can’t ask for your tax return every time you enter the store and change all the price labels to the maximum they think someone of your income group would be willing to pay.

It’s getting easier of course–online retailers can profile you based on past purchases and other collected data, get an idea of what you’re willing to pay, and change the price on that copy of Capital in the Twenty-First Century all with an algorithm if they want to, and once we all get contact lenses with HUD screens projected in front of us that let us shop in augmented reality, supermarkets could do the same thing.

That’s all in the future though–for now, we’re stuck with price discrimination based on simpler types of profiling, which is where Thailand’s ATMs come in. Charging 7 USD for an ATM withdrawal from foreign accounts is a nearly foolproof means of price discrimination in the country. Here are a few reasons Thailand can pull it off.

First, barely anywhere in Thailand accepts credit cards, especially not at normal levels of buying things. 7-eleven stores have a minimum, I believe, of around 3-500 baht, or at least nine dollars. That sounds easy to meet, but in Thailand that’s four bags of chips, three beers, a coffee, and two or three candy bars–and that’s all for my lowball estimate of 300 baht. That’s not a normal amount to purchase at 7-eleven most of the time.

So because everything from street food to the post office is cash-only, you need it–and as a traveller, you typically run out faster than you think you will due to unexpected expenses or just saying “lets do this cool thing” one too many times. And the only way to get cash is ATMs.

Second, there is absolutely no competition–I’m not sure exactly why all the banks charge the same rate, but the two main possibilities are government regulation (basically a tourist tax) or price-fixing/collusion by cartelized banks. In any case, if you need cash, you’ve got a few banks to choose from and they’re all the same price. I always liked Siam Commerce Bank because it’s got a slick color scheme.

Third, tourists aren’t going to organize and get anything done about this–they’re here for a few weeks, and they want to see some cool temples. They’ll bite the bullet and pay, then forget it until the next time. Elasticity of demand for money among tourists in Thailand is pretty low.

Fourth, Thailand doesn’t need to see tax returns to know what price to charge you–if you come to Thailand, you’re already paying a significant amount for travel, signaling that you’re in a disposable income bracket that will absorb higher prices without a lot of hesitation. Thailand’s tourism sector has a less reputable part that basically makes their entire living off this assumption, and even the more reputable parts hike the official prices (for national parks, temples, museums, etc) way up for foreigners. And of course it’s true–even with the price hikes it’s very affordable for someone like me and my U.S dollars.

 

Thailand: Guessing why there are so many pickup trucks here

(Correction: written while in Thailand, published significantly after writing :D)

I’ve been in Thailand a few days now, mostly in one southern region called Krabi Province. Yes, we felt crabby, no we didn’t eat crabs. It’s a bit south of Phuket, and while it has a fair bit to offer and caters extensively to tourists, the town is much quieter than its more famous neighbor and has a much slower pace. Staying there during rainy season meant that the town was even more peaceful than usual. It also gave me a chance to see a little more what the pace of life is like without the tourist industry in full swing.

I have plenty of things to say about Thailand already, but a few in particular stood out to me.

 

Pickup Trucks

This is my first mainland Southeast Asian country, so I’m not sure what the situation is elsewhere, but Thailand has a lot of pickup trucks. Sure, all Asian countries have pickup trucks–they’re very useful. But most that I’ve seen are different. In Asia, pickups to be smaller, less rugged, and much more street-ready than mud-ready. In Korea especially the most popular brand looks more like an oversized vehicle driven by a golf-course maintenance team than it does a typical American pickup.

But in Thailand, at least the south, it’s impossible to watch the street for more than a few minutes without sighting one or five real, 4-wheel-drive, mud-spattered, pickups. Some of them are clearly work vehicles, some of them are taxis–for real, some songthaews (taxi-like vehicles that get you where you need to go on the cheap) are actually modified pickup trucks with a shelter slapped on.

So what’s up? Frankly, I don’t know, because I didn’t take a poll. I have my suspicions though, and they start with infrastructure. Thailand is a wonderful places with plenty of roads–but a fair number of those roads happen to be dirt, and I’d bet that the ones I saw were the good dirt roads. It’s still very much a developing country, and nature is large and in charge. The Thais don’t have the luxury of cute little pickup trucks to the same extent that countries with a bit more asphalt do–they have to go onto some pretty rough roads every day, and if your business involves hauling things around–including people–you need to be pretty sure you can get where you’re going. Thai pickups are probably, in one sense, a symptom of an incomplete road system and a climate that can get very soggy.

Adding on to that, a lot of Thais are still employed in the agricultural sector, and manual labor is still more widespread than service jobs, trades, and professional occupations. Where do you find the pickup trucks? The farms and the worksites. Add to this that road conditions are likely to be a lot worse out in rural and developing areas and you’ve got a need for more muscle than you can get with what I’ve, perhaps unfairly, come to call the Asian pickup truck.

Are road conditions and economic sectors the reason for rate of big pickup ownership in Thailand? That’s a question for a masters’ thesis, but at a minimum, I can guarantee that pickups are common, roads can get rough; and the average employment of the Thai worker tends towards the manual.

Coming up: Thai music is mostly now acoustic covers of western top 40 hits (why?); ATM fees are price discriminating wonderfully; a coffee and a meal here are almost the same price (very cheap); and more!

Southeast Asia: My effort at scraping some social science out of a backpacking trip [SE Asia 1]

Introduction

I just recently wrapped up a multi-year stint teaching EFL in South Korea–an up and down experience I honestly wouldn’t trade for anything smoother. My time abroad has already been an exercise in mind-expansion, and that will hopefully continue as I visit (roughly in this order): Indonesia, Singapore, Thailand, Laos, Cambodia, and Vietnam.

This is a famous backpacker area of course, and there’s no shortage of blogs on the region from that perspective. Rather than narrative travel or “tips,” I will focus on digging a little beyond the vacation lens and provide some insight into economic, social, and political realities as they seem to play out on the ground. Where possible, I will pursue conversations and experiences that give me a personal sense of some aspect of life in these countries, which I will then augment with data (not the plural of anecdote, but a very helpful companion).

In reality what will probably happen is: I see something that provokes a question, I research it, and a few paragraphs result. For instance, I have a particular fascination with what Tyler Cowen calls “GDP tourism.” Directly encountering the fuel that drives the country forward is an exhilarating experience. One question I ask when I’m in a new place is generally “Where is the money made here, and what does that look like?”

 

GDP tourism: South Korea

In the city of Ulsan, where I lived in Korea, the GDP was more obvious than most; you can ride your bike right past the biggest car plant in the world (Hyundai), or take a peek at the world’s biggest shipyard (also Hyundai, I believe). You could go and see the fields upon fields of cars being driven one by one onto massive ships, ready to be shipped along the veins of worldwide trade until they reach their ultimate owner, in some small town you’ve never heard of but where someone produces enough value that they can, through a spiderweb of transactions and networks, trade their skills as a plumber to Hyundai for a car that came from a country they had never been to, yet which built and shipped a car halfway around the world in the anticipation that someone like that plumber would choose to buy a Hyundai.

 

Grocery store tourism: South Korea

I also have a hobby of checking out grocery stores wherever I go. Preferably a supermarket chain, multinational or no, but traditional markets, convenience stores, or local marts are also objects of interest. You can learn a lot about a culture by looking at what the supermarket carries, and how much it costs. Korea, for example, has a love affair with Spam dating back to the Korean War. Today, if you walk through a typical store you’ll find more varieties of the canned meat than you ever wanted, and around the holidays you shouldn’t be surprised if you receive a few cans of delightful mystery meat and some cooking oil wrapped up in an attractive gift box which, in America, might contain some sort of holiday sweets.

In Korea, brand-name Spam is “fancy” because in the aftermath of the Korean War, when it was the poorest country on Earth, American soldiers had it in their rations, and due to its portability and preservation, it was easily used as a trading good and included in aid packages. Korea’s current love affair with meat (it’s in everything) comes from this period where meat was an occasional luxury, which usually arrived in the form of Spam.

You can also ponder the mysteries of why watermelons cost $20.00 USD, while bananas barely register on your receipt at $0.15-$0.25 USD per banana.

Given that I am spending 1-2 weeks in most of these countries, I will develop at best a tenuous grasp on the realities that shape them–but it should always be interesting, and hopefully factual!