Thailand Economy News

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Bank of Thailand liberalisation plan 
Bangkok Post: 5 Nov 2009
www.bangkokpost.com/business/economics/26870/bot-pushes-liberalisation-under-new-plan

BoT pushes liberalisation under new plan

Writer: Wichit Chantanusornsiri

Thailand's new financial master plan will offer greater opportunities for foreign banks, says Bank of Thailand governor Tarisa Watanagase.

New specialised financial institution categories will be set up and commercial banks will be given more flexibility in their business operations, she added.

The central bank's second financial-sector master plan would gradually liberalise the sector from 2010-14.

The first master plan, from 2004-08, aimed to improve the efficiency of, and public access to, financial services. The second will focus on reducing funding costs to support growth while increasing flexibility to cope with market volatility.

Liberalisation will be split into three stages. Phase one, from 2010-11, will focus on increasing the competitiveness of Thai commercial banks. Local banks will be encouraged to merge, while bank regulations will be revised to allow for an orderly exit in case of crisis.

Banks will also have free rein to open branches, providing they comply with ratings criteria and demonstrate risk management and internal controls.

Commercial banks will also have flexibility to expand to other financial services, such as asset management.

From 2012-13, the central bank will allow greater competition within the sector, starting by allowing foreign banks to open up to two branches in addition to their head offices.

Retail commercial banks - a category that covers institutions such as Land and Houses Retail Bank - will be allowed to upgrade to full bank licences if their tier-one capital exceeds 10 billion baht.

The second phase will bring licences for services such as microfinance, trusts, Islamic finance and investment banking.

Foreign banks operating in Thailand may also apply to change their legal status to bank subsidiaries with the capacity to open up to 20 branches and 20 ATMs. Foreign bank subsidiaries must maintain minimum tier-one capital of 10 billion baht and pass criteria on ratings and risk-management practices.

In the third phase from 2014, regulators plan to focus on Thailand's regional presence and Asean economic integration.

The central bank has no plans to offer new universal banking licences, seeing the current 15 banks as enough for the country's needs.

Regulators said the new plan maintained broader goals of improving small business and public access to financial services and expanding asset types permitted for use as collateral. About 10% of the population is estimated to lack access to mainstream financial services.

Finance Minister Korn Chatikavanij said interest margins would be one measure the public could use to judge the plan's success. Bangkok Bank, the country's largest bank, currently offers savings deposit rates of just 0.5% against prime lending rates of 5.875%.

Despite flat loan growth in the first half of the year, Thai banks generally continued to post strong profits in terms of both interest and fee-based income.

Mr Korn said the capital market would also be liberalised, with new securities licences offered to increase competition.

Regulators hope the eight-step development plan for the capital market will help expand its size to 130% of GDP by 2013 from 86% in 2008, while increasing the investor base and facilitating the use of equities and bond markets as funding sources for local companies.

Currently, just 2.4% of the population invests in mutual funds. This is projected to double to 5% by 2014 under the plan.

[dave the dude]

Sounds promising and positive but as T.I.T., I won't hold my breath.

Dave

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Bank of Thailand: Tough year ahead 
Bangkok Post: 11 Dec 2009
BoT: Tough year ahead
Political risk remains biggest economic drag

While the Thai economy has shown clear improvement over the past several months, 2010 will be a challenging year due to continued global economic uncertainty, says central bank governor Tarisa Watanagase.

"There is a clear consensus that the Thai economy has been improving since the second quarter," she told the Bangkok Post.

"But concerns remain about the US and European economies."

US financial institutions still bear deep scars on their balance sheets, impairing their ability to lend and support a sustained recovery in the world's largest economy.

The region's policymakers are nervously watching whether US consumers will resume buying electronic goods, clothes and shoes manufactured across Asia for export to the West.

"There are two schools of thought. One is that US consumers will resume spending once unemployment is contained," Dr Tarisa said. "The other is that, with this current crisis, US households will begin reducing debt levels."

For Thailand and the rest of the region, frugal US consumers bode ill for the immediate term, as Asian economies have for decades depended on exports as their primary engine of growth.

While China - which is by some calculations now the world's second-largest economy - is on track to post growth of more than 8.5% this year thanks to hefty fiscal stimulus measures, the country on its own cannot support the entire region.

"The US, the Eurozone and Japan account for a third of Thai exports, while exports to China are just 9%. China's economic growth will help, but cannot replace demand from the G3," she said. "And while intra-regional trade now accounts for 50% to 60% of exports, final demand is still driven by the G3 economies."

Thai policymakers and economists have discussed for years the need to bolster domestic investment and consumption to reduce the economy's dependence on exports to little effect.

The uptick in economic activity over the second and third quarters was driven largely by a recovery in export demand, as domestic investment and consumption remained weak.

"There is no real choice in the short run. The Thai economy will continue to rely on exports," she said. "But looking to the future, the question is not about recovery, but rather how we will adjust to the new global environment."

Calls to follow Vietnam's recent currency devaluation by weakening the baht are misplaced, Dr Tarisa said.

"For exporters ... a weaker baht is better than a stronger one. But the reality is that we do not control the exchange rate. And even if we did, [weakening the baht] would have negative effects as well, such as higher oil costs," she said.

Exchange rates actually play a relatively small role in terms of overall business costs, and cannot be viewed in isolation from inflation and other factors in the business environment.

"What is the impact from the dong devaluation [on Vietnam's economy]? Yes, it may gain competitiveness in sales of low-grade rice, or in labour-intensive industries such as textiles and shoes," Dr Tarisa said.

"But the reality is that Thailand needs to continue to move up the value chain, raise crop yields and improve product quality. Focusing on exchange rates is the wrong area to focus on."

Progress in other areas, such as improving productivity and competitiveness, raising research and development spending, increasing energy efficiency and strengthening the education system, are more critical factors affecting Thailand's long-term growth.

Accomplishing these goals would enable the country to better compete both globally and in Asean, a market that will only become more integrated in the years ahead.

A third challenge will be in managing Thailand's rising public debt, now at 40% of gross domestic product and expected to rise to nearly 60% by 2012.

"Fiscal stimulus spending has certainly been necessary over the course of the crisis, but ultimately, an exit strategy is needed," Dr Tarisa said.

More needed to be done to expand the tax base and ensure that public spending was optimised for maximum economic benefit, she said.


But the biggest drag on growth evades the central bank's analysis, she said.

"One has to consider why the Thai economy has been slower to recover than others [in the region]. And the answer is the domestic environment and political risk," Dr Tarisa said.

www.bangkokpost.com/business/economics/29047/bot-tough-year-ahead

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Thai banks prepare for holiday rush 
The Nation: 23 Dec 2009
Banks prepared for New Year cash withdrawals

Banks are stocking up extra cash for the New Year holiday period when millions of revellers are in need of cash during Dec 31 to Jan 3.

Bangkok Bank are reserving over Bt40 billion for its 6,000 ATMs nationwide. All 200 micro branches at department stores will open as usual during the New Year holiday period. It would also frequently fill up ATMs at major tourist destinations.

Kasikornbank is stocking up to Bt18 billion, which could be withdrawn at 6,902 ATMs nationwide. The amount is 2 per cent higher than Bt17.68 billion reserved during last year's season.

Siam City Bank, with 1,700 ATMs, will reserve Bt3 billion, slightly above last year's level.

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Inflation in Thailand expected to rise  
Bangkok Post: 5 Jan 2010
December inflation rises to 3.5%


Thailand's full-year inflation contracted by 0.9% in 2009, with the rate expected to climb to 3% to 3.5% this year, according to the Commerce Ministry.

The country's consumer price index, which tracks 417 products and services, rose in December for the third month running, signalling the country's return to "normal growth" in inflation, said commerce permanent secretary Yanyong Phuangrach.

Consumer prices rose by 3.5% year-on-year in December driven by food and beverages, health-care services, transport, and utilities, after a 1.9% increase in November and a 0.4% gain in October.

"The rise in inflation from October to December showed that fourth-quarter data will return to normal growth," he said, attributing the rise partly to a hike in oil prices in the second half of 2009. It also reassures manufacturers, leading to lower unemployment, he said.

The inflation projection is based on oil prices staying between US$70 and $80 per barrel, foreign exchange ranging between 31 and 33 baht per dollar, and continued subsidies for electricity, water, cooking oil, transport, and education for low-income earners.

The core consumer price index, which excludes volatile energy and food costs, rose by 0.2% in December from a year earlier. Core inflation rose by 0.3% in 2009 over a year earlier.

The Bank of Thailand estimates that the country's inflation rate could pick up in the first six months of the year due largely to the state subsidy plans and rising oil prices.

"Last year's inflation was within the Monetary Policy Committee's projection even though it was above target at some points due to government measures to ease people's spending," said central bank deputy governor Atchana Waiquamdee.

The central bank did not expect the government to extend its economic relief measures but their impact should only be short-term, she said.

The BoT said this year's headline inflation should increase by 3% to 5%.

Ms Atchana said inflationary pressure this year would depend on the domestic and global economic conditions together with spending and consumption figures.

Fuel demands would increase as the global economy continued to recover. The BoT expects the average oil price in Dubai will be $85 a barrel this year.

"Pump prices will certainly fluctuate this year ... However, inflation should stay within the target," she said.

www.bangkokpost.com/business/economics/30483/december-inflation-rises-to-3-5

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Optimism returning among Thai and global businesses 
The Nation: 6 Jan 2010
Optimism returns among Thai and global businesses for the year ahead


Optimism among local businesses for 2010 has swung back into positive territory.

Thai companies register as much as 12-per-cent optimism, from minus 64 per cent last year and minus 30 per cent in 2008.

That level is in line with the global survey by Grant Thornton's International Business Report (IBR).

In its 18th year and covering 7,400 businesses across 36 economies, the survey showed optimism among businesses around the world had bounced back. This has given Grant Thornton's global Optimism/Pessimism Index for 2010 a positive optimism balance of 24 per cent, against its lowest-ever score of minus 16 per cent at this time last year.

Thailand experienced a deep recession, but forecasts are for a strong recovery over the next few quarters. The IBR's survey results reflect that forecast, with optimism swinging from very negative last year to a slightly positive 12 per cent this year.

However, Thailand's business leaders are slightly more pessimistic than gross domestic product (GDP) forecasts suggest.

Ian Pascoe, managing partner of Grant Thornton in Thailand, said: "The question for Thailand is whether this renewed optimism can be turned into reality in the Kingdom's complex political environment. While Thailand's strengths include in-demand export products and services, the country also needs a confident domestic market and foreign direct investment, all of which can be negatively impacted by political instability."

Businesses in Chile, India, Australia, Vietnam and Brazil are the most optimistic in the world, all scoring more than 70 per cent. At the other end of the scale, many euro-zone countries remain pessimistic about the future. Italy, Denmark, Finland and France all scored 9 per cent or lower, with Greece (minus 23 per cent) and Ireland (minus 42 per cent) even more gloomy. At the bottom, Spain (minus 56 per cent) and Japan (minus 72 per cent) kept their places as the most pessimistic economies in the world, although even their figures were slightly up on last year.

Compared with GDP figures for last year from the International Monetary Fund (IMF), economies that avoided the worst impact of the recession, such as Australia, China, India and Vietnam, or suffered a relatively minor recession, such as Brazil, Hong Kong, Canada and New Zealand, all feature, not surprisingly, at the top of this year's optimism-league table.

Against the IMF's GDP forecasts for 2010, however, an interesting picture emerges, with businesses in places as geographically diverse as Australia, New Zealand, Canada, Malaysia and Germany recording disproportionately higher optimism than might be expected.

When respondents were asked to rank likely business trends in 2010, the survey found expectations of increased revenue this year came out highest (at 40 per cent), followed by the surprisingly positive view that investment in factories and machinery (31 per cent) and profitability (29 per cent) would both increase.

Thai business respondents are more positive than last year on all business trends, with 39-per-cent optimism for revenue increases and 30-per-cent optimism for net-profit increases. Although positive, Thai business leader's predictions on plant and machinery investment, at 17 per cent, lag behind regional and global averages.

"These survey results suggest that during the recession, businesses have become leaner and more cost-effective, which may enable them to lower prices while still securing increased revenue and, crucially, profits. As the global economy emerges from recession, we are likely to see many businesses reaping the rewards of recession-induced efficiencies to lead the way in the upturn," said Pascoe.

When asked about employment expectations this year, European businesses were far more pessimistic than their counterparts elsewhere in the world: a balance of minus 1 per cent in Europe, against positive balances of 33 per cent and 42 per cent in the Asia-Pacific and Latin America, respectively.

At 28 per cent, Thailand stands ahead of the world average (20 per cent) for employment expectations but somewhat behind the Asia-Pacific average of 33 per cent.

Pascoe concluded: "As the geographies covered in this survey contribute 81 per cent of global GDP, the global business community should be encouraged by the results of this survey.

"Many people blamed globalisation for the speed of the downturn, but we are now seeing that globalisation may also help the world accelerate out of recession. This survey suggests that businesses in the giant emerging markets of China, India and Brazil are confident that they can help to pull the rest of the world back into growth. Businesses in many other economies are equally optimistic that they have survived this recession and are well placed to help drive the upturn and see their business grow as a result. Governments will hope such optimism is well founded."