JTBF Mission to Thailand 2009 (2/23-2/27)

Visit to Ministry of Finance and Bank of Thailand

reported by Hiroshi Motomura (Chief of Finance Committee, JTBF)

Visit to Ministry of Finance, Thailand

  On the way to Ministry of Finance, after a long time since the lat visit, we encountered a traffic jam, and also happened to encounter a group of petitioning farmers surrounding the Ministry building. The traffic jam was so heavy that we felt as if we returned back to past years before 1997, year of the previous economic crisis, and that, so far as traffic was concerned, there was nothing to imply serious economic crisis. Mr. Kitayama and myself, both in a business suit but older than before, became impatient as time elapses. Finally we got off the car and started to walk on a bumpy road toward Ministry of Finance, under highly humid weather of starting summer. When you are unlucky you continue to be unlucky ! On arriving at the front entrance gate, we found it closed and had to walk around to the opposite side. The building was surrounded by a group of petitioning farmers. All of them looked dull under the hot weather but kept sending glances of curiosity to us. We failed to arrive in time for the appointment.

  We enter the room of Deputy Prime Minister, feeling sorry for a delay, to find Dr. Pruektichai Damrongrat, Deputy Minister of Finance was absent. In stead, his brother Mr. Thanakarn and an executive officer of Fiscal Policy Office welcomed us. As we were embarrassed, Mr. Thanakarn, with friendly smiles and a calm tone, explained to us that Deputy Minister was summoned to the Diet urgently, and offered to us that, if we were willing, Dr. Pruektichai could share lunch with us somewhere near the Diet. We politely declined his offer and spent a time to exchange opinions with both of them. Even though we failed to meet Dr.Pruektichai, the executive officer of Fiscal Policy Office earnestly introduced following messages to us.

• Thailand image was damaged by the airport closure. Thailand must restore the image through hosting ASEAN summit as well as succeeding international conferences successfully.
• Thailand, as a whole country, must undertake economic-stimulus measures to overcome the never-experienced world recession.
• Thailand takes an initiative and promote development of GMS region. Especially, Thailand-Japan joint investments must be promoted in the textile and garment sectors.

  In order to hurry for the meeting with BOI, we left behind the familiar building of Ministry of Finance, asking Mr. Thanakarn and the executive officer to deliver our courtesy greetings to Minister Korn and Deputy Minister Pruektichai.

Visit to Dr.Bandid Nijathaworn, Deputy Governor of BOT

  I met him just one year after the last visit. In spite of the current economic confusion world-wide, he seemed more confident than before, which might come from his career in Bank of Thailand. It was in contrast to some worrisome-looking financial leaders of the States or Europe. After exchanging greetings and Mr. Kitayama's introduction of JTBF, Dr. Bandid briefed the current status and outlooks as follows.

• In case of economic crisis of 1997, Thailand was in the center and was the origin. This time, fortunately, Thailand stays on the sidelines and keep a distance from the world-wide chaos. Even if it so, Thailand is suffering from the impacts same as other countries. An important policy issue is how to minimize the impact.
• Export of January 2009, as compared to January last year, will drop to 15-16% negative. (It turned out 26% negative, and negative for consecutive 3 months.) Car industry and electric related industries led the declining trend, in amount 10.5 billion dollars. As import also dropped, the balance of January was 1.4 billion dollars surplus, eventually. The balance through the year, however, will be negative.
• Then, a critical issue will be "how to recover export" as well as "how to invite investment from outside". Private banks could possibly be reluctant in loaning-out, to which we have to pay careful attentions.
• While supplemental budget of 116.7 billion Baht has been approved for this year, more aggressive budget will be required for the next fiscal year (starting October). Fluidity must be secured to the market also. Borrowing from IMF might be difficult.
• As the budgetary deficit is conservatively restricted to 20% of GDP, we have to take supplemental measures. Our consideration is that national companies borrow international loans in advance from the official financial institutes such as World Bank or Asian Development Bank. At this moment, official outstanding debit is 37% of GDP, which will increase to 40% or higher as the large-scaled deficient budget is implemented from now on.

  In responding to messages of Dr.Bandid, we commented on "Financial Institution　Act" which was implemented August last year. Before its implementation, the single lending limit was 5% of Bank's paid in capital. However, under this Act, an idea of "consolidated lending limit" was introduced, that is, a limit of one Bank's consolidated lending amount towards the same group companies (capital share of each is over 10%) was raised up to 25% of Bank's paid in capital. It was meaningful in view of keeping soundness of financial institutions. It could also be a preventive measure not to repeat fallen credibility of American and European banks. The Act, eventually, is to be welcomed while it may not be an easy matter for each bank. To our comment as such, he returned a smiling nod with satisfaction. We left behind his room and Chaopraya river behind the window, hoping to meet each other again.