Published on November 19, 2005

Baht-denominated issues would fund projects in which Thais are involved. The Export-Import Bank of Thailand is preparing to issue baht bonds under the Asian Bond Market Initiative in order to support local investors doing business in neighbouring countries and to add depth to the regional bond market.

Finance Minister Thanong Bidaya set next July as the deadline for issuing baht-denominated bonds after meeting with Exim Bank executives yesterday.

The bank could issue baht bonds itself. It could also act as a guarantor for baht-denominated bonds issued by foreign governments that want to raise funds here for investment projects in their home countries.

The essential condition is that Thai investors must take part in those investment projects abroad.

New chairman Virabongsa Ramangkura said the bank could issue baht bonds under the Asian Bond scheme, probably in a few months. “Suppose we make the first move by issuing bonds worth Bt100 million. Other parties may jump on board to issue Bt900 million,” Virabongsa said.

Political risk in smaller economies such as Cambodia and Burma was a non-issue, he said.

“Although there has been some political violence in those countries they never failed to honour their debts.” President Sataporn Jinachitra said that using Asian bonds might cost more than other fund-raising mechanisms, but it would be worthwhile. The bonds might be 25 basis points higher than the going rate for raising funds.

The government – in cooperation with Japan, South Korea and other Asian countries – has tried to create an Asian Bond market, as they all want to lessen the role of the US dollar in the region and increase the role of regional currencies.

Analysts said the issuance by the Exim Bank could be intended to show finance ministers of the 28-member Asia Cooperation Dialogue (ACD) when they meet in July how enthusiastic Thailand is about implementing the Asian Bond initiative.

Thanong said many regional economic collaborations, including the ACD, have not progressed much because they lack the funds to implement their plans. If the Asian bond market were developed it would help bridge the gap.

Thanong also urged the Exim Bank to convince trading companies to act as middlemen for SMEs. Small companies face high costs in exporting their products, while trading companies could handle their export business at a lower cost, he said.

The Asian Development Bank assumed the leading role in the Asian Bond scheme by issuing baht bonds in May worth Bt4 billion. The Japan Bank for International Cooperation followed in September with baht bonds worth Bt3 billion.

Wichit Chaitrong

The Nation

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