The Finance Ministry is planning, at huge cost, to rescue major state enterprises including the Mass Rapid Transit Authority of Thailand, the State Railway of Thailand and the Bangkok Mass Transit Authority, caretaker Deputy Finance Minister Chaiyot Sasomsub said yesterday.

The plan will place an additional burden on the ministry, on top the government's recent plan to invest about Bt145 billion in three mass-transit routes and skyrocketing non-performing loans (NPLs) at specialised financial institutions that have extended massive loans to boost the economy in the past few years.

According to Chaiyot, the amount of assistance to major state enterprises is expected to be high. To help the State Railway of Thailand (SRT) alone the ministry will have to inject about Bt40 billion to reduce its accumulated debt, he said after a meeting with senior officials of the State Enterprise Policy Office. SRT's debt is estimated to be about Bt100 billion, of which Bt50 billion is a pension obligation for employees and the other half debts incurred from operation of its rail network.

Chaiyot said there was sound reason to help the SRT because it had invested in infrastructure for the overall benefit of the country.

He added that an earlier proposal to exchange SRT's land for debt repayments by the ministry had been dropped.

Executives of SRT insisted that they would develop the land and use the gains to pay the employee welfare of Bt50 billion.

The ministry also sought ways to solve the financial problems of the Mass Rapid Transit Authority of Thailand (MRTA), operator of Bangkok's subway service that is suffering from lower-than-expected passenger numbers. While the MRTA predicted a total of about 600,000 passengers a day, the actual number is about 400,000.

Chaiyot's comments implied that the MRTA had no other solution for its financial woes. Its plan to develop land near to subway line could not be implemented because it did not have the authority to appropriate land from people for that purpose, he said.

The Transport Ministry, which oversees the MRTA, is preparing to build the three new mass-transit routes. Sceptics have wondered how the MRTA will solve its future financial obligations when it has not yet resolved its current debts of Bt80 billion.

The Finance Ministry will also prepare a financial plan for the Bangkok Mass Transit Authority (BMTA) to buy 2,000 buses powered by NGV (natural gas for vehicless), Chaiyot said.

The BMTA will today finalise its terms of reference for bidding on the contract for the buses, Chaiyot said.

The Finance Ministry might also have to provide financial support to the Secondary Mortgage Corp (SMC), since it has experienced rising NPLs, the minister said.

He said mismanagement at the SMC in the early 1990s had contributed to the increase in bad loans.

Regarding the Tanning Organisation, which is under the Defence Ministry, the decision on whether to provide financial assistance or dissolve it will be left to the next government, Chaiyot said.

The Finance Ministry also plans to spend Bt3.1 billion to exercise its rights to buy new capital-increase shares of TMB Bank, of which it is currently a largest shareholder with a 31-per-cent stake.

Chaiyot said the ministry had no cash in hand, so it would have to sell part of its holdings in other state enterprises to raise the money.

Meanwhile, Bank of Thailand Governor MR Pridiyathorn Devakula said yesterday the higher NPLs of state-owned special financial institutions would not affect overall financial stability as these institutions were outside the financial system, which is driven by commercial banks.

"The market for the special financial institutions has apparently been separated from commercial banks. If their NPLs rise, it will not affect the stability of current financial institutions as they [special financial institutions] are outside the main financial system," the governor said.

Eight special financial institutions - including the Islamic Bank of Thailand and the SMC - recorded total NPLs of Bt110 billion in the first quarter, up from Bt104 billion in the previous quarter.

As of the second quarter, these eight special financial institutions had reported total lending at Bt1.3 trillion, up from Bt1.28 trillion in the previous quarter.

The Finance Ministry set 2008 as the deadline for these entities to reduce their bad debts to less than 10 per cent of their total lending.

Wichit Chaitrong

The Nation