Foreign-currency restrictions eased

The Finance Ministry has removed a restriction on Thai individuals and corporations holding foreign-denominated currency derived from foreign investment as a part of efforts to reduce pressures that are leading to appreciation of the baht.

Over the past few years, the Thai authorities have relaxed regulations related to fore-

ign-currency holdings and widened opportunities for corporate investment abroad. Most importantly, they introduced the controversial 30-per-cent reserve requirement to slow down the strengthening of the baht against the US dollar.

Allowing individual and institutional investors to hold foreign currency without limitation is expected to lower demand for the baht and alleviate pressure on the currency that forces its appreciation.

The baht has risen by 9.52 per cent against the dollar since December 2006.

"The move abolishes the restriction on both Thai individuals and institutional investors against holding foreign currency abroad. They can now hold foreign denomination [currencies] without limitation. This seems to be a loosening of the central bank's 30-per-cent capital-reserve requirement," said a Finance Ministry source.

Outgoing Finance Minister Chalong-phob Sussangkarn signed the ministerial announcement last Friday, the source said. It is expected to take effect from this week.

Present restrictions stipulate that Thai individuals and corporations can have foreign-denominated currency, with liabilities, of no more than US$1 million and $100 million (Bt32.94 million and Bt3.29 billion), respectively. Indivi-dual and institutional investors can hold foreign denominated currencies, without any liabilities, of no more than $100,000 and $5 million, respectively.

The abolition of the restriction not only reduces pressure on the baht, but also helps increase Thai investors' flexibility in managing foreign currency, the source said.

As well, it will be another option for Thai corporations in managing their foreign-denominated income and help them balance their foreign-currency holdings between assets and liabilities.

Meanwhile, the Joint Com-mittee on Commerce, Industry and Banking (JCCI) yesterday called on the new government to launch other measures to stabilise the baht before doing away with the 30-per-cent capital-reserve requirement.

It was one of seven urgent measures announced by the JCCI. The others are a debt moratorium for farmers, allocation of a budget for the SML scheme, curbing of the baht's appreciation, an end to the capital-reserve requirement, establishment of a drug-prevention organisation, acceleration of mega-infrastructure projects and stimulation of revenue in the tourism and services sectors.

Meanwhile, the private sector has expressed concern about some of the new government's economic plans that are not clear in detail.

Federation of Thai Industries (FTI) chairman Santi Vilassakdanont said the FTI was worried that if the 30-per-cent measure were cancelled, it would probably strengthen the baht, because of the influx of foreign capital.

"I'm not opposed to the new government's policies. However, they should find other efficient measures to curb the [appreciation of the] baht and stimulate the outflow of capital in a bid to reduce the pressure on local exporters," he said, adding that the Thai currency must not be stronger than the currencies of other regional countries.

Thai Chamber of Commerce (TCC) chairman Pramon Sutivong said he would agree with a debt moratorium if it did not ruin the financial discipline of Thai farmers. Otherwise, it would affect the overall circulation of capital.

The government should help only those who are mired in terrible debt because of negative economic factors and not those who have generated debts because of their poor discipline.

He referred to a University of the Thai Chamber of Commerce report that said for every Bt80 billion of government spending to stimulate the economy, the country's gross domestic product could grow 0.5-1 per cent.

However, the budget should be used properly. For example, half of it could go towards subsidising low-income taxpayers, with the rest used to develop infrastructure.

Each of the private-sector organisations will compile its own proposal for presentation to the new government's economic ministers when the Cabinet is formed. They expect their proposals to be considered before the government presents its policies to Parliament.

Pramon said the TCC would consult the ministers on how it believed the country's economic growth should be driven, because it felt sure that Thailand's economy would be hit by the global economic slowdown.

Thai Bankers' Association chairman Apisak Tantivorawong said his association planned to propose laws and regulations enabling ordinary people to access sources of finance more easily.

FTI chairman Santi said joint committees between the government and private sector should continue.

"Collaboration between public agencies and the private sector is a key factor for developing the country's economy," he said.

Chalida Ekvitthayavechnukul,

Oranan Paweewun

The Nation