Team works to draft bailout plan
HONG KONG A World Bank/International Monetary Fund (IMF) team with more than a dozen members is helping Thai finance and banking authorities draft a comprehensive package to deal with the vulnerability in the financial sector.
The package will be ready by Oct 15 and pave the way for the establishment of a so-called Financial Restructure Agency (FRA), Thai officials said.
The FRA will be a permanent body designed to tackle the ailing banks and finance companies and win back the confidence of the international community.
''We need a permanent body to look after the financial institutions to make sure that there is somebody really in charge over this matter," a Thai banking official said.
Crucial to restoring Thailand's macro-economic stability is a credible and comprehensive programme to deal with banks and finance companies and the programme must not be affected by government change or political instability. After the creation of the FRA, the Committee to Supervise the Merger and Acquisition of Financial Institutions chaired by Amaret Sila-on is expected to be dissolved.
Finance Minister Thanong Bidaya on Monday evening assured international fund managers and bankers that a World Bank and IMF team of 12 to 15 members is helping the Thai authorities put together a comprehensive package to deal with the banks and finance companies, relying on the experiences of Argentina, Mexico and Spain. Before leaving for Hong Kong to attend the annual World Bank/IMF meeting, Thanong asked World Bank/IMF experts to help him draft a report which he would use as a reference to present to international fund managers and bankers. He received only a two-page document.
''The problem is not money. They cannot grasp Thailand's legal problems. They said they need a Thai lawyer to help them. I gave them three. So they are now trying to find a solution for the Thai financial sector," Thanong said.
The scope of the FRA will be comprehensive, witnessed in the creation of a deposit insurance corporation and a restructuring committee for the 58 failed finance companies.
The deposit insurance corporation will handle the public deposits of the 33 remaining finance companies, 15 banks and 12 credit financiers. The restructuring committee for the 58 finance companies will make a specific announcement regarding the two groups of 16 and 42 finance companies forced to close.
The officials expect the FRA, which will set a schedule to tackle the financial institutions and lay a firmer foundation for the development of the Thai financial system, to end its operation in two to three years after it has successfully restructured the ailing banks and finance companies.
Both Thanong and Bank of Thailand Governor Chaiyawat Wibulswasdi have tight schedules of meetings with representatives from the international private and public sectors to try to restore confidence in Thailand's economic adjustment programme. Responding to concern over the censure debate and the growing instability surrounding the Chavalit administration, Thanong reassured that any government change will not have an impact on Thailand's commitment to tackle its balance-of-payments crisis and the ailing banks and finance companies as advocated by the IMF.
''Thailand's commitment to this programme goes beyond any government or administration; we will not waiver from our commitment, regardless of who is in power and when," Thanong said.
On Sept 18, IMF managing director Michel Camdessus told a news conference that the stability of the government for the duration of the stand-by credit is not a performance criterion under the IMF-brokered US$17.2 billion bailout programme.
''It is true that each time we make an agreement with a country led by a fragile coalition we take a risk," he said, ''but Thailand is a democracy.
''When a government falls, in general there is another coalition behind to take the helm. In the case of Thailand, if this eventuality were to occur we are confident that with the wise leadership of His Majesty the King, a new government could take office soon enough to avoid any interruption of the programme."
Chaiyawat assured that the central bank is aiming to uphold and implement a recovery plan by restoring soundness to the Thai financial system.
''To achieve this, we must not only liberalise and modernise the finance and banking systems, but we must also create the regulatory framework and safeguards which can prevent this kind of crisis from happening again," he said.
Chaiyawat also said the central bank is planning to develop a sustainable balance of payments and promote greater fiscal discipline.
''To achieve financial recovery, we will open up to greater foreign participation, implement much tighter monetary policies and use incoming capital more wisely to increase our competitiveness," he said.
Both Thanong and Chaiyawat are urging foreign creditors to roll over $30 billion in short-term debts due this year and to extend new ones.
Siam Commercial Bank president Olarn Chaipravat said Japanese banks in particular have been very cooperative by agreeing to roll over most of the debts and extend new ones to help Thailand weather the financial crisis.
Olarn quoted Thanong as saying that foreign ownership of Thai banks and finance companies could also be raised to 51 per cent on a permanent basis as part of a sweeping restructure of the ailing financial sector.
Olarn said that Thanong gave critical and bold assurances on majority foreign ownership, which is expected to pave the way for foreign bailouts and takeovers of Thai banks and finance companies.
The Committee to Supervise the Merger and Acquisition of the Financial Institutions has raised the ceiling on foreign shareholding from 25 per cent to more than 50 per cent on a case-by-case basis to improve the positions of the banks and finance companies.
However, it set a condition that once the ceiling exceeds 50 per cent, it must be brought down to no more than 49 per cent within five years.
BY THANONG KHANTHONG