Thai government to unveil economic recovery package<\/p>\n
BANGKOK (AFP): Thai Finance Minister Thanong Bidaya said
\nyesterday economic ministers approved tough new regulations to
\nforce a restructuring of the ailing finance sector as part of a
\nlong-awaited economic recovery package.<\/p>\n
The sector will be required to raise huge amounts of new
\ncapital, so financial authorities have been given authority to
\nwaive the current limit of 25 percent on foreign holdings in Thai
\nfinancial institutions.<\/p>\n
Thanong, speaking at a news conference after a weekly economic
\nministers meeting, said foreign investors will be allowed to hold
\nmore than 50 percent of finance companies for up to 10 years, but
\nwill then have to sell down their holdings.<\/p>\n
"A capital increase or new shares must be offered to Thai
\ncitizens or Thai institutions, therefore foreign holdings will be
\nreduced after 10 years to below 50 percent," he said.<\/p>\n
No set limit on foreign shareholdings was given for the 10-
\nyear period, but financial authorities said earlier it would be
\ndecided on a case by case basis, with the rehabilitation of
\nfailing institutions the greatest priority.<\/p>\n
Companies that merge to survive the planned consolidation of
\nthe sector will have to bring their capital to risk assets ratio
\nto as high as 15 percent in the first year, dropping to 10
\npercent in the third year.<\/p>\n
The finance sector measures are part of a wide-ranging
\neconomic rescue plan to be unveiled after Tuesday's weekly
\ncabinet meeting, one day ahead of schedule, the government
\nspokesman's office said.<\/p>\n
The plan will include massive proposed cuts of 100 billion
\nbaht (US$2.7 billion) to the budget for the year to September
\n1998, in line with the terms of a $17.2 billion International
\nMonetary Fund (IMF) bailout.<\/p>\n
Thanong said economic ministers approved Monday a radical
\nrestructuring of financial institutions and agencies seen as
\nvital to restore the confidence of international and domestic
\nmarkets.<\/p>\n
The country is in the grip of a recession and a crippling
\nliquidity crisis.<\/p>\n
Foreign and domestic financial institutions have virtually
\nshut down major lending activity in the wake of the 29 percent
\ndepreciation of the baht, pending credible action by a coalition
\ngovernment widely seen as divided and incompetent.<\/p>\n
Thanong said the modified merger plan for 58 suspended finance
\ncompanies was proposed by a merger committee chaired by Amaret
\nSila-orn, who resigned Saturday along with three other members,
\ncomplaining of political interference in their work.<\/p>\n
The reform package will allow any of the 58 companies indebted
\nto the Bank of Thailand's Financial Institutions Development Fund
\n(FIDF) -- which lent more than 400 billion baht ($11 billion) to
\nsuspended institutions -- to repay the loans within 8 years.<\/p>\n
"The FIDF will also be allowed to convert its loans into
\nequity and to take up newly-issued shares of any finance
\ncompanies among the 58," up to 33 percent of total equity,
\nThanong told a news conference.<\/p>\n
But he said these companies would have "to meet debt provision
\nrequirements and decrease capital by writing off bad debts
\nfirst."<\/p>\n
Shareholders are expected to take huge losses when the
\nunrecoverable portion of bad debts estimated at 1.36 trillion
\nbaht are written off, with some local bankers estimating that
\nhalf the country's tycoons will be wiped out.<\/p>\n
All creditors will have an equal right to claim unpaid loans
\nagainst collateral, he said.<\/p>",
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"sponsor": "Okusi Associates",
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