Thailand launch stimulus package<\/p>\n
BANGKOK (AFP): Thailand launched three multi-million dollar
\ninvestment promotion funds and a raft of import tax cuts on
\nTuesday as part of the latest stimulus package aimed at kick-
\nstarting its comatose economy.<\/p>\n
The package, which also contains measures to heal the property
\nsector, was welcomed by analysts who said it appeared to signal a
\nchange in tack from boosting demand to a longer-term focus on the
\nsupply side.<\/p>\n
\"I think the idea here is that the government has had two
\nstimulus packages which are demand-oriented and will support
\ngrowth and momentum in 1999,\" said SocGen Crosby strategist
\nSyrian Pietersz.<\/p>\n
\"This is a more supply side, investment-oriented package which
\nwill keep investment going beyond 2000. The lead time here seems
\nto be anywhere between six and 12 months,\" he said.<\/p>\n
Analysts said that although the investment funds may not be
\nenough on their own, they appeared in part to be a way of
\nsidestepping the country's troubled banks which are struggling
\nunder the weight of massive non-performing loans and have been
\nslow to help ease tight liquidity.<\/p>\n
The government announced plans to set up an equity fund
\ninitially worth US$500 million but later expanded to $1 billion,
\nwith the World Bank's International Finance Corporation as a key
\npartner.<\/p>\n
The fund will seek ways to help larger enterprises which
\ncannot get loans from the banks.<\/p>\n
A smaller one billion baht ($27 million) 10-year closed-end
\nfund to buy shares in small- to medium-sized enterprises will
\nalso be set up, a statement said.<\/p>\n
The stakes will be purchased through the Stock Exchange of
\nThailand or direct from the companies, with the fund exiting once
\nthe companies are considered well enough established.<\/p>\n
The third fund will be known as the Thailand Recovery Fund,
\ntargeted at competitive medium-sized companies and with initial
\ncapital of $100 million, according to the document.<\/p>\n
It will have the Asian Development Bank as partner and be
\nmanaged by professional fund managers.<\/p>\n
Import duties for capital goods and raw materials, covering
\nsome 326 items including machinery, electronics and electrical
\ngoods, will be cut to three percent.<\/p>\n
The tax for raw materials imported for cosmetics and medicines
\nwill be reduced to one percent from 10 to 30 percent.<\/p>\n
Import duties on some products in the chemicals, plastics and
\nsteel categories will also be slashed.<\/p>\n
The document said Thailand plans to reduce import taxes on
\nabout 7,000 items from 85 percent to zero to five percent from
\nJanuary 1, 2000, in line with ASEAN Free Trade Agreement
\nprocedures.<\/p>\n
The tariff cuts will include raw materials and intermediate
\nand finished products.<\/p>\n
According to the statement, the Government Housing Bank will
\nprepare a 30-year mortgage package, with three-year and five-year
\nfixed interest rates, for home buyers.<\/p>\n
It said the housing bank will issue bonds worth 46 billion
\nbaht over the next nine months, with the first issue due this
\nmonth. Some 25 billion baht will be lent to commercial banks so
\nthey can provide mortgages, it said.<\/p>\n
The National Housing Authority plans to buy unfinished
\nresidential projects from developers, spending up to 15 billion
\nbaht, according to the document, and property transfer fees will
\nbe cut to 0.01 percent of the valuation price from the current
\ntwo percent.<\/p>\n
Analysts said the property measures were aimed at giving the
\nsector a shot in the arm and amounted to about 65 billion baht of
\ngovernment spending.<\/p>\n
\"It will probably reduce the outstanding stock of housing by
\nabout 15 percent, so it would have an impact on the oversupply,
\nbut not as large as you might want,\" SocGen Crosby's Pietersz
\nsaid.<\/p>",
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