Thai banks open to foreign investment

Thai banks open to foreign investment

SINGAPORE (Reuters): Thai Prime Minister Chuan Leekpai on Monday threw open the doors of the Thai banking industry to foreign investment, urging more equity interest.

"In Thailand there had been extensive overhaul of laws and regulations and it can be said there is now an open door for foreign participation in our banking sector," he said at a question and answer session at the East Asia Economic Summit.

"Last week for example, a bank in Singapore took an equity stake in a Thai bank of over 75 percent. So I would now urge all of you to take a similar stake in Thai banks," he said.

That deal between Singapore's United Overseas Bank and Thailand's Radanasin Bank saw the Singapore group take a 75 percent stake in Radanasin for 15 billion baht ($383.6 million).

Chuan told reporters he saw interest from foreign players in Thai banking institutions rising as confidence in the country grew.

"There have already been foreign investors who have taken equity holdings in four commercial banks in Thailand and with increased confidence of an economy on the recovery, there is an expectation that more foreign investors will be coming into the banking sector."

Singapore's DBS Bank bought a majority stake in Thai Danu Bank in 1998. ABN AMRO Bank of the Netherlands took a 75 percent stake in Bank of Asia last year, while Britain's Standard Chartered took a 75 percent stake in Nakornthon Bank last month.

Chuan said bank non-performing loans (NPLs), a major concern of foreign investors, were going down but not as fast as the government would like.

"NPL's have been declining but they have not declined as fast as we would like to see. And it is expected by reports from the Bank of Thailand that the reduction in NPLs will be more rapid in the future," he told reporters.

The central bank said on Friday that Thai non-performing loans stood at 46.76 percent at the end of August, a near half percentage point improvement from the end of July.

The Thai Prime Minister said in his keynote address that structural changes and economic reforms had to be extended to the "regional and global levels as well."

He said structural changes, while not easy, had been taking place in Thailand.

"I, however, do not wish to understate the problems and difficulties we have been facing in pushing forward these reforms. Though the process has clearly started, it is not yet complete and much more remains to be done."

Chuan said the government had no gross domestic product projection estimate yet but said he expected GDP to grow between the second and third quarters of this year.

After contracting by around 10 percent in 1998, Thai GDP has stabilized and most economists expect modest growth this year.

The International Monetary Fund said last week the Thai economy should grow four percent in 1999 and any revision to this forecast would be on the "positive side".