Thai currency needs three years to recover: Supachai

Thai currency needs three years to recover: Supachai

BANGKOK (AFP): The head of the incoming Thai government's
economic team said in remarks published yesterday that it would
take three years to tackle Thailand's financial problems and turn
the economy around.

Supachai Panitchpakdi, slated to take the posts of deputy
premier for economic affairs and commerce minister, said in an
interview with The Nation that critical private sector debt and
liquidity problems must be addressed to restore confidence in the
economy.

A shorter tenure than three years for the new government would
hurt efforts to rebuild the shattered economy, which has not yet
seen the end of a severe downturn, he said.

"What I am worried about is that people have high expectations
and the task ahead is very difficult, as the current economic
crisis has not yet reached its bottom. But at least we will
attempt to make a difference," Supachai said.

Thailand's banks and finance companies are saddled with more
than US$35 billion in domestic bad debt, while the private sector
owes around $75 billion to foreign creditors.

Supachai wants to expand the role of a nascent Financial
Restructuring Agency (FRA) from that of a referee deciding what
to do with 58 suspended finance companies to give it powers over
all of the country's 106 banks and finance firms.

But Supachai said FRA should play a bigger role in the
restructuring, while the Bank of Thailand should restrict itself
to regulation and work towards transforming its rescue fund into
a deposit insurance corporation.

The AMC, meanwhile, should be capitalized at 30-40 billion
baht (around one billion dollars), rather than one billion baht
as currently planned, and should manage bad assets for later
resale rather than just auctioning them immediately at very low
prices.

"We should not use the U.S. model (of quickly selling out bad
assets), because the U.S. has more than 10,000 financial
institutions while Thailand has only 106 with a small number of
healthy financial institutions," The Nation quoted Supachai as
saying.

The issue was raised last week at meetings between Democrat
Party officials and International Monetary Fund (IMF) Asia and
Pacific director Hubert Neiss.

The IMF official was here to review Thailand's progress and
compliance with the terms of a $17.2 billion standby credit line
to shore up the country's foreign reserves while it rides out the
crisis.

The baht had recovered to around 37 to the dollar in trading
Monday on news that Supachai and company were taking charge.

Immediate restoration of confidence was crucial as foreign
creditors are considering whether to roll over some $20 billion
in short-term loans to the Thai private sector coming due by the
year end.

Supachai said the export sector will also have to be
revitalized, and the government will need to push for more
exports to Japan, China and South Korea.

The new government -- which should be up and running at the
beginning of next week -- will also continue the liberalization
of trade and investment sectors, he said.

Supachai's Democrat Party has nearly universal support in the
markets due to the proven quality of its economic team, which
operated independently under party leader and then premier Chuan
Leekpai from 1992-95.

Chuan won approval late Sunday of his nomination to assume the
premiership following the resignation of Chavalit Yongchaiyudh,
who left office amid a complete collapse in the confidence of
investors and creditors.

Chuan also said Monday that he was looking at an extended
tenure, and that the elections Chavalit promised to hold early
next year may not be on the cards.