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