Tuesday, November 4, 2008

Thailand's commercial banks should help in SME funding

Commercial bank role seen in state SME funding


Authorities should provide low-interest loans to small and medium-sized businesses (SMEs) that are being squeezed by the global economic downturn and growing reluctance of banks to lend, according to local bankers and analysts.

Veerathai Santiprabhop, an executive vice-president at Siam Commercial Bank, said large Thai companies were already having greater problems in raising funds from the international markets as a result of the crisis.

To counter this, more firms are looking to raise funds from the domestic market, either from local banks or the bond market, he said at a conference on the global crisis yesterday.

But this shift in turn would put smaller companies under greater liquidity pressure, as lenders focus funding resources on serving larger companies.

Analysts said authorities looking to ease the funding crunch should consider low-interest loan programmes managed through local commercial banks as a faster, more efficient means of helping companies than direct lending through state banks such as the SME Bank.

The government can also ease pressure on the local market by financing its infrastructure megaprojects through overseas borrowing from institutions such as the Japanese Bank for International Co-operation or the World Bank rather than local loans that will only ''crowd out'' private borrowers from the market.

Dr Veerathai said the government can further help companies survive the global recession by offering guarantees on trade finance, maintaining the stability of the baht and encouraging the private sector to take advantage of benefits offered through free trade agreements.

Surapon Vongvadhanaroj, chief executive officer of Surapon Food, said private companies needed to take action themselves to prepare for the recession. For instance, exporters need to diversify their market risk and reduce dependence on any one geographic region. Funds should also be spread across various currencies to reduce risks of currency volatility, he said.

''You need to look after yourself, and reduce dependence on the government, I think,'' Mr Surapon said. ''Cut costs, conserve cash and set a clear goal for sustainable growth. But the important thing is to survive the current crisis, more so than generating profits.''

Business leaders agreed that currency volatility was a major impediment for traders, and that trade negotiators should continue work to extend benefits under free trade agreements.

Businesses also want the government to move forward with a registration programme for foreign workers and a restructuring of investment promotion benefits offered by the Board of Investment.

Paboon Nalintrangkura, chief executive officer of Tisco Securities, said tax cuts would help stimulate domestic demand in the country to offset declining export growth.

He added that the government needed to have a clear contact point and establish an investor relations unit to communicate with businesses and investors.

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