The proposal, put forward by the Federation of Thai Capital Market Organisations (FETCO), will result in the SEF replacing the LTF at the start of next year.

The SEF will allow investors to deduct up to 30 per cent of their total annual income from the fund – compared with the 15 per cent allowance under the LTF – for investments under Bt250,000.

Moreover, the SEF will also require that investors spend a proportion of their capital on sustainable equities such as the Thailand Future Fund and equities that are environmentally friendly.

In this way, SEF will be able to draw in more investors and, at the same time, promote sustainable investments,  FETCO chairman Paiboon Nalinthrangkurn said.

“We aim to provide maximum benefits to the farmers. Initially, many departments have already reported details of their work, including on an action plan to be conducted for next year,” he said.

Thammanat will provide the policy guidance to the Department of Royal Rainmaking and Agricultural Aviation, the Agricultural Land Reform Office, the Marketing Organisation for Farmers, and the Land Development Department.

He said that the Land Development Department has recently reported on its plan for water resources development. Part of the plan is aimed at aligning with the government’s policy focus on drought and flood alleviation as urgent issues to be tackled in its 2020 fiscal year. The department also asked for a budget to construct small water storage areas for farmers and the public to use during the dry season. Such small water storage areas will be handed over to people in local communities to manage.

“For the plan to raise the budget from Bt5 billion to Bt10 billion, this will be requested by the Land Development Department for use in the 2020 fiscal year. Part of these funds will be allocated to the scoping out of water storage areas, which are the small projects. For the department’s underground water bank project, I personally would like the project to be conducted as a significant channel to keep water for the farmers. However, study should be made in advance to find out its good and bad points,” said Thammanat.

Deputy Prime Minister Somkid Jatusripitak on Thursday (August 8) told high-ranking executives that he would soon appoint a special committee to supervise the country’s finance and treasury matters, aiming primarily to restore the stability of the baht.

The committee is expected to consist of experts and officials from the Finance Ministry, the Bank of Thailand, the Stock Exchange of Thailand and related agencies.

“The top priority of the government’s economic teams is to build confidence among foreign investors by continuing projects undertaken by the previous government,” he said. “The private sector should also take part in this endeavour, as it is the first step towards reforming Thailand’s economy.”

Regarding implementation of economic stimulus measures, the deputy PM said that currently the ministries of Finance, Agriculture and Cooperatives, and Tourism and Sports are preparing detailed action plans to present to the Cabinet, which is scheduled to meet soon.

Somkid added that in 2020, the Eastern Economic Corridor will fully implement 5G to facilitate development projects and improve the quality of agricultural products using new technology and innovations. “5G will help add value to Thailand’s export products, as well as improve the quality of services in the tourism and hospitality sectors,” he said.

While the central bank’s statement on the policy rate reduction did not mention the strength of the baht, economists suspect the baht’s strength and its impact on the Thai economy was a key reason for the Monetary Policy Committee’s decision to lower the key interest rate by 0.25 percentage point — from 1.75 per cent to 1.50 per cent — on Wednesday (August 7).

The baht has appreciated by 5.5 per cent thus far in 2019 when compared to neighbouring currencies, and the economic impact of the baht’s strength are starting to show in the country’s poor export performance, said Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank (SCB)’s Economic Intelligence Centre.

The central bank, he said, takes economic growth into account when considering monetary policy, leading to the lowering of the policy interest rate on August 7.

The EIC expects the BOT to reduce interest rate once more in 2019 by 0.25 per cent, taking down the policy interest rate to 1.25 per cent due to economic factors such as the impacts of the US-China trade war which has escalated to a currency war and the delayed government economic stimulus package.

The baht was valued at Bt30.77 to the US dollar on August 7 after the interest rate cut, weakening by only Bt0.01 from Bt30.76 per US dollar on August 6, according to the BOT.

The effectiveness of the central bank’s past measures to curb the strengthening baht has been unclear, said Tim Leelahaphan, an economist with Standard Chartered Bank.

On July 12, the BOT reduced the limits for outstanding balances of non-resident baht accounts (NRBA) and non-resident baht accounts for securities (NRBS) from Bt300 million to Bt200 million per non-resident.

Market analysts see this announcement as the central bank’s attempt to reduce speculative capital inflows into Thailand’s economy and keep the baht’s volatility under control.

Since then, the baht has appreciated slightly from Bt30.81 to Bt30.77 per US dollar.

These measures may take some time before their impacts on the baht are shown, the StanChart economist said.

While the BOT’s measures have not been successful in curbing the baht’s strength, which has been damaging Thai export figures, the measures are meant to keep the baht in check and prevent it from getting stronger than it already is, said Mana Nimitvanich, first vice president of Krungthai Bank’s Global Business Development and Strategy Group.

However, despite the measure’s intended impact, Krungthai expects the baht to appreciate even further, predicting the baht will hit Bt30.2 to the US dollar by the year-end.

Economists suggest that the key reason for the baht’s strength is largely unaffected by the BOT’s measures, as Thailand’s current account surplus — valued at 6 per cent of GDP — leads to a perception among foreign investors of the country being a “safe haven” as an investment destination.

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On Thursday, Lavaron Sangsnit, the director general for the Finance Ministry’s fiscal policy office, announced that the Bt170 billion package would be submitted to the Cabinet for approval on August 19.

The package, he said, will focus on the tourism and agricultural sectors while also boosting domestic spending and supporting small and medium-sized enterprises (SMEs) in the country.

However, doubts have been raised by economists on whether the ambitious package will have the intended impact amid declining exports, delays in government investment and disappointing consumer spending figures in the first half of this year.

The government’s stimulus packages may not reach the local community and secondary cities if the government does not also launch a public campaign to promote spending in local areas, said Kiatanuntha Luankaew, an economics lecturer at Thammasat University, regarding the government’s plan to promote the tourism sector and support small businesses.

Without a public campaign running in parallel with the stimulus package, the money injected into the economy might be spent in concentrated areas and end up with big businesses such as shopping malls, he said in an interview with The Nation.

Hence, Kiatanuntha suggested, the government should also run a campaign to promote tourism in secondary cities and communicate to the public that the stimulus package is meant to support small businesses in more remote areas of the country.

The effectiveness of the stimulus package is still unclear as the details of how the package will be implemented have not been released, said Mana Nimitvanich, first vice president of Krungthai Bank’s Global Business Development and Strategy Group.

Mana expects a portion of the stimulus package to be from state enterprise investments, such as allowing state banks to offer soft loans to promote spending.

Among the policies that would have an immediate positive impact on the economy would be an initiative offering soft loans to the agricultural sector, likely to be offered by the state-run Bank for Agriculture and Agricultural Cooperatives, he said.

While the stimulus package may lead to policies that are necessary to prop up economic growth in the short term, the policies resulting from the package may also be harmful to economic productivity in the long term, Kiatanantha cautioned.

For instance, he said, the government could use the package to fund its income and price guarantee scheme for the agricultural sector. This is necessary as a short-term measure to reduce inequality and support the sector due to recent droughts and price issues.

However, the government should also communicate to the agriculture sector that such policies are only one-off policies to support the agricultural sector in emergency situations, he said.

Otherwise, he said, the agricultural sector may become reliant on government income safety nets, leading to a reduction in the sector’s growth and productivity.

Related story: Bt170-bn stimulus to focus on tourism boost as economy slows

Consumer confidence has dropped continuously for five months due to several negative factors, including the trade dispute between the US and China and high concerns about the local political situation.

Thanawat Polvichai, director of the Centre for Economic and Business Forecasting at UTCC, said that the index in July stood at 75.0, down for the fifth consecutive month, and was the lowest in 22 months since October 2017. The consumer confidence index to the economy dropped continuously for five months and was the lowest in 214 months, or 17 years and 10 months, while the consumer confidence index to the political situation declined continuously for five months and was the lowest in 63 months since 2014.

He said that the key factors affecting the decline in the consumer confidence were the slow rebound of the economy, the trade dispute between the US and China, local political situation, the lower prices of agricultural products, concerns of drought, and the recent blasts in Bangkok.

“The index dropped for all items, reflecting the fact that the overall economy is still not rebounding, making people cautious in how they spend money.” He said this was witnessed in all the quarters this year. The new government should have a concrete plan to stimulate the economy, as well as relax its monetary and fiscal policies, looking after people’s cost of living and take care of the baht,” said Thanawat.