While Finance Minister Apisak Tantivorawong said that a draft law would facilitate the merger of some specialised financial institutions, a source within the Finance Ministry said the proposed legislation was intended only for SMC and GHB.

The anonymous source from the Fiscal Policy Office (FPO) said that the draft law had no other targets beyond SMC and GHB and that officials had been mindful that employees of other state-run banks would be concerned for their jobs.

After a public hearing for the draft law, the plan could be disclosed, said the source, adding that the FPO and the policymakers have been discussing for some time a merger between SMC and GHB, as the lenders run relatively similar businesses.

SMC supports the secondary mortgage market with financial support from the state, while self-reliant GHB extends and manages mortgages.

“The merger plan will likely proceed with speed, but the draft law must come into force first. Each agency has been established by law. If they are merged, a new law must be launched,” the source said.

The Finance Ministry would oversee the merger.

Based on the merger plan, each company’s permanent employees would not be affected in terms of salaries, welfare and positions, while the jobs of temporary employees would be terminated, with compensation as stated in the law.

The FPO has drafted the law for a state-run bank merger that could lead to better management of liability-asset maturity mismatch; a public hearing on the legislation has been launched.

The Bank of Thailand has also permitted commercial banks to perform transactions similar to those of a state-run bank whose business is transferred. This means there will be state-run banks, as necessary, but they will not compete with the private sector, nor would they become a financial burden to the budget at any time in the future.

At the end of last year, SMC had total assets of Bt18.97 billion. Its capital adequacy ratio was 11.42 per cent.

GHB had total assets of Bt1.16 trillion at that time. Outstanding loans were Bt1.116 trillion. Total deposits were Bt943.38 billion. Its non-performing loans amounted to 46.495 billion, or 4.17 per cent of the total outstanding loans. Its capital adequacy ratio was 14.19 per cent, higher than the minimum 8.5 per cent as required by the central bank.

 “We are currently in a transition period between the current government and the new post-election government,” he said yesterday at a press conference after meeting with the management team of the Commerce Ministry. “At this point, it is crucial that the Ministry of Commerce keeps up its efforts to boost both external and internal trade to maintain the level of business sentiment in the country.”

Global trade has not yet recovered and this has damaged Thai exports, he said. This means the Commerce Ministry must further strengthen local trade and promote Thai goods to tourists in secondary cities, Somkid said.

From January to February, exports contracted by 0.16 per cent year on year, according to the Commerce Ministry, which stated their value at Bt1.294 trillion. The Thai National Shippers’ Council (TNSC) expects exports in March shrank further, resulting in a likely first-quarter contraction of 1 per cent, according to TNSC chairman Ghanyapad Tantipipatpong.

“Some 40 million tourists visit Thailand each year, with the largest portion coming from China,” Somkid said. “Chinese tourists have advanced their consumption habits to use e-payment when shopping both in their home country and overseas.”

Somkid has instructed the Commerce Ministry’s Department of Internal Trade (DIT) to make sure that stores in key tourist areas accept e-payment methods used by Chinese tourists, such as Alipay.

“Thailand should also be looking to sell its goods in tourist areas abroad,” he said. “In other tourist cities around the world, the Commerce Ministry should launch projects to open ‘Thai stores’ that sell Thai goods and which support e-payment to boost exports of goods through tourism.”

Somkid also told the Commerce Ministry to closely monitor commodity prices in order to prevent unnecessary price hikes and prevent the price of agricultural goods from dropping further.

Inflation was 1.24 per cent higher in March than the same month last year. The upward trend has continued for five straight months, driven mainly by the rising prices of fresh produce and oil, the Commerce Ministry reported.

The price of food and non-alcoholic drinks rose 2.38 per cent year on year in March, with prices in the transport and communication sectors increasing 0.76 per cent. The ministry’s Trade Policy and Strategy Office forecast that inflation will be between 0.7 and 1.7 per cent in 2019.

“The Commerce Ministry must be strict and take a strong stand against unnecessary rises in prices and hold the responsible parties accountable,” Somkid said.

Newin Sinsiri, the ADB’s country director for Myanmar, told a press conference yesterday that the country could enjoy 6.6 per cent growth in gross domestic product growth this year and 6.8 per cent next year.

“We remain positive about this economy, as Myanmar opens up its retail and wholesale sectors and continues to modernise corporate governance and management,” he said after the release of the Asian Development Outlook report for this year.

Newin expects the country’s growth to be steady in the next few years if the government accelerates the wide range of economic reforms initiated since 2011. He stressed the importance of improvements in both hard and soft infrastructure.

“In order to make agriculture more productive, we need to have good infrastructure in place, and to know how to integrate into the value chain. We need to look at the bigger picture,” he said.

“We need to bring the market close to the production. Better roads and railways as well as reliable 24-hour electricity are critical. When it comes to soft infrastructure, the most important is human capital. We are looking at how we can help the government with technical know-how in its efforts for Industry 4.0.”

According to Newin, infrastructure is the key for advancement in the service and IT industries, and the legal framework is also important in that it ensures people can do businesses easily. He underscored the importance of generating revenue and effective expenditure on much-needed sectors.

“We have to find several ways to generate more revenue and reduce subsidies in some of the areas where people can afford,” he said.

Yumiko Tamura, principal country specialist at the ADB’s Myanmar Resident Mission, said Myanmar’s monetary and fiscal policies are moving in the right direction. She called on people to take advantage of the resources available in the country.

“This country is still receiving a lot of concessional assistance, and the effective use of such concessional ODA (official development assistance) will lead to improvements in infrastructure in social services delivery, of which this country is in real need,” she said.

According to Tamura, interest rate liberalisation is one of the areas that the government is finding it difficult to pursue. The market sentiment is driven by not only by economic growth but also price movements, she said.

“Inflation has been quite high, and the kyat has weakened. This trend will continue, so businesses will probably feel the impacts,” she said.

Yet, she foresees the potential for further growth in Myanmar, driven by higher foreign direct investment (FDI) and growth in core areas such as agriculture, industry and services.

“With good weather, this country can achieve a higher agricultural growth rate. In terms of GDP share, trade and transport are two big sectors. Trade is actually controlled by the private sector, so the private sector sentiment is very important,” she said.

“We expect FDI to be quite steady, and the visitor arrivals, particularly from Asian countries, will stay quite strong. So, tourism-related services may also grow. Another sector is the financial sector, which is actually quite small in its share to GDP, but this sector may benefit from the government’s policies.”

Tamura foresees some inflows of domestic and international investment.

“The government’s vision is quite ambitious, and that will have a good impact on the private sector investment,” she said.

Tamura also warned of the risks to an otherwise bright outlook, including the possible withdrawal of the European Union’s trade preferences for Myanmar, the effect on exports of a slowdown in the major economies, domestic conflicts, and the slow progress in implementing economic reforms.

“One of the challenges is to position this country well in the regional and global value chain,” she said.

“We would like to see a clear policy direction on which particular industries this country would like to position itself in the value chain.”

She urged the government to prepare for the potential impact of things that are beyond its control and which may influence the outlook, including natural disasters and the EU’s decision on trade preferences.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) cited the clouded political outlook and the superpower trade dispute as the two biggest risks facing the economy.

“The private sector is worried about the political uncertainty in the upcoming months, which may lead to political unrest and damage the local economy,” Supant Mongkolsuthree, chairman of the Federation of Thai Industries (FTI), said at a press conference yesterday.

Kalin Sarasin, chairman of the Board of Trade of Thailand, said: “Stability is what we value the most. It is the reason why foreign investment and tourism has been a key driver of economic growth. Hence, political uncertainty can be a key risk to the Thai economy.”

As a means of reducing the political uncertainty, Supant said that he wanted the new government to be formed next month, as soon as possible after the royal coronation ceremony set for May 4.

Once the new government is formed, the FTI chairman urged that progressive policies be pushed out, instead of populist ones that may damage the financial foundations of the country in the long run.

As for investment, the political uncertainty will not halt ongoing projects, Supant said. However, prospective investors may delay their spending plans in the Kingdom until its politics becomes more stable.

This month, the JSCCIB reduced its GDP growth forecast for 2019 from a range of 4 to 4.3 per cent predicted in December to between 3.7 and 4 per cent.

However, Supant said that this downward adjustment did not account for the risks arising from political uncertainty.

The lowered estimate is largely a result of the global economic slowdown and the US-China trade war.

“There are external factors that present a threat to the economic growth of Thailand, as well as the global economic growth,” Supant said. “The largest threat of all is the ongoing US-China trade war, which has continued to dampen Thai exports in 2019.”

Exports for January and February contracted by 0.16 per cent, year on year, with a value of Bt1.294 trillion, according to the Commerce Ministry.

Reflecting this decline, the JSCCIB scaled back its forecast for export growth in 2019, from a range of 5 to 7 per cent stated in December to 3 to 5 per cent.

The United Kingdom’s departure from the European Union may also lead to impacts on the Thai economy, the committee said.

“Although Brexit may not significantly impact Thai exports and investments, it may weaken the level of investors’ sentiment globally,” said Predee Daochai, chairman of the Thai Bankers’ Association.

“This will have global ramifications and may negatively impact the Thai capital market,” he said.