beyondbrics

It’s a good time to be Thailand. The economy is bouncing back nicely, markets are booming – and loans are flowing in.

The Asian Development Bank has signed a deal to lend $300m to Thailand, south-east Asia’s second largest economy, and there is another billion in the pipeline from the World Bank.

The ADB said its money will go toward Bangkok’s Capital Markets Redevelopment Plan, which seems a bit curious given that even by the ADB’s own estimate, the plan is going to cost no more than $58m in direct costs, and much of the plan has already been implemented.

The goal is to help the country transform from a middle-income to high-income economy through increased contribution of the domestic capital market to financing domestic investment and economic growth.

Thailand’s capital markets are already relatively developed compared to those of other ADB members such as Vietnam and Uzbekistan. But the Thai master plan is designed to cut the costs of raising money and improve access for millions of Thais who currently have only limited access to financial services.

The government has demutualised the stock exchange and abolished the flat fee brokerage system, and the futures exchange has announced that it intends to offer currency futures, although no date has been set for the trade to begin.

So it appears that most of the ADB loan, which comes at concessionary rates, will go toward budget support.

“We can borrow domestically but we are anticipating that with the economic recovery, we cannot assume that the level of domestic liquidity will be there forever,” Korn Chatikavanij, the finance minister, told the FT. “And we wanted to stretch the average maturity of the national debt on our books, and the only way is to borrow from programmes such as this.”

Korn said much of the money would be used to finance the first legs of a high-speed rail joint venture Thailand is planning with China. The rail links, between Bangkok and Nong Khai on the Laotian border, and Bangkok and the industrial hub of Rayong to the southeast, are part of an ambitious $8bn plan to network southern China with south-east Asian ports and consumers.

Related reading:
Thai baht: climbing ever higher, beyondbrics
Thailand’s economy roars, beyondbrics
China: a future on track, FT