The new government’s priority is to reinvigorate the Thai economy, which continues to be seriously affected by a series of problems. As the local equity and bond markets are currently 1.2 times larger than the banking industry, the Thai capital market will play an important role in solving the nation’s economic problems in several ways. First, the market will act as a major capital-raising center for both state and private projects and, second, boost tax income from listed companies. Third, the capital market will prepare the country to cope with an aging population through savings promotion and, fourth, by offering new risk management tools, will lift Thailand’s global competitiveness, SET Chairman Pakorn Malakul Na Ayudhya said.
“After the economic crisis, a key to the country’s sustained economic expansion over the next five years will be private investment restoration. This requires strong and sound financial and capital market systems to accommodate increased fundraising activity by both private and public sectors,” Mr. Pakorn added.
Over the past 10 years, capital raised through SET has been more than 1.8 times the net lending of commercial banks. Over 2000-the present, private and state sectors have raised more than THB 900 billion (approx. USD 26.10 billion) through equity and bond markets and around THB 55 billion (approx USD 1.59 billion) through property fund issuances. Apart from financial institutions, others in the business sector have raised nearly THB 60 billion (approx. USD 1.74 billion) through the capital market.
Moreover, as of December 31, 2007, listed firms, which represent 0.1% of more than 500,000 juristic persons in Thailand, accounted for 43% of total corporate income in that year. In addition, when comparing the taxes these companies paid three years before their listing with those paid three years after listing, total tax payment over the three-year spans increased 2.7 times.
Furthermore, by providing an alternative for savings and investment that offers satisfactory, long-term returns, the capital market plays an important role in helping government tackle the challenge of an aging population. During 1975-2007, annualized returns on equity and bond investment have been 12% and 9% respectively. At the same time, more than 13.2 million people across the country have been directly or indirectly active in the capital market.
Having a wide variety of securities on offer will help the government both manage risk effectively at a national level and lower to costs of doing so. In turn, this government ability will enable Thai businesses to more readily compete in the international arena.
Despite political and economic turmoil, SET will soon be more robust through demutualization and listing, which will enable it to better support private sector revival and sustained national economic growth, Mr. Pakorn concluded.
The Exchange has forwarded an eight-part capital market development plan to the new government for their consideration. The plan includes: 1) continued support for the Capital Market Development Committee, 2) support for SET demutualization by reviewing related laws to facilitate the development and restructure of the Thai bourse, 3) promotion of the Exchange as the ASEAN Common Exchange Gateway to attract more foreign capital into the country, 4) encouraging listing through reducing red tape and rewarding good corporate governance in the public sector, 5) promoting bond market development, 6) creating interconnection and centralization of futures market systems to enable closer collaboration with the agricultural futures exchange, thus increasing efficiency, economies of scale and liquidity, 7) establishing a national provident fund to encourage Thais to save more, appreciate the importance of saving for retirement, and expand the proportion of institutional investors so that the capital market has more price stability, and 8) reviewing and continuing state enterprise restructuring, especially of those that work closely with the private sector, so that they can raise more funds and be more operationally flexible.
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