The ministry will allow the World Bank to make a credit guarantee for foreign firms, foreign governments and financial institutions of foreign governments that want to issue bonds or convertible bonds in Thailand, Pongpanu Svetarundra, director-general of the Public Debt Management Office, said yesterday.

The International Finance Corporation (IFC) and the Asian Development Bank (ADB) are also allowed to guarantee Thai firms that wish to raise funds through bank loans, corporate bonds and convertible bonds in domestic and overseas markets.

These international financial institutions in the past had to ask for permission from the ministry to be a guarantor on a case-by-case basis. From now until the end of 2009, the ministry has given blanket permission for these international financial institutions, said Pongpanu.

The guarantee types include full or partial guarantees and political-risk guarantees.

The deregulation is expected to facilitate Thailand to play a greater role as a source of fund raising in the region under the Asian Bond Market Initiative, he said. Private companies would find it easier to source long-term debts, which would lessen risks stemming from maturity mismatches. This would support fund raising for mega-project investment in Thailand. It would also be beneficial for investors in financial markets as lower-risk bonds are available.

Over the past four years, ADB and IFC had guaranteed corporate bonds issued by three Thai private firms worth US$197 million (Bt7.05 billion).

However, if private firms bring in foreign funds, they would still be subject to the 30-per-cent reserve of capital flow required by the central bank. The Finance Ministry is trying to find a solution for bond issuers on this issue, said the official.

Wichit Chaitrong

The Nation