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Published on July 20, 2007

Individuals will be allowed to open dollar accounts in Thailand, and hold up to US$100,000 in them, under new moves to be announced today by the central bank.

Exporters will also be allowed to hold dollars for more than the current limit of 15 days.

The moves are part of measures by the Bank of Thailand (BOT) to curb the rise of the baht, according to central bank governor Tarisa Watanagase.

The baht opened at 33.48 to 33.50 to the dollar yesterday and hovered in this range as the market waited for the BOT announcement. The Thai currency later closed at 33.50-33.51 to the dollar.

The new rules are part of eight measures the central bank has proposed to the Finance Ministry to help boost capital outflows. The moves were revised from short-term and long-term measures proposed by a joint private committee to the authorities last week.

Tarisa said individuals would also be allowed to open deposit accounts in other foreign currencies but the amount must not exceed $100,000.

Corporations would be allowed to open deposit accounts in foreign currencies as well. The maximum amount would be higher but she did not give a figure yesterday.

According to a source, corporate accounts for foreign currencies would be permitted to hold up to $300,000. This would help people cover their currency risk - by having accounts in several currencies, the source said.

In addition, Tarisa said exporters or those who have foreign-currency incomes do not need to convert foreign currencies into baht within 15 days, as is now the case. They would be able to hold foreign currencies longer.

The governor said she had also discussed with the Securities and Exchange Commission whether to allow local brokerage houses to invest in stocks in foreign markets. This measure may be implemented later.

Kosit Panpiemras, the deputy prime minister and industry minister, said after meeting with Tarisa and Finance Minister Chalongphob Sussangkarn yesterday that some measures could be announced and implemented immediately. But others may need Cabinet approval.

Tarisa will meet Chalongphob today to discuss the package in detail.

Kosit said he would report on the moves to Prime Minister Surayud Chulanont today, before meeting the National Economic Committee on Monday. Any measure that required Cabinet approval would be proposed to the Cabinet on Tuesday, he said.

"This problem is caused by capital transactions that happen every second. Hence, we try to keep the market flexible in order to adjust our management to suit global changes," he said.

But he said the measures must not run counter to market mechanisms.

According to the source, other measures include allowing individuals to invest or buy real estate overseas - up to $1 million. Individuals would also be able to transfer money more freely to relatives living overseas.

Another proposal is to allow listed companies on the Stock Exchange of Thailand to buy unlimited foreign currency with which to invest or trade overseas.

However, the eight measures have yet to be approved by the ministry. They could be revised before being put to the premier, the source said.

Chalongphob said the Finance Ministry was speeding up consideration of private-sector measures including having state enterprises convert foreign debts into baht-denominated debts.

Santi Vilassakdanont, chairman of the Federation of Thai Industries, said it was good news that the government accepted the joint committee's short-term measures.

The BOT governor also insisted yesterday that the central bank needed to keep the 30-per-cent capital reserve measure unchanged. Tarisa said the measure still had a psychological impact and was expected to help narrow the gap in the baht's value in onshore and offshore markets.

She described the current interest rate level as appropriate.

"If we cut more than 0.25 per cent, it would create a side-effect in the long term."

She said the BOT was not worried about inflation and the lower interest rate would partly help curb the rise of the baht because some people might shift to borrow from domestic financial institutions or withdraw money to invest overseas.

"If the interest rate is too low, we won't have enough money for future investment, particularly in the government's mega-projects," she added.

Meanwhile, Chatchai Bunyarat, vice chairman of the Thai Chamber of Commerce, said the baht could strengthen if the government failed to urgently introduce aggressive measures to prevent money speculation.

"A baht valued at 37 to the dollar is the most satisfactory rate for all industries. For every one baht of appreciation, 10 per cent of exporters lose competitiveness," he said.

Thanawat Phonwichai, director of the Economic and Forecasting Centre at the Thai Chamber of Commerce University, said that a cut of 0.25 per cent on the base interest rate could show the government had good intent to solve the baht problem in the short term.

Chalida

Ekvitthayavechnukul

The Nation