• 
• 

Published on December 3, 2007

Financial analysts predict that deposit insurance, one of the effects of the Financial Institutions Business Act, will shake up the banking industry.

Small banks will face extra challenges wooing deposi-

tors, whose worries will shift from interest rates to wealth security, says financial-systems division director at the Finance Ministry Chodechai Suwanaporn.

Fiscal Policy Research Institute director Kanit Sangsubhan disagrees with the legislation. "Officials at the Finance Ministry and Bank of Thailand have yet to fully agree on who should supervise financial institutions," he said.

The ministry wants the government to set up an independent body to regulate the industry, but the central bank wants to maintain its role.

But there is consensus that the country needs to develop further its capital market. Nobody in the National Legislative Assembly is against the Public Debt Manage-

ment Bill, the director of the ministry's Public Debt Man-agement Office, Pongpanu Svetarundra, said.

The new law will enable

the government to issue bonds for capital-market development. Currently the government can issue bonds only

to finance budget deficits.

Finance Minister Chalong-phob Sussangkarn said the new law would minimise the risks of bond misuse. Funds raised via bonds will be invested in safe, highly rated assets only.

Bonds can supplement the central bank's stabilising of the exchange rate, too.

The pending State Enter-prise Corporation Act will allow the government to pursue privatisation transparently and in a way expected to earn public trust.

Privatisation is politically sensitive. People worry it could be open to corruption.

Thaksin Shinawatra's government was accused of manipulating privatisation for his own interests.

State enterprises with exclusive rights, such as the right to appropriate private land, will not be privatised.

An independent regulator is needed first.

Somkiat Tangkitvanich,

a director at the Thailand Development Research Institute who helped draft the law, was confident it would serve the public interest. Clear rules will allow stakeholders, supporters of privatisation, opponents and the courts to find the best solution to conflicts.

So far, no political party is saying in its campaign that it will pursue privatisation.

Stock exchange chair-

man Pakorn Malakul Na Ayudhya suggested a new

government list state enterprises on the market as part of its development as well as raising funds from the private sector for future investment.

The Private Sector Participation Act will close loopholes in current laws by clarifying public-private joint ventures. The ministry will return a role to the National Economic and Social Development Board. It will scrutinise joint-venture projects before they are proposed to the Cabinet. Opponents say it will make business harder.

The Civil Servants Act recently passed its third reading. It overhauls pay and promotion.

The law is supposed to secure the careers of top-performing people, but critics say corrupt politicians will find ways to circumvent the law and promote cronies. Corruption is widespread in the bureaucracy, they say.

Wichit Chaitrong

The Nation