state banks urged to help cash-hit firms

Finance Minister Korn Chatikavanij yesterday reiterated state-owned financial institutions must play a bigger role in extending loans to the business sector, thus extending a lifeline to liquidity-strapped companies while the country awaits economic-stimulus spending.

He said he would this weekend discuss with Prime Minister Abhisit Vejjajiva and Deputy Prime Minister Korbsak Sabhavasu the additional funds to be injected into the economy, aside from the Bt100-billion expansionary budget. As the Bt100 billion is unlikely to be disbursed before April, short-term measures will be announced next month to ease the liquidity crunch, he said.

"I believe all state financial institutions are ready for loan extension. Their lending has continued to grow, exceeding 100 per cent of their deposits, against 95 per cent among commercial banks. If loan extension continues, the economy will keep expanding," Korn said.

He added that combined measures should enable the 2009 gross domestic product to grow above the Fiscal Policy Office's forecast of 0-2 per cent.

The University of the Thai Chamber of Commerce's December business survey report released yesterday said 73 per cent of the 400 respondents were suffering from liquidity problems.

The remaining 27 per cent expected such problems to arise in the next three to six months.

More than 55 per cent said they were having difficulty in accessing new credit.

They contributed the credit problems to lower orders, higher production costs, banks making it tougher to get loans, buyers delaying payments and problems in getting bank guarantees.

"The lack of liquidity is dangerous for the economy next year, as it will lead to lay-offs and business closures," said Thanawat Polvichai, director of the university's Economic and Business Forecasting Centre.

The centre urged the government to cut interest rates to reduce companies' operating costs. Commercial banks are also urged to ease credit-approval measures and extend payment periods for debtors, while the government should provide soft loans to enterprises that are constrained by a lack of capital.

Other measures put forward are promoting export growth and helping exporters penetrate new markets, promoting confidence among investors and travellers and stimulating domestic economic growth.

The broad sectors most in need of liquidity are trading, manufacturing, services and agriculture.

Saowanee Thairungroj, vice president of the university's Research Division, said the problems at large enterprises were bigger than at small and medium-sized ones. In order to survive, all types of company resorted to using savings, more bank credits, negotiation for debt-repayment extension and the sale of assets.

Less than 1 per cent of respondents were unable to pay their debts altogether, while 1.8 per cent of debtors said they had delayed repayment.

The university's poll also showed that consumers were likely to spend Bt76.52 billion over the New Year season, 3.5 per cent higher than last year's Bt73.94 billion. On a per capita basis, consumers are expected to spend Bt8,461 during this festive season.

The growth rate is the lowest in five years. Last year's rate was 6.4 per cent.