Bt30-billion package targets loans to smes

The Cabinet today will approve a Bt30-billion stimulus package aimed at

supporting entrepreneurs and small businesses suffering from economic hardship.

Under this latest package, the government will provide financial support to small and medium-sized enterprises (SMEs) facing difficulty obtaining bank loans.

A Finance Ministry source said the Abhisit Vejjajiva government would assign the state-owned Small Business Credit Guarantee Corp (SBCG) to include Bt30 billion worth of loan guarantees in this financing package, which would enable banks to lend three times the amount they otherwise could.

Target recipients include hotels, restaurants and exporters. Each segment will receive a guarantee up to Bt20 million, with a fee of 1.75 per cent.

The Bank of Thailand is in talks with banks that will join in the lending scheme.

The government expects banks to be more willing to lend in projects in which the SBCG participates, due to the low risk involved.

The source said the project would be initiated next month. If all of the Bt30 billion is used, the government may consider providing more guarantees.

The SCBG predicts the government may need to shoulder about Bt2 billion of the cost of the project, due to the possibility of non-performing loans.

Meanwhile, Thai Chamber of Commerce chairman Pramon Sutivong said SMEs needed loan guarantees of Bt30 billion to Bt50 billion to stay afloat.

If the government could provide support, that would help small firms obtain access to bank loans, he said.

He said confidence in the economy had improved, due to the government's previous stimulus package worth Bt116 billion, even though the country had to wait until April for its implementation.

Speaking to a seminar hosted by the People's Network for Elections in Thailand, former finance minister MR Pridiyathorn Devakula expressed his support for Prime Minister Abhisit's plan to spend money to renovate schools and hospitals nationwide.

"Small construction projects are expected to create jobs," said Pridiyathorn.

However, he does not agree with a government plan to offer individuals Bt2,000 in cash to stimulate consumption. He prefers stimulus projects that create jobs and foster further investment.

The agricultural sector can absorb laid-off workers, but the government should campaign for integrated farming in which farmers produce livestock, vegetables and other products from single farming enterprises, he suggested.

Tris Rating president Warapatr Todhanakasem said Thailand's creditworthiness, now at investment grade, or BBB+, could be downgraded if economic woes prevented the country from servicing its debts.

And if political uncertainty deteriorates and affects the economy, the international credit-rating agencies could downgrade Thailand's sovereign debts to junk-bond status, which would push up borrowing costs, he warned.