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FTI vice chairman, Thanit Sorat said after consultations with Wichit Akrathit, the SBCG chairman, that both organisations will set up a committee to work out the details before a memorandum of understanding is signed next month.

"Under the agreement, SMEs which borrow Bt20 million or less will have the full back-up of the SBCG," Thanit said, adding that the FTI is also moving to convince state-owned banks like the Government Savings Bank to extend loans to SBCG-supported enterprises.

He said the agreement would allow SMEs to obtain loans even if they are non-performing borrowers. At present, the SBCG promises to extend credit guarantees up to 20 per cent of the loan amount, but no more than Bt20 million.

Thanit said that as the economy is showing more positive signs, with a slower economic contraction in the second quarter compared to the first quarter, businesses should begin to see revenues begin to pick up. However, some manufacturers have been suffering from liquidity shortages, and they lack the capital to purchase raw materials or expand capacity.

"It is necessary that we all must find solutions to help them tap funds, so their business can recover," he said.

Sommat Khunset, FTI deputy secretary-general, said the organisation's chairman Santi Vilassakdanont is to meet Bank of Thailand Governor Tarisa Watanagase tomorrow. On his agenda is commercial banks' lending activity, following complaints from business operators. Santi will also discuss foreign exchange rates, as the baht continues to appreciate. The central bank knows the export sector is important in driving the economy so it should intervene to keep the baht exchange rate at a suitable level.

Sommat noted that at Bt34 per US dollar, the exporters' view is that the baht is too strong compared to regional currencies. Any further appreciation would erode export competitiveness, several countries have acted to weaken their own currencies including Japan and Singapore.

The Joint Public/Private Committee earlier agreed the Bank of Thailand should adopt a two-pronged strategy to manage foreign-exchange rates. While rates for hot-money inflows, which are mostly geared towards the stock market and other securities, should be allowed to move freely, the rates applied to the export sector should be fixed. It believes the rate should be fixed at Bt37-Bt38 against the dollar.