Asean turns to Big 3 in setting up bond guarantees for private sector

"China, Japan and South Korea, have already committed to contributing to the fund with an initial size estimated at about US$1 billion [Bt34.6 billion]," a source said last week.

Meanwhile in Thailand, the final draft of a national pension fund prepared by the Finance Ministry offers more incentives to savers. Earlier, finance ministers from the 10 Asean members and three East Asian countries assigned the Asian Development Bank to study the bond guarantee mechanism.

The source said officials from the three nations have said their governments were willing to pitch in. Due to their large foreign-exchange reserves, they would not find it difficult to finance the fund, the source said, adding that the fund would be designed to enhance the credit rating of corporate bonds issued by local firms.

"At the same time we will promote local currency denominated bonds in the Asean+3 countries," the source said.

The bond-guarantee fund will be submitted to the summit of Asean leaders and their counterparts in Phuket in October.

Earlier, Finance Minister Korn Chativanij said central banks could only invest only in "AAA"-rated bonds, though he expects the fund to bolster the credit ratings of firms in the region and make them attractive to investors.

Asean and the three countries have already agreed to create a multilateral currency swap mechanism worth $120 billion, and setting up the bond-guarantee fund will be an another landmark agreement.

Korn is today meeting with senior officials to discuss plans for a national pension fund and other bond development measures.

Somchai Sujjapongse, director-general of the Fiscal Policy Office, said the office proposed a new rate for government contributions to the national pension fund, which will cover people in the informal sector who are not covered by existing retirement schemes such as the Social Security Fund or Government Pension Fund.

Under the final draft, savers are divided into three age groups: 20-30; 31-50; and 51-60. After join-|ing, members would be required |to contribute at least Bt100 per month, while the government chips in Bt50 for the first group, Bt80 for the second and Bt100 for the third group.

Upon retirement, members will receive a monthly payment of Bt2,500 plus the Bt500 elderly allowance, he said. Currently, each senior citizen is given Bt500 every month, which is not enough.

The national pension fund will cost about Bt20 billion in its first year, and more than 20 million people are expected to receive benefits under this new scheme.

Somchai said Korn would decide when he would propose the national pension fund to the Cabinet for approval before it is forwarded to the legislature. Korn had earlier vowed to present the bill to Parliament.