The Nation

INTERNATIONAL RESERVE

Go slow on wealth fund, govt told

The government has been urged not to fast-track the creation of a sovereign wealth fund in the light of concern that the country's international reserves risk being wasted.

Speaking during the second day of the debate on government policy, Senator Kamnoon Sithisman yesterday expressed his concern over the government plan to establish a sovereign wealth fund by using money held by the central bank.

Prime Minister Yingluck Shinawat-ra said on the first day of the debate that the government would consider creating such a fund as part of an effort to manage the Kingdom's assets better.

Pheu Thai politicians during the election campaign had proposed the idea that having foreign reserves worth about US$180 billion (Bt5.38 trillion) was excessive, so part of the money should be allocated for risky investment in such areas as oil exploration and commodities, including gold and other ores.

The Bank of Thailand currently invests a substantial portion of the reserves in US government bonds, considered to be safe-haven assets, but Pheu Thai politicians have criticised it for the low returns achieved due to the falling US dollar.

Kamnoon, however, argued that a move into riskier assets through a sovereign wealth fund could lead to a waste of the nation's accumulated reserves.

He urged the government to seek the public's opinion on the idea before pressing ahead, as well as submit the matter for proper parliamentary consideration. "The government must consult the public and propose a bill to Parliament. It must not, however, issue an emergency executive degree to set up the fund," he added.

Past administrations have failed before to lay their hands on reserves managed by the central bank, Kamnoon said, referring in part to attempts to make use of the reserves to pay off public debt incurred during the Asian financial crisis in 1997.

The Bank of Thailand also opposes the creation of a sovereign wealth fund for fear of misused reserves and lost money because of risky investment.

Economists are split on the issue. Praipol Koomsup, professor of economics at Thammasat University, said previously that the idea was interesting but he was worried about the effectiveness of fund management.

Opposition leader Abhisit Vejjajiva voiced concern during Tuesday's debate that the government might intend using the reserves for annual budget spending purposes, which would not be a professional asset-management practice.

On another matter raised during yesterday's debate, Democrat MP Vithoon Nambutr criticised the government for cancelling the high-speed-rail project planned by the Abhisit administration.

He said the government now had no plan to invest in high-speed trains connecting Bangkok to other major cities and neighbouring countries: namely, Chiang Mai, Nong Khai, Ubon Ratchathani, Rayong and Malaysia.

Lamenting the fact that the government had only stated that it would conduct a study into the matter, he said: "There is no need for a study; the investment is needed."


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