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WEALTH FUND

Chalongphob opposes idea, cites SK loss

Thirachai: all views will be considered.

Former finance minister Chalongphob Sussangkarn has warned against the creation of a sovereign wealth fund, saying the government should heed what had happened to South Korea in recent times.

Thirachai Phuvanatnaranubala, the current finance minister, meanwhile insists the government will listen to all parties before deciding whether to press ahead with the idea. South Korea had international reserves of close to US$300 billion (about Bt9 trillion) before the US sub-prime debacle triggered the global financial crisis in 2008. However, the country then faced a liquidity crunch as investors sold off stocks and bonds, Chalongphob told a symposium on the future of the Thai economy moving towards the Asean Economic Community, hosted yesterday by the Fiscal Policy Office. Seoul was then forced to seek a credit line from the US Federal Reserve, he said, adding that Thailand's international reserves of $186 billion were not excessive should it be faced with a similar crisis.

Chalongphob said that when he was finance minister, he had asked the central bank to look at the possibility of establishing a sovereign wealth fund, but had found that the reserves were insufficient.

"It's lucky [we did not do so], otherwise we would have lost all our money" if the fund had invested in global assets such as sub-prime mortgages in the United States, he added. Thirachai assured the symposium that he would listen to all parties. "We will not rush into creating a fund," he said. He added that whatever assets the central bank invested in carried risks. For example, Bt260 billion was lost because of the depreciation of dollar- and euro-denominated assets held by the Bank of Thailand last year. MR Chatu Mongol Sonakul, chairman of the Bank of Thailand, said he welcomed the proposal to establish a sovereign wealth fund, but such a move must be carried out with thorough and meticulous preparation. He said there had been a discussion of the matter during the previous government. At the time, he had proposed that about $10 billion from the foreign reserves be channelled to such a fund, so that it could be invested in equities. At present, the reserves can be invested only in low-risk bets such as high-rated government bonds and gold. He said he had also suggested that the committee managing a sovereign wealth fund should consist of members from the central bank and two representatives from the Finance Ministry. "It is true, as Finance Minister Thirachai said, that the money belongs to the nation, not the central bank," he told reporters, insisting that he was not totally against the idea. Thirachai said he was adamant that the reserves should be put to better use. On fears that the fund would encounter a loss, he said the central bank had also witnessed a loss on its bond investment. Last week, he ordered BOT Governor Prasarn Trairatvorakul to present him with studies on four key issues, including establishment of a sovereign wealth fund, and solutions to the debts held by the Financial Institutions Development Fund (FIDF). On the debt issue, Chatu Mongol said he had proposed to the previous government that use be made of monetary reserves worth Bt1 trillion. The reserves could be deposited at banks and, at an interest rate of 3 per cent, they could generate an annual return of Bt30 billion, sufficient to reduce the FIDF debt burden. He said he was surprised that the Finance Ministry had not moved on the proposal. Although legal amendments would be required, he said implementation of the idea was well within the power of the finance minister. Meanwhile, followers of the late Luang Ta Maha Bua yesterday gathered at the Finance Ministry to express their objection to the idea of creating a sovereign wealth fund. The revered monk had played a key role in opposing plans by past governments to encroach on to the turf of the central bank.


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