IMF decision given thumbs up from business

By Business Reporters/ The Nation
DATE : 29/07/1997 02:01:52

THE business community has welcomed the government's decision to seek financial assistance from the International Monetary Fund.

However, the prevailing view is that the finance sector will struggle to survive under an IMF-imposed austerity programme.
Praising the government's move, Board of Trade chairman Vichien Tejapaibul said it must prepare measures to help businesses which will be affected by the IMF conditions - especially an expected value-added tax hike to 10 per cent from 7 per cent.

Speaking after a meeting of the BOT's executive committee, Vichien suggested the government should solve the liquidity and high interest rate problems, cut basic utility fees and reduce tariffs on raw materials imported for export industries, to compensate for the IMF directives.

Siam Cement Plc president Chumpol Na Lamlieng said the IMF assistance is good in the short term since it guarantees foreign investors that Thailand will not run out of cash. For the long term, Chumpol said Thailand must learn to rely less on offshore funding.

Chumpol said Thailand should not cut its domestic budget but rather its external expenses, especially imported luxury items.
"Measures issued during the Gen Prem [Tinsulanonda) government after the 1984 baht devaluation such as the limit on purchases by Thais travelling to foreign countries and strict quota permission for imported goods would be appropriated under the present circumstances," the SCC chief said.

Vorawee Wanglee, chief executive officer of Nakornthon Bank, is confident IMF aid will yield satisfactory results in the future as the programme will help to eliminate the barriers to reviving the sluggish economy.

Vorawee said IMF assistance would restore investor confidence which would help attract foreign capital inflow, paving the way for a possible reduction of domestic interest rates.

He indicated that banks must proceed with measures to promote better efficiency and management due to the tough conditions expected under an IMF programme.

"The IMF wants weak financial institutions with severe problems to be allowed to go under. The IMF aid will push us [banks] for higher quality and force us to use our resources in the most efficient way possible," he said.

Commerce Minister Narongchai Akrasanee said financial support from the IMF would help ease the severe shortage of liquidity in the financial markets as well as help the government resolve the country's economic problems. However, he declined to reveal the size of fund, saying only that final approval from the Cabinet is expected within three weeks.

"IMF financial support will help restore investor confidence and that will restore economic stability," he added.

Narongchai said the stand-by credit line from the IMF may be used as a two-step loan. He said that after the government makes long-term loans from the IMF, it may then re-lend the money to the private sector.

Sutee Losoponkul, vice president of Nakornthon Bank, warned that in spite of the IMF's financial assistance, Thailand is likely to experience more problems over the next six months under the tough programme.

Pisit Lee-atham, executive vice president of Bangkok Bank, said that how strict the IMF is with the government on measures to cope with economic problems, will be determined in negotiations.

He noted that the credibility of the government lies with how many IMF conditions it accepts.