FTA negotiators fear financial sector liberalisation could trigger capital outflow

TNA / MCOT News

Bangkok, 25 October 2005

FTA negotiators fear financial sector liberalisation could trigger capital outflow

BANGKOK, Oct 24, (TNA) - Dr. Narongchai Akraseranee, chairman of the Working Group on FTA Negotiations, reaffirms that Thailand will not speed up the opening of its financial sector because domestic players are not ready for such competition.

The Working Group is also concerned about possible capital outflows once liberalisation frees up deposit transactions.

Dr. Narongchai said Thailand will not expedite the financial sector liberalisation for any country at all with which the Kingdom is negotiating a free trade agreement, including the United States.

This is because Thai financial institutions are not yet ready, he said, even though a bevy of US companies have been active in insurance, life insurance, securities and investment consultancy in
the aftermath of the financial crisis of 1997 when Thai companies were forced to seek foreign strategic partnerships to stay afloat.

He claims that Thai law needs to be amended to make way for full financial sector liberalisation. Given the state of Thai firms, the opening up of the financial sector as demanded by the US in the FTA negotiation has to be done in phases.

Specifically, the FTA working group is concerned about deposit services. It fears that full liberalisation will result in Thais moving their savings to invest overseas in bonds or savings for better return. A lesser worry than capital flight but equally sensitive is the area of lending service, he said.

source: MCOT