The Nation, Bangkok
US meets resistance on full access to finance
By Siriporn Chanjindamanee
18 February 2006
A seminar heard yesterday that although US negotiators had asked Thailand to fully deregulate its financial services and allow US investors unrestricted stakes in the brokering and banking sectors, Bangkok was insisting that the sector was not ready to face direct competition.
During a speech at the seminar entitled “Service sector: Preparation for the FTA between Thailand and the US”, Naris Chaiyasoot, the Fiscal Policy Office’s director, said that the United States had asked the Kingdom to allow new US banks to operate in Thailand through branches and subsidiaries.
The Bank of Thailand prohibits foreign investors from holding more than 25 per cent in Thai banks. However, during the financial turbulence in 1997, the central bank allowed foreign banks to hold shares of up to 49 per cent in some local banks.
Moreover, Washington also asked Thai authorities to abolish the limitations on the number of Americans on commercial banks’ boards and in the management of companies, Naris said.
The US has also asked Thailand to liberalise broker licences and to cancel foreign ownership restrictions, he added.
Washington also asked Bangkok to allow American financial advisers to sell their services here, even if they have no local office, and requested looser capital controls for mutual fund operators, he said.
Naris, however, said that Thailand was not ready to proceed as the US required because brokers have been governed by specific laws and by regulators.
“We consider it is unnecessary to accelerate full liberalisation in the sectors if local operators are not ready. Moreover, some conditions, including allowing foreign investors to be major shareholders in brokers and mutual fund firms, have already been implemented,” he said.
Commenting on banks, he said deregulation would be undertaken in phases because some requirements needed amendments to laws, which must pass through Parliament.
“Cross-border services would be allowed in businesses where we have no expertise, such as derivatives products. Brokerage licence limitations remain essential to alleviate the tough competition,” said Naris.
Narongchai Akrasanee, former commerce minister, said Thailand’s financial sector should be reformed and regulated properly ahead of liberalisation with the US.
“We have to be concerned about the interests of consumers and operators, and the country’s financial stability. The regulatory system should function efficiently and local operators should be able to survive after any liberalisation,” he said.
“We cannot allow the free flow of capital as the US requires as our currency may become volatile and lead to another financial crisis, as happened in 1997.”