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Reformers take on monopolies; record bond issues forecast

Reformers are planning to grant more power to a watchdog tasked with breaking up business monopolies, as the Thai Bond Market Association predicted last week that Thai companies will set a new record this year for corporate bond issues.
 
To create a more level playing field for local and international business, the National Reform Council (NRC) is proposing an overhaul of Thailand’s Trade Competition Commission to make it more independent and able to act against business monopolies and shield it from political interference.
 
Krirk-Krai Jirapaet, who chairs an NRC panel on industry, agriculture and commerce, told a recent NRC meeting that enforcement has proved to be impractical when it comes to the 1999 Trade Competition Act. The Act was designed to ensure fair competition and prevent monopolies, but politicians and business groups have been able to exercise influence over the Commission and essentially neutralize its watchdog role, he said. He asked NRC members to suggest changes to the Act to bolster the Commission’s independence.
 
Chirmsak Pinthong, another NRC member, pointed out that a major problem with the Commission is that its chairman is the Minister of Commerce. The Commission is unlikely to be independent and free of political influence if its chairman is a politician.
 
NRC member Alongkorn Ponlaboot said that political groups that receive financial contributions from big conglomerates then work together to prevent enforcement of the law. State officials collude in not enforcing the law because they expect to be rewarded with lucrative advisory positions with the conglomerates after they retire.
 
Meanwhile, small and medium-size companies are helping to drive strong growth in the corporate bond market this year. The Thai Bond Market Association said that small and medium-sized businesses had contributed 158 bond issues during the first quarter of 2015, and the number of bond issues in the first quarter is already 70 percent of the total number of bond issues in all of 2014.
 
However, the total value of bond issues in the first quarter was lower than the corresponding period during the previous year.  The Association said that new bond issues totaled US$7.5 billion compared with $13.2 billion in the first quarter of 2014.  Last year’s higher value was driven by extremely large corporate debt instruments for agro-industrial giant CP Group and Thai Oil.
 
Thai companies have been turning to the debt market in greater numbers because banks have kept prime lending rates high despite cuts in the central bank's policy rate. Sluggish economic growth has made banks leery about lending.
 
“We try not to borrow from banks as it costs more,” said Sompon Aketerajit, managing director of Lease IT Plc., which sold bills of exchange for the first time this year.
 
Thailand’s economic policymakers have long advocated that firms should make greater use of the capital markets to raise funds, rather than relying too heavily on bank loans.
 
See the original article at Thailand Focus

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