tanya sirivedhin : new challenges for finance and capital markets speech by ms tanya sirivedhin, deputy governor of the bank of thailand, at the conference on “ thailand - finance and capital markets ”, held in bangkok, on 28 september 2000. * * * today ’ s conference is very timely, in view of the increasing role that finance and capital markets are likely to play in the future thai financial scene. i have identified several aspects of the challenges of “ finance and capital markets ” which i would like to share with this audience. i hope that the open discussion of these challenges will be an important input into the work of the thai authorities, and what we envisage to be the vision for our industry. i shall frame the challenges in three dimensions : first, the challenges from rebuilding and strengthening the business and financial industry. second, the challenges from the adoption of best international practices. third, the challenges from the race to catch up with the new technological frontier of e - commerce and electronic trading. rebuilding and strengthening the financial industry the 1997 economic and financial crisis brought to light many weaknesses in thailand ’ s macroeconomic and financial management. in its aftermath, measures were undertaken speedily to shore up the currency and to restore confidence in the viability and sustainability of firms and businesses, both in the financial and non - financial industry. through the implementation of these measures, there were inevitably many casualties. for example, as many as 56 finance companies were closed down permanently while others, as well as the weak banks, were taken over by the authorities or consolidated. businesses caught short by the depreciation of the currency or the austere belt tightening environment which lifted interest rates to historically high levels, had to be closed down or consolidated. it became of utmost urgency to improve confidence, strengthen the operations of financial institutions and enable them to improve and resume their intermediation role. in the view of the bank of thailand, the only way to bring about sustained recovery of the economy which was affected by the liquidity crunch situation, and by the concern over counterparty credit risks in the midst of the crisis, was to tackle head - on the issue of non - performing loans. in june 1998, the bank of thailand, in cooperation with five associations, namely, thai bankers ’ association, foreign banks ’ association, association of finance companies, board of trade, and federation of thai industries, set up the corporate debt restructuring advisory committee ( cdrac ). this was aimed to oversee and

policymakers therefore will have to be watchful and well - prepared to implement appropriate policy to ensure continued growth momentum amidst these challenges. first, the global economic recovery, particularly those of the industrialized economies, remains fragile and subject to downside risks. in spite of the higher - than - expected growth in the fourth quarter of 2009, the us economy is still beset by high unemployment, continued deleveraging, and weak financial institutions. all of these will have dampening effects on domestic demand, especially consumer spending – the main growth driver for the us economy. at the same time, concerns on the eurozone ’ s sizable fiscal deficits especially those of the peripheral economies may trigger another round of confidence problems. furthermore, the exit policy especially of the major economies could spill additional risks to the ongoing global recovery. their timing and speed will be crucial. the action that is either too early when the economy is not sufficiently robust, or too late when inflationary pressure and / or economic imbalances have already been formed will have important implication on recovery, price and financial stability. second, emerging economies, thailand included, face the challenge of sizeable and volatile flows of capital due to their better growth prospect and sooner policy normalization vis - a - vis g3 countries. these flows could lead to volatility in foreign exchange markets and might potentially create financial imbalances. from the data thus far, we have seen sizable inflow of capital into some of the asian countries such as korea, taiwan, india, and china since the second half of 2009. and in the last couple weeks, this money started to flow into thailand. third on domestic front, as you are well aware, thailand also faces two major uncertainties : the problem of map ta phut and the on - going political unrest. i believe the “ map ta phut ” problem is of the most interest to japanese investors, and therefore i would like to say a few words. at present, the authorities have put all efforts to achieve the resolution of the problem, given its implications on the country ’ s future investment prospect, industrial practice, and economic recovery. so far, the processes of the eia, hia, and public hearing processes have been formalized and the government is now in the process of establishing independent agencies which will be responsible for evaluating all of the proposed investment projects. it will take some more time, but progresses are being steadily made. in my view, the “ map ta phut ” problem