prasarn trairatvorakul : financing the greater mekong subregion keynote address by dr prasarn trairatvorakul, governor of the bank of thailand, at the euromoney greater mekong subregion investment forum, bangkok, 20 june 2012. * * * excellencies, honorable speakers distinguished guests ; ladies and gentlemen it is an honour to be a part of the greater mekong investment forum and a great pleasure to commemorate the 20 - year anniversary of the asian development bank greater mekong subregion ( gms ) economic cooperation program. i would like to thank the euromoney for inviting me to speak today. the shift in the world ’ s center of gravity towards “ rising asia ” has been widely recognized and well documented. but within the asian region lies the mekong subregion which the adb has been financing and providing technical assistance for more than two decades. today this region is getting much of the world ’ s interest and attention. the rich human and natural resource endowments as well as the complementary diversity of the greater mekong subregion have made it the new frontier of south east asian economic growth. the gms stands among the world ’ s fastest growing areas, registering a 10 - year - average growth of around 8 %, followed by the bric nations at 6. 7 % and sub - sahara africa at 5. 5 %. the global attention and interest on this region means prospects for increasing trade and investment. financial services as we all know are derived demand from the needs of the real economy for trade and investment opportunities. though not taking a driving seat, a financial system that is safe and sound has an important role to support growth and sustainable development. when it comes to finance, three issues come to my mind. first, what should be the strategy for meeting the financing needs of the subregion. second, what role should the thai financial system play as an intermediary and as a member of the gms. third, what are the regulatory and institutional challenges to ensure financial stability and sustainable development. on the first issue of financing, we generally observe that trade and direct investment flows are largely influenced by proximity and endowment. finance, on the other hand, knows no boundary. given the broad - based financing needs of the gms which range from large scale project finance to commercial banking for sme, there is a role for all types of institutions : local, regional and global. for local financial institutions, their knowledge and understanding

have already taken place. in particular, the bank of thailand now has the authority, bestowed by the government, to supervise and regulate the specialized financial institutions ( sfis ), which account for around 25 % of thai financial system ’ s total assets. in light of this, new sets of rules have already been imposed on sfis to improve governance, operational capability, credit risk management as well as transparency. along with improving soe performance, businesses, are expected to compete in a fairer environment than before through better law enforcement. the revision of the trade competition act, currently being considered at the national legislative assembly, will establish an independent commission - the trade competition commission - to review and regulate business competition, thereby ensuring a fairer and more competitive environment among businesses. the commission will be more independent and less prone to influence from both the public and private sectors, unlike the current structure in which the committee is chaired by the minister of commerce and half of the committee can consist of representatives from large companies. in addition, the law is expanded to cover commercial operation of soes1, and antitrust penalties will be more penal. therefore, the law is expected promote a more level playing field not only among private firms but also between private firms and public enterprises. on top of this, access to credit for small and medium sized firms will be improved. the business securities act, effective since july of last year, widens the scope of eligible collateral for secured lending. prior to this, only real estates and certain types of movable property can be used as collateral. with this new act, a firm can further gain access to funding by putting up inventories, machineries, and intellectual property as collateral. given this, thailand ’ s small and medium enterprises, which constitute 95 percent2 of the total number of firms and make up 30 percent of total employment3, are expected to gain better access to credit, thus representing a better distribution of economic opportunity. ladies and gentlemen, allow me to reiterate that, although i group this set of laws as ones that promote governance and improvement in economic opportunity, in actuality, they all have positive spillover towards enhancing economic growth and productivity. after all, having a well - functioning capital market, better managed soes, a fairer and more competitive environment, and more access to credit will allow 1 excluding activities to preserve national security 2 source : the office of smes promotion, 2014 3 average over 2015, national statistical office of thailand calculated by the bank