Finance Minister Korn Chatikavanij on capital market reforms planned for this year
By Jon Fernquest
Thailand's
stock market has seen
better days.In Thailand bank credit now accounts for "as much as 90% of gross domestic product."
The market capitalisation of the Stock Exchange of Thailand (SET) lags at just 79% of GDP.
The development of efficient capital markets would "help bring down funding costs for companies by offering competition to the banking sector" (Read previous article).
Today's article is about the action plan for capital market reform of Finance Minister Korn Chatikavanij.
capital markets - markets
such as stock exchanges where companies raise money for their
businesses by selling securities such as stocks and bonds
capital market reforms - improvements in capital markets
efficient capital markets - capital markets that can get funding to the projects that need it so that the economy can grow and reach its potential
has seen better days - was better in the past
credit - loans
GDP, Gross Domestic product - a measure of economic activity in a country, the value of the country's output of goods and services. GDP is defined roughly as: GDP = Household Consumption + Business Investment + Change in Inventories + (Government Spending - Taxes) + (Exports - Imports) (See Economist Glossary)
market capitalisation, capitalisation - the total value of a company's stock shares (determined by their selling price on the stock exchange)
lags - is behind others, is slow
capital market reforms - improvements in capital markets
efficient capital markets - capital markets that can get funding to the projects that need it so that the economy can grow and reach its potential
has seen better days - was better in the past
credit - loans
GDP, Gross Domestic product - a measure of economic activity in a country, the value of the country's output of goods and services. GDP is defined roughly as: GDP = Household Consumption + Business Investment + Change in Inventories + (Government Spending - Taxes) + (Exports - Imports) (See Economist Glossary)
market capitalisation, capitalisation - the total value of a company's stock shares (determined by their selling price on the stock exchange)
lags - is behind others, is slow
CAPITAL MARKETS
Korn: Tax overhaul completed this year
Move to streamline rulesWICHIT CHANTANUSORNSIRI
21/07/2009
The Finance Ministry hopes to complete a tax overhaul for the capital markets by September, with cabinet approval scheduled this year.
Finance Minister Korn Chatikavanij said the programme would streamline tax rules related to the capital market, including regulations governing mergers and acquisitions, individual provident funds and venture capital rules.
The ministry hopes the measures will help boost the Stock Exchange of Thailand's capitalisation to 150% of gross domestic product by 2013, from less than 100% today.
Broadening and deepening the capital market is critical for Thailand's economy, which remains highly dependent on the banking system for financing.
Mr Korn said Thailand's capital market had developed at a slower rate than others in the region, with the country's weighting in the MSCI Asia ex-Japan index now less than 2% compared with about 10% more than a decade ago.
Plan to strengthen capital markets
Authorities have set an eight-step plan to strengthen the capital market, starting with a restructuring of the SET itself, which plans to demutualise into a public company within the next several years.Other steps include liberalising the securities industry, overhauling laws to encourage mergers and acquisitions, tax reforms and encouraging the development of new financing instruments such as infrastructure funds.
The government also will implement a national savings programme to supplement retirement savings, encourage greater flexibility for workers choosing retirement plans and introduce new securities in the market to act as benchmarks for the private sector.
Tax reforms planned under the development programme covered 10 issues, said Satit Rungkasiri, a deputy permanent secretary at the ministry.
For instance, Thai companies would receive a tax waiver on dividend income paid by funds that have already paid tax, a waiver already received by non-residents. Workers will also receive tax waivers for transfers of retirement savings held in provident funds, the Government Pension Fund or the new national savings programme.
Insurance firms meanwhile will no longer have to set aside 65% of their premiums as reserves, but may now use actuary data to set reserves in line with international practices.
To support the issue of sukuk instruments, taxes will be exempted for asset transfers made to a trustee vehicle.
Tax obstacles in the securities borrowing-and-lending field will also be eliminated.
Somchai Sujjapongse, director-general of the Fiscal Policy Office, said the new savings programme was aimed at some 24 million workers who currently lack any formal retirement coverage, whether it be the GPF, the Social Security Fund or voluntary provident funds.
Under the programme, workers will contribute from 100 to 1,000 baht per month to the fund. The government will match the contributions with 50 baht per month for members aged 20 to 30 years and 100 baht per month for members aged 31 to 60.
A worker aged 20 who contributes the minimum 100 baht per month to the fund until retirement at 60 will receive pension benefits of 3,000 baht per month, including a 500-baht payment already given by the government.
Authorities estimate the programme's cost to be around 20 billion baht per year.
(Source: Bangkok Post, business, Korn: Tax overhaul completed this year, WICHIT CHANTANUSORNSIRI, 21/07/2009, link)
Vocabulary
overhaul - a
thorough repair, repairing everything that needs to be repaired
tax overhaul - making all the improvements in the tax system that need to be made
streamline - to make more efficient by removing unnecessary parts
streamline tax rules - to make tax rules more efficient my removing unnecessary parts
merger, a business merger - joining two or more companies into one company
Mergers and Acquisitions (M&A) - the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies as well as other assets. Usually mergers occur in a friendly setting where executives from the respective companies participate in a due diligence process to ensure a successful combination of all parts.(See Wikipedia)
provident funds - a system for saving money for retirement, both employee and employer make regular payments into the fund
voluntary - have choice, can do or not do, not required
involuntary - must do, required
voluntary provident funds - retirement savings plans within a country that people can choose to save money with
broadening and deepening the capital market - getting more investors (broadening) and increasing market capitalisation, more money invested (deepening) (note this seems to be the meaning, see next entry for a common definition)
capital deepening - in a growing economy capital deepening raises capital per worker for all workers (See LSE)
critical for - important for
stock market index - a method of measuring the performance of part of the stock market, when the stock market does well teh index goes up (See Wikipedia)
MSCI indices - stock market indices for several different groups of countries and kinds of stocks prepared by Morgan Stanley Capital International (See Wikipedia)
MSCI Asia ex-Japan index - the MSCI stock index for Asian countries that excludes by far the largest: Japan
weighting in an index - the price of each country or stock is given a weight in the index depending on its relative size and capitalization
the country's weighting in the MSCI Asia ex-Japan index - what percentage of the index the country stock prices
constributes
a mutual organisation - an organisation run for the people who use its services (not its owners, for example, a co-op running a supermarket or a credit union that offers the same services as a bank)
demutualise into a public company - to change from a company run for the people who receive the company's services to a company run for owners or shareholders
liberalisation - to reduce rules and regulations in an industry
liberalising the securities industry, overhauling laws
reforms - improvements
tax reforms - improvements in the tax system
financing instruments, instruments - an investment bought and sold in an organized system (stocks, bonds, derivatives, commodities futures)
infrastructure funds - an investment fund that invests money for many individual investors in infratstructure projects
national savings programme - a government programme that helps everyone in the country save money
supplement - add to
benchmarks - quality or performance standards used for comparison and measurment
a waiver - permission not to do something
dividend - the regular annual payment from a company's profits to the investors who hold the company's stock
tax waiver on dividend income - permission not to pay taxes on dividend income
pension, pension plan - a system of saving for retirement in which both employer and employee make regular payments into a fund, after retirement or diability these funds are withdrawn
pension benefits - the series of regular payments of money made to a retired person by a company or government
Government Pension Fund (GPF) - the official name of the Thai government pension fund for civil servants
civil servants - employees of the government
set aside - to keep money for some future use
premiums, insurance premiums - regular payments to an insurance company for insurance
reserves - money kept for future use
actuary - the expert who calculates insurance risk and payments for insurance companies and pension funds
actuary data - statistics on accidents, fires, deaths used to calculate risk and insurance payments
exempt - permission not to do something
taxes will be exempted - permission not to pay taxes
asset transfer - changign the owner of an asset
trustee - someone who is responsible for managing money or property for other people
X is a vehicle for Y - X is a way or method of achieving goal Y
an investment vehicle - a way of making an investment
a trustee vehicle - a way of managing money for other people
sukuk instruments, taxes will be exempted for asset transfers made to a trustee vehicle.
obstacles - problems that prevent goals from being achieved
the securities borrowing-and-lending field -
eliminated - remove completely
formal retirement coverage - money saved for retirement through some system (not saved personally)
Social Security Fund (SSF) - a government programme to provide different sorts of benefits to workers such as money when they lose their job or money when they get injured on the job, workers and their employers pay part of their pay checks every month into the fund (See list of benefits)
contribute to a fund - regularly put money into a fund
tax overhaul - making all the improvements in the tax system that need to be made
streamline - to make more efficient by removing unnecessary parts
streamline tax rules - to make tax rules more efficient my removing unnecessary parts
merger, a business merger - joining two or more companies into one company
Mergers and Acquisitions (M&A) - the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies as well as other assets. Usually mergers occur in a friendly setting where executives from the respective companies participate in a due diligence process to ensure a successful combination of all parts.(See Wikipedia)
provident funds - a system for saving money for retirement, both employee and employer make regular payments into the fund
voluntary - have choice, can do or not do, not required
involuntary - must do, required
voluntary provident funds - retirement savings plans within a country that people can choose to save money with
venture-capital - private equity capital
provided by professional outside investors to new, growth businesses.
Cash is exchanged for shares in a usually high risk company with
above-average returns (See Wikipedia)
broadening and deepening the capital market - getting more investors (broadening) and increasing market capitalisation, more money invested (deepening) (note this seems to be the meaning, see next entry for a common definition)
capital deepening - in a growing economy capital deepening raises capital per worker for all workers (See LSE)
critical for - important for
stock market index - a method of measuring the performance of part of the stock market, when the stock market does well teh index goes up (See Wikipedia)
MSCI indices - stock market indices for several different groups of countries and kinds of stocks prepared by Morgan Stanley Capital International (See Wikipedia)
MSCI Asia ex-Japan index - the MSCI stock index for Asian countries that excludes by far the largest: Japan
weighting in an index - the price of each country or stock is given a weight in the index depending on its relative size and capitalization
the country's weighting in the MSCI Asia ex-Japan index - what percentage of the index the country stock prices
constributes
a mutual organisation - an organisation run for the people who use its services (not its owners, for example, a co-op running a supermarket or a credit union that offers the same services as a bank)
demutualise into a public company - to change from a company run for the people who receive the company's services to a company run for owners or shareholders
liberalisation - to reduce rules and regulations in an industry
liberalising the securities industry, overhauling laws
reforms - improvements
tax reforms - improvements in the tax system
financing instruments, instruments - an investment bought and sold in an organized system (stocks, bonds, derivatives, commodities futures)
infrastructure funds - an investment fund that invests money for many individual investors in infratstructure projects
national savings programme - a government programme that helps everyone in the country save money
supplement - add to
benchmarks - quality or performance standards used for comparison and measurment
a waiver - permission not to do something
dividend - the regular annual payment from a company's profits to the investors who hold the company's stock
tax waiver on dividend income - permission not to pay taxes on dividend income
pension, pension plan - a system of saving for retirement in which both employer and employee make regular payments into a fund, after retirement or diability these funds are withdrawn
pension benefits - the series of regular payments of money made to a retired person by a company or government
Government Pension Fund (GPF) - the official name of the Thai government pension fund for civil servants
civil servants - employees of the government
set aside - to keep money for some future use
premiums, insurance premiums - regular payments to an insurance company for insurance
reserves - money kept for future use
actuary - the expert who calculates insurance risk and payments for insurance companies and pension funds
actuary data - statistics on accidents, fires, deaths used to calculate risk and insurance payments
exempt - permission not to do something
taxes will be exempted - permission not to pay taxes
asset transfer - changign the owner of an asset
trustee - someone who is responsible for managing money or property for other people
X is a vehicle for Y - X is a way or method of achieving goal Y
an investment vehicle - a way of making an investment
a trustee vehicle - a way of managing money for other people
sukuk instruments, taxes will be exempted for asset transfers made to a trustee vehicle.
obstacles - problems that prevent goals from being achieved
the securities borrowing-and-lending field -
eliminated - remove completely
formal retirement coverage - money saved for retirement through some system (not saved personally)
Social Security Fund (SSF) - a government programme to provide different sorts of benefits to workers such as money when they lose their job or money when they get injured on the job, workers and their employers pay part of their pay checks every month into the fund (See list of benefits)
contribute to a fund - regularly put money into a fund
