Thai EXIM Bank to the
rescue!
After exports collapsed and trade finance along with it...
By Jon Fernquest
Earlier
this year the exports that have driven growth in Asian economies for
years suddenly collapsed. When exporters started having problems, the banks that lend them money (trade finance) started to lend less because the loans suddenly looked a lot riskier.
The Thai government then intervened to alleviate some of the problems. As economists at VoxEU noted recently:
"Thailand
will inject
an additional $140 million to the Thai EXIM Bank to increase export insurance. In
addition, $85 million were allocated
to the Small
Business Credit Guarantee Corporation so it can raise
small and medium-sized enterprises' credit
guarantee fund and loans. In response to increasing
demands from Thai exporters, the Thai EXIM Bank also provided risk assessment
services and related trainings. Familiarising small and medium
enterprises (SMEs) with trade
finance instruments is essential as buyer default risk
has increased and SMEs are usually not protected against it " (Source: VoxEU
also Bangkok
Post article)
Today's article covers the latest developments in government support being given to exporters, especially Japanese SMEs:
Japanese SMEs more hopeful
Aid may expand beyond export creditsBy NAREERAT WIRIYAPONG AND VICHAYA PITSUWAN
24/06/2009
Thailand is expected to grant other financial aid to Japanese small and medium enterprises (SMEs) operating locally in addition to offered by the export credit insuranceExport-Import Bank of Thailand (Exim Bank).
The condition that companies need to be at least 51% Thai-owned should be lifted for access to government loans, said Munenori Yamada, president of the Japan External Trade Organisation (Jetro) in Bangkok.
"In Japan, no matter whether you are a Japanese or foreign firm you receive the same treatment on financial assistance from the government," he said.
The Japanese Chamber of Commerce (JCC) recently asked the Thai government to help ease cashflow problems faced by Japanese SMEs.
The JCC has officially presented its proposal to government agencies including the Finance Ministry. It is seeking greater access for Japanese firms to credit from the Thai SME Bank and the export risk coverage from Exim Thailand.
Exim Thailand yesterday signed an agreement with the Nippon Export and Investment Issuance (Nexi) for trade risk coverage for Japanese affiliates using Thailand as their export base.
Under the agreement, Exim Thailand would offer export credit insurance to Japanese firms and Japanese joint ventures exporting products from Thailand to other countries except Japan.
In case of payment default, arising from commercial or political risk, Exim Thailand will pay compensation of up to 90% of the loss realised.
"We expect more measures will be introduced, though it will take time. Given the large number of SMEs in two nations, If they survive, both would definitely benefit," Mr Yamada said.
He said Japanese legislators were now debating a supplement budget for stimulating the economy, which would pave way for the Japan Bank for International Co-operation (JBIC) and Japan Finance Corporation (JFC) to financially assist 7,000 Japanese businesses in Thailand.
Japan also will ask Asean members meeting in Jakarta next Monday to step up stimulus programmes in the region through infrastructure development.
"We would propose faster trade and financial liberalisation within Asean under the Asean Economic Community (AEC) blueprint which took effect at the beginning of this year," he noted.
Economic liberalization
In a related development foreign investors in Thailand have called for services industry liberalisation to make Thailand more attractive for foreign direct investment.The Joint Foreign Chamber of Commerce in Thailand (JFCCT) has been pressing for service sector liberalisation for some time and will raise the issue again at its next quarterly meeting with the Board of Investment (BoI).
As Thailand faces the impact of the global financial crisis, the JFCCT believes some structural changes in some areas or bold decisions by the government could turn a crisis into an opportunity.
"Thailand need new boost and it could come with liberalisation of the service sector," Nandor von der Lueche, the JFCCT chairman.
He will raise the issue at a meeting between JFCCT members and Prime Minister Abhisit Vejjajiva in mid-July.
Industry Minister Charnchai Chairungruang said he would seek to discuss the request with the Commerce Ministry for further development.
Mr Charnchai also noted that the new One Start and One Stop Service Center for foreign investors was expected to open by September.
The centre aims to be the only facility investors need for dealing with applications involving many agencies, with shorter approval times as a result.
trade finance -
banking services that support the business operations of exporters (See
Wikipedia
also see US
government trade finance guide)
intervened - became involved in an activity (to solve problems and fix things)
alleviate problems - reduce suffering from problems, solve problems
export credits - government support for exporters including: direct credits/financing, refinancing, interest-rate support, export credit insurance and guarantees, and deferred invoicing
export credit insurance, export insurance - insurance designed to guarantee that an exporter will be paid for his/her goods after delivery, protect exporters against commercial and political risks, (note: responsibility for collecting payment from the company that imports the goods in another country, or the company's agent, rests with the underwriter of the export)
Export-Import Bank of Thailand, Exim bank - government bank established in 1993 to support both Thai investors overseas as well as local investors in business relating to export or business which earns or saves foreign exchange (See website)
inject - put into
allocated to - given to
Small Business Credit Guarantee Corporation (SBCG) - a Thai company established in 1991 to provide "credit guarantees for viable small enterprises which do not have enough collateral to enable them to obtain sufficient credit from the financial institutions" (See website and list of similar companies in other countries)
credit guarantee fund - money set aside by the government to guarantee loans (pay back loans for business people who cannot pay them back themselves)
risk assessment - evaluating risks and estimating how big they are
instrument - a legal document
trade finance instruments - a legal document used in trade finance
buyer default risk - when buyers of your product do not pay you for it
Japan External Trade Organisation (JETRO) - the Japanese export promotion agency (See Bangkok website)
Japanese Chamber of Commerce (JCC) - the organisation representing Japanese companies operating in Thailand
cashflow - the movement of money into and out of a business
cashflow problems - when there is more money going out of a business than coming in so difficult to meet everyday business expenses (working capital)
ease cashflow problems - having enough cash on hand to meet business expenses (working capital)
export risk coverage, trade risk coverage - insurance to protect from problems when exporting goods
Nippon Export and Investment Insurance (Nexi) - a major Japanese provider of export credit insurance (See website)
an affiliate - a company connected with another larger company in some way
Japanese affiliates using Thailand as their export base - Japanese companies producing goods in Thailand for export
joint ventures - a business that is owned and ran by two or more companies (rather than one company)
payment default - not paying on time, late with payments
pay compensation - pay money to someone who has been damaged or lost money in some way
the loss realised - the money that the company lost (and was recorded in their accounting records)
Japanese Bank for International Co-operation (JBIC) - a bank owned by the Japanese government, founded in 1999 to "promote economical cooperation between Japan and oversea countries, by providing resources to foreign investments and by fostering international commerce. It also has a major role in promoting Japanese exports and imports, and the country's activities overseas" (See Wikipedia)
Japan Finance Corporation (JFC) - the parent company of JBIC, a policy-based financing institution
step up - increase (intensity of activity)
step up stimulus programmes - more government spending and tax cuts to get the economy growing again
liberalisation - relaxing rules in an industry, making the rules governing an activity less strict
financial liberalisation - relaxing the rules in the financial sector (for banks and stock firms)
services industry liberalisation - reducing regulations in service industries
a blueprint - a plan
Asean Economic Community (AEC) - a plan for the econmic integration of ASEAN states by 2015 with a gradual elimination of barriers to trade and investment in the region (See introduction and description [scroll down])
Foreign Direct Investment (FDI) - when a foreign company invests directly in a business in a country (in a "portfolio investment" an investor only holds stock)
Joint Foreign Chamber of Commerce in Thailand (JFCCT) - an organisation that joins together 22 foreign chambers of commerce and 3 business associations in Thailand (Read description)
Board of Investment (BOI) - the Thai government agency responsible for providing incentives to encourage investment in Thailand (See website)
intervened - became involved in an activity (to solve problems and fix things)
alleviate problems - reduce suffering from problems, solve problems
export credits - government support for exporters including: direct credits/financing, refinancing, interest-rate support, export credit insurance and guarantees, and deferred invoicing
export credit insurance, export insurance - insurance designed to guarantee that an exporter will be paid for his/her goods after delivery, protect exporters against commercial and political risks, (note: responsibility for collecting payment from the company that imports the goods in another country, or the company's agent, rests with the underwriter of the export)
Export-Import Bank of Thailand, Exim bank - government bank established in 1993 to support both Thai investors overseas as well as local investors in business relating to export or business which earns or saves foreign exchange (See website)
inject - put into
allocated to - given to
Small Business Credit Guarantee Corporation (SBCG) - a Thai company established in 1991 to provide "credit guarantees for viable small enterprises which do not have enough collateral to enable them to obtain sufficient credit from the financial institutions" (See website and list of similar companies in other countries)
credit guarantee fund - money set aside by the government to guarantee loans (pay back loans for business people who cannot pay them back themselves)
risk assessment - evaluating risks and estimating how big they are
instrument - a legal document
trade finance instruments - a legal document used in trade finance
buyer default risk - when buyers of your product do not pay you for it
Japan External Trade Organisation (JETRO) - the Japanese export promotion agency (See Bangkok website)
Japanese Chamber of Commerce (JCC) - the organisation representing Japanese companies operating in Thailand
cashflow - the movement of money into and out of a business
cashflow problems - when there is more money going out of a business than coming in so difficult to meet everyday business expenses (working capital)
ease cashflow problems - having enough cash on hand to meet business expenses (working capital)
export risk coverage, trade risk coverage - insurance to protect from problems when exporting goods
Nippon Export and Investment Insurance (Nexi) - a major Japanese provider of export credit insurance (See website)
an affiliate - a company connected with another larger company in some way
Japanese affiliates using Thailand as their export base - Japanese companies producing goods in Thailand for export
joint ventures - a business that is owned and ran by two or more companies (rather than one company)
payment default - not paying on time, late with payments
pay compensation - pay money to someone who has been damaged or lost money in some way
the loss realised - the money that the company lost (and was recorded in their accounting records)
Japanese Bank for International Co-operation (JBIC) - a bank owned by the Japanese government, founded in 1999 to "promote economical cooperation between Japan and oversea countries, by providing resources to foreign investments and by fostering international commerce. It also has a major role in promoting Japanese exports and imports, and the country's activities overseas" (See Wikipedia)
Japan Finance Corporation (JFC) - the parent company of JBIC, a policy-based financing institution
step up - increase (intensity of activity)
step up stimulus programmes - more government spending and tax cuts to get the economy growing again
liberalisation - relaxing rules in an industry, making the rules governing an activity less strict
financial liberalisation - relaxing the rules in the financial sector (for banks and stock firms)
services industry liberalisation - reducing regulations in service industries
a blueprint - a plan
Asean Economic Community (AEC) - a plan for the econmic integration of ASEAN states by 2015 with a gradual elimination of barriers to trade and investment in the region (See introduction and description [scroll down])
Foreign Direct Investment (FDI) - when a foreign company invests directly in a business in a country (in a "portfolio investment" an investor only holds stock)
Joint Foreign Chamber of Commerce in Thailand (JFCCT) - an organisation that joins together 22 foreign chambers of commerce and 3 business associations in Thailand (Read description)
Board of Investment (BOI) - the Thai government agency responsible for providing incentives to encourage investment in Thailand (See website)
(Source: Bangkok Post, business, Japanese SMEs more hopeful Aid may expand beyond export credits, NAREERAT WIRIYAPONG AND VICHAYA PITSUWAN, 24/06/2009, link)
