27 Feb, 2021
Plan is to save viable tourism concerns involving soft loans and asset parking which must happen in tandem with the reopening of Thailand’s borders. Most analysts in Bangkok see an upside in tourism-related trade from 2022 and forecast the country reopening to vaccinated travellers in the third quarter of this year with a further relaxation being dependent on the vaccination drive which kicks into full throttle from June to December with the Ministry of Public Health aiming for 54% of all adults to be vaccinated.
The Thai government, led by the Finance Ministry working with the Bank of Thailand, is trying to engineer a blueprint that will allow the kingdom’s tourism industry time and financial breathing space to recover as the government pushes ahead with its vaccination programme with plans to begin reopening to commercial tourism in the third quarter of 2021 with rising numbers expected in the fourth quarter of the year.
The Bank of Thailand and the Finance Ministry are working closely to develop a plan to tackle the crisis within the foreign tourism sector which extends to a large proportion of the country’s hotels and other business operations such as airlines.
It comes as officials within both institutions are also pressing for the country to reopen as soon as possible to avert the risk of an uncontrolled collapse as a large number of creditors, particularly within the hotel and hospitality sector, find themselves unable to meet their financial obligations.
The central bank and ministry officials are understood to be looking at an asset warehousing scheme specifically designed for this crisis which has seen otherwise profitable concerns with quality assets plunged into financial peril because of the pandemic.
Industry, central bank warn foreign tourism must return to avoid collapse
As yet, there are no formal proposals on the table to be considered by the cabinet but intensive discussions are underway which would effectively allow commercial banks and borrowers in difficulty to transfer the assets of the business concerns to a loan warehousing scheme.
It is understood Mr Ronadol Numnonda, the Deputy Governor of the Bank of Thailand with responsibility for the oversight of financial institutions, is actively involved in the discussions.
The goal is to find a practical solution to allow the kingdom’s tourism infrastructure to survive by establishing a mechanism to give operators an opportunity to preserve the value of the assets and prevent the loans from going bad.
This would have to be done in tandem with reopening the foreign tourism economy which brought over ?2 trillion into Thailand in 2019. In this respect, the timing and coordination of the plan are critical to its success.
This plan is aimed at businesses and borrowers who have not been able to avail of a debt restructuring agreement with the banks.
The government is understood to be determined to ensure that the right balance is struck between the interests of the borrowers, who would effectively end up renting their property with an option to purchase it back, once the tourism economy comes back to life and confidence sets back in.
One option being proposed by the Bank of Thailand is that commercial banks themselves set up these ‘asset warehouses’ normally associated with economic collapse seen within the Eurozone in 2008 and 20o9 and the Asian Financial Crisis.
It is thought this situation is quite different as all the borrowing concerns are known to be viable under normal conditions while the assets are of a high quality and profitable nature.
Key considerations related to the new plan are insurance arrangements, the buyback price and terms afforded to the business owners while also protecting the lenders involved.
The government, through the Finance Ministry, is ready to play its part with concessions on property transfer fees and any potential corporation profits tax liabilities being waived.
It is also being reported that it may earmark ?100 billion of the special soft loan fund of ?500 billion for this strategically important purpose.
‘The central bank is allowing banks to set up their own warehouse to manage NPAs, rather than setting up a centralised warehouse,’ said one source involved in the ongoing discussions.
‘Basically, the asset warehousing concept would use a budget of around ?30 to ?50 billion, while the government is likely to prepare a budget of around ?100 billion for the scheme,’ the source outlined.
There are also plans to extend the scheme also to other sectors of the tourism economy in particular airlines who are waiting for the government to put meat on the bones of a suggested soft loan deal for them as they wait for the skies to reopen while they haemorrhage capital in unprecedented losses.
Thai Airways recorded a loss of ?140 billion in 2020, a record for Bangkok’s SET Stock Exchange. It comes days before it is to present a survival plan to the Central Bankruptcy Court in Bangkok which must be approved by all creditors.
The arrival of vaccines in Thailand this week and a more upbeat outlook in prospects for overcoming the pandemic has led the financial markets in Bangkok to look closely at stocks and investments linked to the now decimated tourism sector.
On the market, the expectation among traders and analysts is that the government will allow vaccinated travellers to enter Thailand without restrictions in the third quarter of this year with an even more liberal regime in the fourth quarter depending on how well the kingdom’s vaccination campaign comes along.
The prospect of vaccines has lifted the cloud of doubt that hung over the industry but there is, as yet, still no certainty.
The campaign starts on Monday but will start on a large, scaled basis from June when an effort will be made to inoculate 10 million people a month leading to 30 million people or nearly 54% of the population over 18 years of age receiving the full dosage required.
In recent days, an analyst with Capital Nomura Securities in the city suggested tourism sector stocks on the SET exchange linked with tourism, although they may continue to fall during 2021, will recover in 2022.
The same analyst highlighted the massive cost of this pandemic when he disclosed his firm expects Minor International, one of Thailand’s most successful enterprises owned by Mr Bill Heineke, will lose ?10 billion this year.
Last year, Mr Heineke encouraged the government, in a public letter, to lock down and this year called on it to reopen with the help of vaccines. The multinational company, established by the entrepreneur in 1978, is involved in hotels in Thailand, the restaurant sector and the lifestyle retail sector.
However, despite this, the analyst says his firm is recommending Minor International (MINT) to its clients for 2022.
It is hoped that the same can be said of Thailand and its prospects.
