No. 78/2000. Thailand s International Investment Position and Revision of External Debts

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1 N. 78/2000 Thailand s Internatinal Investment Psitin and Revisin f External Debts Fllwing the Bank f Thailand's press release dated Friday, 23 June 2000 that the Bank f Thailand is making imprvements in data cllectin and disseminatin in line with internatinal best practice, the Bank f Thailand is disseminating as f tday; data n the cuntry s Internatinal Investment Psitin (IIP), cmprising data n external assets and liabilities psitin which can be classified as fllws: As f end-1999, Thailand s external assets excluding the assets f nn-banking sectr std at US$48.4 billin, an increase f US$7.0 billin frm 1998, f which US$5.2 billin is the increase in the Bank f Thailand's external assets. External liabilities excluding stcks f freign direct investment and freign prtfli investment amunted t US$95.6 billin, a decrease f US$9.5 billin frm 1998 due t external debt repayment f the private sectr. It shuld be nted that the annunced external assets cmprise nly thse f cmmercial banks and the Bank f Thailand while thse f the nn-banking sectr have been unavailable s far since the nn-banking sectr des nt reprt its external assets t the Bank f Thailand n a regular basis. Thse external assets belng t bth juridical persns and individuals in varius frms such as establishment f businesses and factries verseas, purchase f private residences. It is anticipated that such external assets are likely t be substantial. By the same tken, n the external liabilities side, data n the accumulated amunts f freign direct investment and prtfli investment in Thailand are als nt available. In this light, the Bank f Thailand has designed a wrkplan in cllabratin with the IIP's experts t cnduct a cmprehensive survey t facilitate a cmpilatin f the IIP and will prmptly release the survey results as they are available, thugh the prcess is expected t be time cnsuming. Annuncements will be made at the earliest available pprtunity.

2 The data n external liabilities differ significantly frm the previusly annunced figures due t a new cmpilatin methd via a cmprehensive survey cnducted by the Bank f Thailand n external debts f the nn-banking sectr. The survey was distributed t ver 6,000 cmpanies and cnducted with the IMF s technical assistance. The survey result revealed higher external debts f the private sectr than the previusly released figures, and the revised data which is retrspectively adjusted t 1995 is presented belw: Ttal External Debt In billins f US$ Mar Previus data Revised Data* * Data fr were estimated by applying the net flw data f external debt frm the freign exchange transactin recrds t the stck f external debt as f end E: The prvisinal March figure wuld be revised after the next survey has been cmpleted. E The differences resulting frm private external debts f the nn-banking sectr are presented belw: Private External Debt f the Nn-banking Sectr In billins f US$ Mar Previus data E

3 Revised Data* * Data fr were estimated by applying the net flw data f external debt frm the freign exchange transactin recrds t the stck f external debt as f end E: The prvisinal March figure wuld be revised after the next survey has been cmpleted. The abve differences between the previus and revised data reflect primarily the inadequacy f the frmer data cmpilatin system and the mdificatin f survey's methdlgy as fllw: 1) In the past 5-6 years, the peratin f Thai businesses has becme mre internatinalized. Sme cmpanies directly financed their investments abrad by freign lan that were nt channeled thrugh the Thai banking system. 2) Sme Thai cmpanies use external brrwing t settle payments r purchase capital gds abrad withut remitting such funds t Thailand. 3) The previus external debt data was based n a small sample size. In the current survey, all the cmpanies (ver 6000 in ttal) invlved in freign exchange transactins related t external debts in the last 10 years have been included in the survey database. 4) T strictly cmply with the highest internatinal standard, external debts denminated in baht are nw included in the revised data. Althugh the revised external debts derived frm the new survey methdlgy were higher than the previusly released ne, the Bank f Thailand is cnfident that the revised external debt data d nt affect the assessment f Thailand's debt servicing capability since 1) External debt data has already been in existence. Even thugh the inflws f debts were nt recrded in the freign exchange transactin reprts, all amrtizatin ccurring during the past years have already accunted fr the revised data.

4 2) The stck f Thailand's external debt have been steadily declining frm the peak f US$109.3 billin in 1996 t US$92.3 billin in March Since the end f 1997, private sectr has been repaying external debts substantially, thus leading t a decline in private external debt psitin by US$36 billin 3) The external assets, financed by external debts f the nn-banking sectr, in the frm f manufacturing factries, htels and service businesses generate freign exchange earnings t repay the external debts withut additinal burden t the cuntry. The Bank f Thailand wuld like t stress that the revised data have n serius impact whatsever n the debt servicing ability f bth public and cmmercial banking sectrs. Regarding the nn-banking sectr, despite higher external debt figures, they have already been in existence fr many years. In case f imprt financing, the external debt repayments have already been captured. Regarding the purchase f external assets, thse assets can generate freign exchange earning and put the least burden n Thailand's external debt servicing capability. In additin, the revised external debts are nt cnsidered high by internatinal standard as evidenced by the fllwing indicatrs. 1. Debt servicing ability indicatrs 2. On liquidity f debt repayment Ttal external debts t GDP declined t 77.2 percent in 1999 frm a peak f 93.6 in Debt service rati, which was higher than 20 percent in 1998, drpped t 19.4 percent in Internatinal reserves have been higher than shrt-term debt since In 1999 the rati f internatinal reserves t debt std at 1.7, and in March 2000, the rati is 1.8. Internatinal reserves level is higher than bth shrt-term and lng-term debt that is falling due in the next 12 mnths. The rati is 1.3 as f March 2000.

5 The maturity cmpsitin f external debt has imprved significantly with the share f ttal shrt-term debt declining frm 52 percent in 1995 t 20 percent in March In particular, the rati f nn-banking sectr declined frm 43.8 percent t 24.5 percent. Part f these debts are thse that have already been restructured r rescheduled, while thers are debts f the 56 clsed finance cmpanies which are nt ging t be repaid in the near term as it is awaiting the liquidatin prcess. As fr the preventive measure addressing the inaccuracies in the external debts reprting system, the Bank f Thailand prpsed a new Ministerial Regulatin in accrdance with the Exchange Cntrl Act, requiring entities with external assets and liabilities t regularly reprt their psitin t the Bank f Thailand. In additin, the Bank f Thailand will cnduct quarterly surveys f businesses with external debts, starting frm March Bank f Thailand 30 June 2000