Bangkok Post : Vayupak may help finance projects

Vayupak may help finance projects

Size and maturity of fund to be expanded The cabinet has given a green light for the use of the 300-billion-baht Vayupak Fund as a financial tool to raise funds for the country's future development and investment.

After approving in principle on Tuesday the expansion of the Vayupak Fund to serve purposes other than maximising the profit from state-owned companies and enterprises, the cabinet has instructed related agencies to draft a guideline for the fund expansion, both in terms of size and maturity.

The first 100-billion-baht Vayupak Fund was set up in late 2003 as a 10-year flexible fund investing mostly in shares of listed companies previously held by the Finance Ministry. Among the shares it held were those of blue-chip stocks like PTT, Thai Airways International, Krung Thai Bank and Siam Commercial Banks. The fund guarantees a 3.5 % minimum yield.

Deputy Prime Minister Kittiratt Na-Ranong said the government needs to invest in infrastructure to maintain the country's competitiveness in the long term. It has already planned a 350-billion-baht fund to invest in new water-management projects. It has discussed various alternatives to mobilise funds such as issuing domestic bonds and overseas borrowing.

Enlarging the Vayupak Fund and will be another alternative to raise the funds for the long-term development projects. If successful, the government might not need to borrow as much as 350 billion baht and will be able to keep public debt within the limit.

Prasong Poontaneat, director-general to the State-Owned Enterprises Policy Office, said the Vayupak Fund will mature in the next two years and the agency is considering the fund's next step. In principle, the fund should be used as a financial tool for capital-market development but its scope of investment may be expanded to cover the shares of non-state enterprises. However, he has doubts about the government's plan to use the profit from the fund to invest in infrastructure development because the dividend paid to unitholders should be quite high compared to other sources, mostly soft loan with 1-2% interest rates

Mr Prasong said since the fund guarantees a minimum return to investors, the government may end up paying 5-6% interest.

In another development, Finance Minister Thirachai Phuvanatnaranubala has already signed an executive decree to allow the Bank of Thailand to lend 300 billion baht to commercial and state-owned banks at 0.01% interest, which the central bank puts in 70% of total credit line.

These banks then will lend to flood-hit small and medium-sized enterprises and individuals at 3% interest per year with a five-year repayment period.
The interest could not be under 3% or lenders will keep the funds in savings accounts and earn the difference between the lending and borrowing rates.

Writer: Chatrudee Theparat & Wichit Chantanusornsiri