Interview : Antoine Gustin
How can foreign banks capitalise on high-networth individuals and a growing middle class?
ANTOINE GUSTIN: Unlike many countries in the region, Thailand’s economy is predominantly driven by its private sector. There are only a few large public groups, such as PTT and Siam Cement Group, and the rest are companies that are family owned or run by entrepreneurs, some of which are listed. There are many high-net-worth individuals in this country. These people are very knowledgeable about the tools and products they can use to grow their business, and they usually work with international banks on an investment or corporate banking basis. Domestic businesses are looking at capital markets and exploring new ways to invest in fixed-income products offshore, and they are certainly looking for returns. We have noticed a slight increase in assets invested offshore, which makes the market more appealing to a lot of international banks.
Where do you see banking competition growing in support of large corporations and multinationals?
GUSTIN: The government is pushing Thailand 4.0 to shift the country from a production-based to a service-based economy, with a particular focus on promoting technology, creativity and innovation, and it will continue to invest in the Eastern Economic Corridor (EEC) in the coming years. For the onshore market, local banks are more competitive where baht-denominated loans and deposits are concerned. For this reason, international banks often operate in niche segments, including equity capital markets, debt capital markets, commodity hedging, or mergers and acquisitions (M&A).
On the offshore side, the country has many firms that are going overseas. For years, local corporations have been investing increasingly overseas, namely in the Cambodia, Laos, Myanmar and Vietnam (CLMV) market, as well as Indonesia and Malaysia. China is also important for some Thai groups, as is Australia, which is a key market for the sugar, real estate and coal industries. Europe and the Americas are also key markets for Thai agri-food and petrochemical corporations. This is where the value of a foreign bank comes in, with network strength, as well as on-the-ground knowledge and expertise, to connect domestic clients with global opportunities.
This value is demonstrated when a bank works with Thai groups with an overseas presence. ASEAN banks are significant players, but the bulk of M&A financing and advising is provided by European, US or Japanese banks. Foreign banks continue to play a role in connecting institutional money with the corporates that require it. In addition, foreign banks will likely boost their support for the development of the EEC, where many public and private projects are expected to take place in the coming years. The EEC is indeed a cornerstone of Thailand 4.0 initiatives, with a goal to achieve more sustainable long-term growth.
What kinds of regulatory changes would allow Thailand to become a regional banking centre?
GUSTIN: The ASEAN Banking Integration Framework aims to achieve a free flow of services within the region’s market by 2020. Thailand aims to further develop its financial sector to become a regional financial centre. As part of this, there is a need to attract more international banks. For example, there are steps that Thailand could take to strengthen its position as a regional Treasury centre, even as new tax schemes, such as regional or area headquarters incentives, are being introduced.
At the same time, from a regional perspective, Thailand is already a business centre for the CLMV market up to the Greater Mekong Subregion – excluding China – as the majority of multinational companies present in Thailand operates in at least one CLMV country with their headquarters in Bangkok.
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