Push for opening in banking ahead of AEC

"While Asean members plan to open the AEC financial market in 2015, with full opening coming in 2024, we should accelerate it," he said yesterday.

More foreign banks here, in particular large banks from Asean countries or China, India and South Korea, should increase competition, he said.

Consumers would benefit from the expected narrowing of the interest spread between loan and deposit rates, he told the Fiscal Policy Office's annual symposium on the future of the Thai economy moving towards the AEC.

For example, the first-, second- or third-largest bank in India should locate branches in Thailand to facilitate the growth in trade and investment between the two countries, he said, adding that he would consult with the Bank of Thailand on relaxing the barriers to entry.

To prepare for the AEC, the government will cut the corporate income-tax rate from 30 per cent to 23 per cent next year and to 20 per cent in the following year.

The Board of Investment is also considering reforming its incentive package, as current tax breaks may be too much, Thirachai said.

As more Asean firms list on other stock exchanges in the near future, minority shareholders should be protected, he said. Currently it is too costly for shareholders to pursue civil cases against companies in other Asean countries.

Asean governments are now working on a mechanism to protect shareholders, Thirachai said.

Bhanupong Nithiprapa, economics dean at Thammasat University, said Singapore would gain a greater advantage under financial liberalisation, as its banks were very competitive.

The Thai government should prepare for liberalisation by strengthening its fiscal position. Public debt should be reduced to 40 per cent of gross domestic product to maintain fiscal discipline. Lower debt would leave the government with ample resources in time of crisis.

The deepening of economic integration will also bring risks to the economy, possible via trade and financial market linkages, he said.

Pailin Chuchotthavorn, chief executive officer of IRPC, a subsidiary of PTT, said the government should develop rail and road links with Asean countries, particularly the East-West Corridor from Danang, Vietnam, to Dawei in Burma, and the link to southern China and India.

Former finance minister Chalongphob Sussangkarn said Asean should look beyond 2015. Now academics are trying to look at Asean 2030. Researchers expect that by 2030 Asean as a bloc will be as important as a key economic player as India, though Asean's economy may be much smaller than China's.

A study by the Fiscal Policy Office found that Thailand's value-added-tax rate of 7 per cent was too low while its corporate income-tax rate of 30 per cent was too high compared with peer countries. And the highest rate of 37 per cent in Thailand's progressive personal income tax is also too high.