Allowing more banks will make sector more competitive, banker says

Expanding the number of financial institutions in Thailand will invigorate the banking sector, but the expansion should be gradual to maintain quality standards and minimise risks to the financial system, he told the seminar "Sustainable Development of the Thai Economy, Fiscal and Capital markets". The seminar was part of a training program for economic journalists organised by Bangkok Bank and the Economic Journalists Association.

It focused on a proposal to allow more financial institutions to enter Thailand.

Kobsak agreed that increasing the number of banks in the country would promote competition and reduce costs for the private sector and the public. Furthermore, the presence of more financial institutions would prompt banks to improve their services and force them to compete effectively. However, they should be gradual to ensure adequate regulation and risk management, he said.

An excessive number of banks may not guarantee consistent quality and risk management may not be comprehensive if not properly implemented, he said.

Kobsak also said the Thai economy can sustain itself, even if the formation of the next government is delayed for one quarter. Ongoing growth in the tourism sector is driving the economic expansion, he said, adding that he hopes the next government will accelerate the economic recovery and boost the tourism sector.

He said he expects a rise in Chinese tourists, which will help offset anaemic exports and production.

The key challenge for the government is to make it easier for tourists to enter Thailand, Kobsak said, suggesting that regional visas should be offered so that tourists can enter more than one country with a single visa.

He also spoke about the wealth gap, noting that the gap between the top 20% and the bottom 20% has increased tenfold. There is also a massive disparity in land ownership, while only 1% of the 110 million bank accounts in Thailand have more than 1 million baht in them. Still, they add up to more than 70% of total bank deposits, Kobsak said.

He said the top-down economic growth approach has failed.

If Thailand does not change this model now, it will become increasingly difficult to do so in the future, he added, stressing that the focus must be on sustainable development.

Thailand’s problems should be addressed at the community level, he said, before listing three major problems:

Informal debt: These debts have high interest rates that make it impossible to repay the principal and trap borrowers in debt.

Middleman: Brokers have too much in some sectors and the result is that only small portions of income reach, for example, farmers.

Knowledge gaps: There is a shortage of knowledge and innovation that prevents productivity from rising.

Kobsak suggested three solutions:

Local leadership: Creating strong local leaders will help guide communities to understand and solve problems, especially in establishing savings foundations and resolving informal debts.

Reducing the role of middlemen: Community groups can be formed to increase bargaining power and sell products directly to consumers and this can be facilitated by e-commerce and technology.

Private sector: Help can be provided for the private sector to directly support communities and the agricultural sector with clear and sustainable strategies, such as finding markets that sell agricultural products at reasonable prices. Incentives, such as tax benefits, may be provided to encourage more private sector involvement.

Kobsak also called for a reduction in red tape, saying the government should help reduce regulatory and legal barriers to economic development. Policies and short-term monetary measures do not provide lasting solutions, he said.

He said the slow pace of forming the next government will delay the approval of this year's budget by about three months. However, preparations regarding the use of the budget have already been made, so it should not significantly impact the overall economy.

Pressuring to attain a high level of economic growth may not be as important as maintaining a sustainable level of growth, he added. Once the government is successfully formed, the budget for the next fiscal year can be considered and approved, which should help stimulate the economy in the first quarter of next year and continue to drive the economy forward. However, if the formation of the next government is delayed for a long time, that will create more problems, Kobsak said.