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Bangkok Post - Rubber lifeline go-ahead
Rubber lifeline go-ahead

Rubber lifeline go-ahead

State banks to lend B4.5bn for purchase

Surat Thani workers load stacked rubber sheet onto a truck to sell at a processing plant. (Photo by Patipat Janthong)
Surat Thani workers load stacked rubber sheet onto a truck to sell at a processing plant. (Photo by Patipat Janthong)

The Finance Ministry has given two state-controlled banks approval to extend a 4.5 billion-baht interest-free loan to the Public Warehouse Organization (PWO) to buy 100,000 tonnes of rubber in an effort to shore up the commodity's sinking price.

The plan will seek cabinet approval next week, Finance Minister Apisak Tantivorawong said after a meeting Thursday.

The Government Savings Bank (GSB) and the Bank for Agriculture and Agricultural Cooperatives (BAAC) will be the loan's sponsors.

On Tuesday, the government agreed to buy 100,000 tonnes of all types of rubber products directly from growers at an above-market price of 45 baht per kilogramme in an attempt to ease pressure on rubber farmers.

After peaking at over 100 baht per kg in the past, the rubber price has slid to about 30 baht due largely to lower demand from China and the softer oil price.

Mr Apisak said the rubber would be used for projects of eight ministries including the Transport Ministry and the Tourism and Sports Ministry.

The Finance Ministry also plans to instruct the GSB, the BAAC and two other state-run banks -- the Small and Medium Enterprise Development Bank of Thailand and Krungthai Bank -- to offer cheap loans to private companies to buy rubber to use as a raw material in the government's infrastructure projects, he said.

Krisada Chinavicharana, director-general of the Fiscal Policy Office, said the ministry would subsidise the 2% interest cost, translating into 80-90 million baht, for the 4.5-billion-baht loan to the GSB and BAAC.

Industry Minister Atchaka Sibunruang said the Board of Investment would offer an eight-year corporate income tax exemption plus a reduction of the tax to 50% for five years to attract downstream rubber industries to invest in Thailand in line with Prime Minister Prayut Chan-o-cha's policy of setting up a rubber city.

Somporn Isvilanonda, a senior fellow at the Knowledge Network Institute of Thailand, said it could take four or five years for the rubber price to reach 60 baht per kg as requested by farmers, assuming an eight-year cycle for rubber prices, which have plunged for two years.

He blamed the global economic doldrums, oversupply of rubber and the tumbling crude oil price for falling rubber prices.

The price for the benchmark Brent oil reached a 12-year low of US$29.73 a barrel on Wednesday.

Mr Somporn hailed the government's decision not to buy rubber at 60 baht per kg, as it would require hundreds of billions of baht.

The right way is to move towards bioagriculture to encourage the use of more farm products as raw materials, he said.

Rubber prices have affected the agricultural sector and caused overdue payments on leasing of pickup trucks and motorcycles.

Ronadol Numnonda, the Bank of Thailand's assistant governor for supervision, said people had been affected by low farm incomes, but it was not a recent development.

Non-performing loans (NPLs) are not expected to rise substantially due to tumbling rubber prices, he said.

An initial assessment suggests NPLs have stabilised, he said, adding that they were not projected to reach 3%.

Overall NPLs in the three months to September 2015 rose to 2.78% from 2.38% in the April-June period.

NPLs in the corporate segment jumped to 1.98% in last year's third quarter, valued at 93.1 billion baht, up from 1.19% and 58.4 billion baht, due mainly to Sahaviriya Steel Industries Plc's bad debt.

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