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Sovereign Wealth Fund limit, $10 billion from $190 bil in reserves best. Main reserves function is to manage exchange rate, keep baht, exports stable & competitive.

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SOVEREIGN WEALTH: Chatumongol warns against BoT taking helm of fund by Wichit Chantanusornsiri & Parista Yuthamanop

A sovereign wealth fund should be managed by a board comprised of representatives from across society, according to Bank of Thailand chairman MR Chatumongol Sonakul.

He said he had put a similar proposal to the Abhisit Vejjajiva government, calling for a fund board represented by officials from the central bank and Finance Ministry, the Budget Bureau and investment experts from the asset management sector.

Such a fund should not be managed by the central bank alone. By nature, the central bank does not want to take risk.

The Democrat-led government did not go ahead with the idea.

"Such a fund should not be managed by the central bank alone. By nature, the central bank does not want to take risk," said MR Chatumongol, a former central bank governor and finance permanent secretary.

Finance Minister Thirachai Phuvanatnaranubala last week told the central bank to consider a sovereign wealth fund to invest in overseas projects.

A number of countries around the world, including China, South Korea, Vietnam and Singapore, operate sovereign wealth funds to manage excess government revenues or foreign reserves.

Thailand's foreign reserves are running at an all-time high of nearly $190 billion, compared with $172 billion at the end of 2010. Reserves have climbed in recent years thanks to inflows from trade and investment and moves by the central bank to stabilise the baht.

MR Chatumongol, speaking on the sidelines of the Fiscal Policy Office's annual economics symposium, stressed that Thailand's foreign reserves belonged to the entire country, not the central bank or the ruling government.

Any consideration to [establish a sovereign wealth fund] has to focus on the overall good.

Establishing a sovereign wealth fund would require big changes to the Bank of Thailand Act and the Currency Act. Under the law, permitted reserve assets include gold, foreign currencies, foreign government bonds and Thai government bonds issued in foreign currencies.

Expanding possible investment options to infrastructure projects would potentially boost returns for the country, albeit at a higher risk.

But the central bank already faces considerable challenges in managing its reserve portfolio, considering the fact that weakness in the US and European economies suggest further currency weakness for both the dollar and euro in the years ahead.

MR Chatumongol said investing in overseas bonds offers negligible returns, while intervention imposes high costs for the central bank. When the central bank intervenes in the foreign exchange markets, it must issue local bonds to help absorb foreign inflows to prevent disrupting the domestic money market

The process, known as sterilisation, results in expenses for the central bank on the interest paid to investors to hold the bonds.

The central bank's bond auction on Friday, for instance, saw 50 billion baht of 14-day notes sold for an annualised yield of 3.40785%. By contrast, investing in US government one-year bonds currently pays interest of just 0.1%.

MR Chatumongol said the challenge would be how to structure reserve investments to not only avoid losses, but ensure availability in case of need.

About $10 billion could be used for a wealth fund without affecting market confidence in the central bank's reserve levels.

Mr Thirachai said further study and public consultation was needed before any decision was made. "One thought is for the central bank to create sub-accounts within the reserve account."

If profits are generated, then they revert to the government. 'If losses are incurred, then the government must set aside a budget to cover," he said. Mr Thirachai, a former senior central banker before joining the cabinet last month, acknowledged that any investment came with risk.

"There is always a chance to profit as well as lose. What we must consider is how to maximise returns," he said.

Central bank governor Prasarn Trairatvorakul welcomed the move by the Finance Ministry to discuss the fund.

Careful consideration was needed, considering that the international investment position has remained negative in recent years, with a deficit of $5 billion as of 2009.

A deficit in the international investment position indicates that foreigners own more Thai assets than Thais own foreign assets. 

Frankly, [a sovereign wealth fund] is not really an urgent issue at the moment. Helping flood victims is much more urgent

(Source: Bangkok Post, SOVEREIGN WEALTH, Chatumongol warns against BoT taking helm of fund, 6/09/2011, Wichit Chantanusornsiri & Parista Yuthamanop, link) 

Economics Vocabulary

Sovereign Wealth Fund (SWF) - an investment fund owned by the government that invests money for the whole country (See Wikipedia)
wealth fund - same as "sovereign wealth fund"

fund - a collection or gathering together of money for some purpose เงินทุน กองทุน
sovereign - (of a country) ruling itself เอกราช อำนาจอธิปไตย
wealth - how much money and assets a person or country owns

central bank - the main government bank in a country that manages the supply of money and loans (credit) in the economy by adjusting the cost of borrowing from the bank (policy interest rate) (See Wikipedia)
central bank governor - the head of the central bank, the highest level manager in the central bank

board - the group of people who make the high-level policy decisions that guide an organization, also called the "board of directors"
chairman - the head of the board of directors, also called "chairman of the board"
X comprised of Y - X is made of Y (the parts or members of X are Y)  

board comprised of representatives from across society - the group making high-level policy and investment decisions has people from all different parts of society with different interests and goals

take the helm of Y - to officially control an organisation or company Y มีตำแหน่งผู้ควบคุม
proposal - a plan or suggestion for a group to consider ข้อเสนอ

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
experts - people who know a lot about some subject or activity ผู้เชี่ยวชาญ

asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
asset management - the management of the financial assets of companies (and people with money to invest) in order to maximize return, , also called "investment management" (See Wikipedia)
sector - a part of the economy  ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)

asset management sector - the part of the economy that specializes in investing money (mostly for other people)

nature - the basic quality of feature of something ลักษณะที่แท้จริงของสิ่งต่างๆ, ธรรมชาติ
risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง

issue local bonds to help absorb foreign inflows to prevent disrupting the domestic money market - same as "sterilisation"

sterilisation - buying up and accumulating foreign exchange reserves, as Thailand has been doing recently, increases the money supply, to cancel this increase, the central banks sell bonds, exchanging the bonds for the new money, thereby decreasing the new money that was created, "Most often sterilization is used in the context of a central bank which takes actions to negate potentially harmful impacts of capital inflows - such as currency appreciation and inflation - both of which can cause loss of export competitiveness... in the 21st century, sterilisation has most commonly been associated with efforts by nations with a balance of payments surplus to prevent currency appreciation." (See Wikipedia)

results - what is produced in the end by an activity or task
interest - payments made for the use of another's money for a period of time

annualised - for one year ในหนึ่งปี (calculated for the period of a year using statistics (figures, numbers) for a shorter period such as a quarter or half year)
yield - the total amount of profits or income that you get from an investment or from a business, for example, a yield of 10% on your investment.

bond - a formal contract to repay borrowed money with interest at fixed intervals, a paper certificate is issued much like a stock certiticate (See Wikipedia)
bond yield -  the interest rate of the bond, the annual income from a bond expressed as a percentage of the current market price of the bond, the annual coupon of the bond divided by the market price of the bond, note: there are different kinds of bond yields (See Wikipedia)

auction - selling things by competitive bids, selling to the person who offers that best price (See Wikipedia) การขายโดยการประมูล, การขายทอดตลาด
bond auction - an auction to sell bonds

foreign government bonds
issued - made available ออกใหม่
Thai government bonds issued in foreign currencies

go ahead with the idea - decide to do a project (that has been planned and proposed)

finance - to provide money for something จัดหาเงินทุนให้
permanent - happening or existing for a long time or for all time in the future ถาวร
finance permanent secretary - a high-ranking permanent government official (civil servant)

overseas projects - projects in other countries, in foreign countries
funds - money needed or available to spend on something เงินทุน

excess - greater than is usual; too much of something มากเกินปริมาณที่พอดี
revenues - money received by a business or government รายได้ของรัฐ
excess government revenues - when the government collects more money in taxes than it needs to pay for government salaries and projects (budget surplus, not the normal deficit)



currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)
foreign currencies - the currency of a foreign country (not Thailand)

currency weakness - when a currency becomes less valuable compared to other currencies (which makes the country's exports cheaper and more competitive in international markets)
currency strength - when a currency becomes more valuable (making exports more expensive and less competitive in international markets)

reserve - something currently not being used but that can be used when needed สำรองไว้ ที่จัดสรรไว้ สำรอง
foreign reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง

assets - a thing of value with an owner, or example: stocks, bonds, real estate, loans to others, or money ทรัพย์สิน
reserve assets - assets kept for future use (future central bank interventions (buying and selling) in foreign exchange markets)

stabilise - to reach a state where there are no longer any major changes or problems ทำให้มีเสถียรภาพ
moves by the central bank to stabilise the baht - same as "intervene in foreign exchange markets"

intervention - becoming involved in a situation and trying to change it การแทรกแซง
foreign exchange intervention - when the central bank buys and sells in foreign currency markets to influence the baht exchange rate
intervenes in the foreign exchange markets

trade - the buying and selling of goods การค้าขาย
inflows from trade - money coming into Thailand from exports sold to other countries (trade surplus)

on the sidelines (of a large meeting) - at a large meeting, some small meeting (such as an interview or a few questions asked by a journalist)
annual - happening once a year ประจำปี
symposium - a conference or large meeting in which experts and acadmics discuss a subject in detail

speaking on the sidelines of the Fiscal Policy Office's annual economics symposium

stressed - emphasized, said was important
stressed that Thailand's foreign reserves belonged to the entire country

the ruling government - the politicians who won the last election
consideration - giving careful thought to something before making a decision

establish - to start a organization or practice that will likely continue for a long time สถาปนา, ก่อตั้ง, จัดตั้ง
focus - concerned itself with one important thing ให้ความสำคัญ

options - choices, the different things that someone can choose to do ทางเลือก
expanding possible investment options- increase choices for investment

infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค

potentially - possible in the future ที่อาจเกิดขึ้นได้
boost - to increase; to strengthen เพิ่ม; ทำให้มีกำลังมากขึ้น
boost returns - make more money, increase profit

negligible - very small or unimportant ซึ่งไม่สลักสำคัญ
offers negligible returns - can only make a small amount of money with investment, small profits

albeit - although, though
potentially boost returns albeit at a higher risk - make more money from the investment (but the investment is riskier, so as in gambling, possible losses are greater too)

portfolio - a set of investments owned by a person or organization, such as securities (stocks, bonds) owned and derivatives owned by a firm or individual หลักทรัพย์
reserve portfolio - all the different kinds of assets held by the central bank as "foreign exchange reserves" 

in the years ahead - in the future

considerable - large; of noticeable importance จำนวนมาก ค่อนข้างใหญ่
challenges - difficult tasks that require great effort
face considerable challenges - will have difficult projects and difficult goals to achieve

imposes high costs - is expensive, uses a lot of money

local - related to this country (here: Thailand)
absorb - to take in a liquid, gas or other substance form the surface or space around ซึมซับ ดูดกลืน

domestic - within the country ภายในประเทศ
process - a series of actions that you take in order to achieve a result แนวทางปฏิบัติ, กระบวน, วิธีการ

contrast - a difference between two things when you compare them ความแตกต่าง
By contrast, - looking at a situation that is different

challenge - something that needs a lot of skill, energy, and determination to deal with or achieve สิ่งที่ท้าทาย, การท้าทาย
ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ ให้การยืนยัน
availability - they exist and people can use them
structure reserve investments to not only avoid losses, but ensure availability in case of need
 
confidence - trusting and believing in something, feeling sure or certain about something ความมั่นใจ ความเชื่อมั่น
consultation - talking to people so you know their opinion before doing something that has an effect on them
public consultation - ask the people what they want (and experts what they think will work)

accounts - the accounting records of a company, the records of money paid, received or owed over a period of time by a company
sub-accounts - breaking one main account into several smaller accounts (which "add up to" or "roll up to" the larger account) 
reserve account - the bank account at the central bank in which the country's foreign exchange reserves are kept

generated - created
generate profits = create profits, make money

revert to government - goes back to the government
If profits are generated, then they revert to the government - the government gets profit (and also loss, which is a very real possibility as risk increases)

incur losses - when an organisation officially loses money (and is recorded in accounting records and official quarterly and annual reports)
If losses are incurred, then the government must set aside a budget to cover the losses

budget - an amount of money able to be spent on something งบประมาณ
any investment came with risk - in general, there is a risk-return tradeoff in making investments (the higher the risk, the higher the possible return;  making only low risk investments, is not rewarded, and only receives low returns)

profit - money that you make from selling goods and services after all your costs have been paid กำไร
There is always a chance to profit as well as lose

welcomed the move - liked that they did, approved of what they did (their action)
consideration - thinking carefully about a decision before it is made (projecting what will happen, planning for things that could go wrong = contingencies)
careful consideration was needed - must plan carefully before making a decision

financial position - the amounts of different assets that an investor owns or "holds"; the different assets in an invstors portfolio 
the international investment position - foreign assets owned (held in the investment portfolio)
deficit - when money spent (going out) is greater than revenues (have to borrow to cover deficit; financed or funded by borrowing)

Frankly, ... to speak truthfully ....

urgent - needs to be done quickly (or problem solved quickly), must happen quickly, needing to be dealt with immediately ที่เร่งด่วน
issue - a problem that needs to be considered ประเด็น
moment - a very short period of time; a particular time or occasionชั่วขณะ, โอกาสสำคัญ

not really an urgent issue at the moment

victims - people who are killed injured or harmed in some way from an accident, natural disaster, crime, etc.
flood victims - people who have lost money and been harmed from flooding across the country 

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