Local businesses are looking forward to more efficient cross-currency transactions once the Bank of Thailand eases foreign-exchange controls.
Piyasvasti Amranand, the former president of Thai Airways International, said the tight controls, aimed at preserving the baht's stability, needed to be amended if local businesses were to be more competitive.
The existing rule caps a local entity's transfers of funds abroad at $50 million per year. Special approval is needed for amounts exceeding $50 million.
Also seen as restrictive is a requirement that local businesses repatriate foreign-exchange gains within one year, which can increase operating costs.
As well, businesses are not allowed to unwind foreign-exchange hedging contracts for investment, which limits operating flexibility, Dr Piyasvasti said during a panel discussion held by the World Economic Forum.
He also noted that the central bank limited the types of assets that asset management firms could create, which has inhibited the broadening of the local capital market. All these rules, he said, reflected the central bank's orientation toward foreign-exchange stability, rather than liberalisation.
"If Thai companies are to be competitive, all these rules have to be discussed," he said.
The Bank of Thailand recently completed consultations with business and academics on a plan to comprehensively liberalise foreign-exchange regulations, said Pongpen Ruengvirayudh, assistant governor for financial market operations. It will soon be submitted for the approval of the Monetary Policy Committee and the Finance Ministry.
The academics and business executives who were consulted advised the central bank to be cautious in liberalising the foreign-exchange regime, but it intends the new plan to increase flexibility of businesses and individuals in outbound investment.
The country has been much more progressive in terms of liberalising inbound portfolio investment and direct investment, noted Ms Pongpen.
"We heard diverse opinions. Some people raise a case that some countries need to reverse their policies after full liberalisation," she said.
Changes expected over the next two years include extending the ceiling on outbound investment and increasing the types of investments eligible for local entities.
The central bank plans to lift a requirement for businesses to repatriate foreign-exchange income after the first phase of the plan takes effect.
The plan would also allow businesses to unwind hedging contracts for investment, aside from goods and services, which is now the case, she said.
"The plan is for the benefit of the long-term structure of the country's capital account. Although there might be some shockwaves, we could not delay it," she said.
Mr Pongpen said possibility of foreign capital flight was rather limited, if history is any guide. Capital outflows have been insignificant, despite the heightening risk seen in the euro.
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- Writer: Parista Yuthamanop