The Securities and Exchange Commission (SEC) has identified inefficient legal processes _ from passing and enforcing laws to amending them _ as the major obstacle to capital-market development.

Deputy secretary-general Chalee Chantanayingyong yesterday said the complicated legal process is weighing on the capital markets, and weak law enforcement fails to penalise wrongdoers.

He told at a capital-market development forum that the capital markets have expanded drastically in terms of market prices and capitalisation, but this is due mainly to the country's strong economy and fundamentals.

"Our legal process is time-consuming and complicated, with the involvement of too many parties, duplication and so on. Another main factor is that ministries and members of parliament, who are authorised to approve or axe a law, know nothing about capital markets," said Mr Chalee.

"This has always been our weakest link. The law has never succeeded in deterring wrongdoers."

Also, the populist mindset is a hurdle to passing laws that are unpalatable but necessary for long-term growth.

He said an example is the push for a mandatory pension fund. Even though it would benefit everyone in the long term, a draft has never seen the light of day, as politicians fear the wrath of workers who do not want to see their pay deducted even for their own good.

On capital-market quality, the panellists admitted some of the SEC's policies are less popular than others, especially one that encourages small and medium-sized enterprises (SMEs) to raise funds through the capital markets.

Banyong Pongpanich, the chief executive of Kiatnakin Bank, said he disagrees with the policy, as the capital markets are too costly for SMEs.

"The development should instead focus on attracting large companies such as state enterprises, as they have the capacity to be developed into quality companies for investors," he said.

For SMEs, he suggested they raise funds through the cooperative model, whose cost suits their business size.

Vorapol Pongpanich, secretary-general of the SEC, argued the entry cost may be high for SMEs, but it is worthwhile, as they need greater access to financial sources.

"Also, we give them the option of seeking a listing through venture capital," he said.