The Bank of Thailand is preparing a further relaxation of foreign exchange regulations to facilitate local firms and individuals investing abroad.
Suthasinee: Pushing investment abroad
Suthasinee Nimitkul, the director for foreign exchange administration and policy, said the central bank started to relax regulations for outbound investment by allowing local firms to invest in foreign assets without seeking permission since 2009, leading outbound investment to increase to US$10 billion last year from $4 billion in 2009.
From April-June, it will allow shareholders of listed firms to convert funds for investment in more than a 10% stake of foreign firms without asking permission.
The central bank will also relax currency exchange for local investors' investment in less than a 10% stake of companies abroad, which abandons a previous requirement that such investment be conducted by an intermediary such as a private fund and securities company.
She said the relaxation is aimed at saving cost and time for local firms. The central bank sent a request to the Finance Ministry to approve the moves, she said.
Ms Suthasinee said the central bank has allowed local firms to issue domestic bonds denominated in foreign currency since last Oct 17. The option curbs foreign exchange risk for local firms expanding abroad.
The central bank will also allow local firms to buy foreign currency and deposit it in foreign currency accounts at commercial banks without a time limit for withdrawals or a cap on outstanding balances.
This should benefit firms planning to invest abroad that wish to secure funding at the most competitive foreign exchange value, she said.
Ms Suthasinee said the central bank plans to relax regulations further to allow local firms to unwind their currency hedging contracts freely for outward investment and foreign-currency loans apart from payment for goods and services that is already permitted.
Wetang Phuangsup, a senior official in the Fiscal Policy Office, said the FPO is studying a rule to make expansion abroad more attractive for local firms' taxes, as the current system requires them to include income from abroad in their corporate tax liability, causing some local firms to register overseas.
Pongpen Ruengvirayudh, the central bank's deputy governor for monetary stability, said the central bank and Finance Ministry have been pushing hard for liberalisation of foreign exchange rules to facilitate outward investment. This should help local businesses to diversify the risks.
Currently, the value of local business expansion aboard remained as low as one-fourth of Singapore's and one-third of Malaysia, said Ms Pongpen.
Cross-border cash transfers in excess of 500,000 baht will soon be allowed.
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- Writer: Parista Yuthamanop