The World Bank Wednesday urged Thailand to continue easing existing laws and regulations that hamper small and medium-sized enterprises (SMEs) from easy access to funding.
Deputy Prime Minister Visanu Krua-ngam, who met Ulrich Zachau, the World Bank director for Thailand, Malaysia and Regional Partnerships, said the World Bank is pleased with the overall performance of the Thai government's efforts to address ease of doing business.
However, the bank remains concerned about the Secured Transactions Act and its limited coverage.
Mr Visanu said the World Bank suggested the government extend business collateral that considers SMEs' reputations and credit track records.
Thailand's Secured Transactions Act came into force on July 4, 2016, giving SMEs and startups easier access to credit by letting them use inventory, raw materials and intellectual property as collateral. The law helps unlock the financial limitations on entrepreneurs in securing loans to finance their businesses and create new business, hopefully contributing to economic growth as well.
Previously, borrowers could not retain possession of movable assets pledged as collateral for the duration of the security period. Out-of-court enforcement options were also limited.
The new law removes these prohibitions, providing borrowers with greater access to credit. These developments are expected to improve the country's system of secured transactions and increase investment in domestic ventures.
Under the law, the limitation on the type of assets that can be given as collateral is eliminated.
It is now possible to have as collateral a business, a right of claim, or movable property of the security provider used in operating a business such as machinery, inventory or raw materials, real property, intellectual property or any other assets as specified in the ministerial regulation.
Thailand has 2.8 million SMEs, of which 610,000 are registered as juristic persons.
Some 70% of SMEs previously used their land as collateral, with the remainder using other assets. In developed countries, only 30% use land as collateral.
Deputy Prime Minister Somkid Jatusripitak, who also met Mr Zachau, said the government will discuss the World Bank's proposal with the Bank of Thailand and Thai Bankers' Association.
Thailand climbed to 26th place in the World Bank's Ease of Doing Business ranking for 2018 among 190 economies from 48th in 2017 and 49th in 2016.
Several recent improvements included abolishing a requirement to obtain a company's seal and eliminating the need for approval of a firm's employment regulations from the Labour Department.
The government also introduced an automatic risk-based system for selecting companies for a tax audit; reduced the property transfer tax rate; adopted legislation to broaden the scope of assets that can be used as collateral; and implemented geographic information systems to access electricity.
Kobsak Pootrakool, the Prime Minister's Office Minister, said in January Thailand could crack the top 20 in 2019 ranking.
Thailand scored poorly in some areas of the ranking, such as dealing with construction permits, registering property, trading across borders and handling insolvency. The government hopes to improve these areas to move up in the ranking, he said.