Thailand eyes Japanese guarantee on state firms' bonds

Asian Economic News, June 7, 1999

BANGKOK, June 4 Kyodo

Thailand intends to ask Japan to guarantee long-term bonds to be issued by its state enterprises under the second phase of Japan's Miyazawa initiative, which was unveiled last month, Finance Minister Tarrin Nimmanahaeminda said Friday.

"We would prefer to explore chances of bond guarantees by either the Export-Import Bank of Japan or the Asian Development Bank (ADB) for our state enterprises, not for our global bonds to be issued by the Finance Ministry," Tarrin told reporters.

Tarrin made the comment after meeting with Eisuke Sakakibara, Japanese vice finance minister for international affairs.

Tarrin said Thai state enterprises relied "quite a lot" on foreign funds, but declined to detail how much they would need from the new Miyazawa initiative.

He said new funds under more relaxed conditions would help state enterprises deal with overdue foreign debt and finance investment budgets.

A working group comprised of the Thai Finance Ministry's fiscal policy office and an equivalent unit from the Japanese Finance Ministry will be set up to work out the details.

Last month at a ministerial meeting of the Asia-Pacific Economic Cooperation forum, Japanese Finance Minister Kiichi Miyazawa announced Tokyo will partially guarantee sovereign bonds issued by emerging economies to help mobilize some 17 billion dollars in private-sector capital for their recovery.

Tarrin said that based on the legislative process in Japan, the plan will be ready from October onward.

The Thai finance minister said it would not be appropriate to seek Japanese backing for Thailand's sovereign bonds.

"We want to stand on our own...We don't want to send any wrong signal to the market. The spread of Thai sovereign bonds is rated at a satisfactory level," he said, adding Thai sovereign credit ranks only behind Chinese and Hong Kong bonds.

The Thai Finance Ministry received a legislative mandate to raise 2-5 billion dollars through a global bond issue, but unfavorable market conditions throughout last year delayed the launch.

Tarrin said the launch of Thai sovereign bonds would not be soon.

Japan has created a 3 billion dollar fund in the ADB, and has passed legislation that would allow the Export-Import Bank of Japan to guarantee sovereign bonds issued by emerging economies, or to purchase them directly.