On March 23, 2021, Thailand’s government approved its latest economic relief package, valued at 350 billion baht (US$11.2 billion), to support businesses in the country.
Some 250 billion baht (US$8 billion) was allocated for soft loans while the remaining 100 billion baht (US$3.2 billion) will go towards an ‘asset warehousing’ program whereby debtors can use their assets as loan collateral but will have the right to redeem their assets under a specific time frame.
- Thailand’s latest relief package aims to improve the liquidity of businesses still impacted by the pandemic through the issuance of soft loans.
- Businesses can also opt for the asset warehousing program, which allows debtors to use their assets as collateral for loans but have the right to buy back their assets once the financial situation of their business improves.
- The asset warehousing scheme will last up to five years.
The third stimulus package, valued at 1.9 trillion baht (US$58 billion) comprised of 500 billion baht (US$15 billion) worth of soft loans for businesses, 1 trillion baht (US$30 billion) in financial aid to temporary workers, contract workers, and self-employed persons, in addition to local infrastructure development. Furthermore, 400 billion (US$12 billion) was allocated to establish a Corporate Bond Liquidity Stabilization Fund (BSF), a special lending scheme that allows the Bank of Thailand to buy corporate bonds through the BSF to ensure sufficient liquidity in the market.
Who will be eligible for the loan scheme?
The scheme is open to small and medium-sized businesses in Thailand that have been impacted by the pandemic but are still deemed viable (potential recovery of the business is expected).
The scheme has expanded to include both new and existing borrowers, and the credit limit has increased to better support business recovery. Additionally, the length of the tenure was extended.
Under the loan program, business owners with credit not exceeding 500 million baht (US$15.million) with financial institutions can apply for loans of up to 30 percent of the credit limit; this was previously at 20 percent and capped at 150 million baht (US$4.7 million). The loan tenure has also been extended to five years, whereas earlier it was two years.
The guarantee period is 10 years and the amount will not exceed 40 percent of the debts under the scheme.
New creditors with no existing credit line, as of February 28, 2021, are eligible to receive 20 million baht (US$638,000).
How can businesses benefit from the asset warehousing scheme?
The asset warehousing scheme allows a business to use their assets as collateral for loans with the central bank assigning financial institutions to screen debtors.
Debtors will have the option to buy back their assets when they improve their financial status. The Bank of Thailand will provide the loans to financial institutions, which will be extended to debtors under this relief measure.
The debtor will have the first right to buy back the collateral asset within five years, at a repurchase price not exceeding the initial transfer price to the creditor. The creditor can charge maintenance costs to the debtor for the asset.
Further, if the debtor wants to lease the asset from the creditor, the rent payment will be deducted from the repurchase price. The asset warehousing scheme will last up to five years.
Who are the most likely beneficiaries of the scheme?
The government hopes this scheme will appeal to property owners, particularly in the tourism industry. A recent survey conducted by the Thai Hotels Association (THA) concluded that some 82.4 billion baht (US$2.6 billion) of combined hotel assets wanted to enroll in the program, with properties valued between 100 million baht (US$3.19 million) to 500 million baht (US$15.9 million) showing the greatest demand. The program also helps prevent hotel owners from selling their entire properties to foreign investors.
Tourism is a vital industry to Thailand’s economy, with the country registering over 39 million international visitors prior to the pandemic, contributing US$64 billion to the economy. The industry itself contributes to 20 percent of the total GDP.
Other initiatives to revitalize the tourism industry
In an attempt to revive the tourism industry, the Thai government has introduced a stimulus package worth 22.4 billion baht (US$718 million) to boost domestic travel through subsidized flights, hotel accommodations, the facilities at tourist destinations, and food, etc. The Tourism Authority of Thailand (TAT) extended the program to cover two million more people starting in May 2021.
Another initiative was the issuance of a special tourist visa (STV) in October 2020, which allows tourists to stay in the country for up to 90 days, and can be renewed twice – meaning tourists can stay up to nine months in Thailand.
To be eligible, applicants needed to undergo a 14-day quarantine and multiple COVID-19 tests upon arrival. Additionally, they are required to have travel insurance worth US$100,000.
This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]