Thai govt sets up fund for loans

31 March 1997 00:00  [Source: ACN]

THAI textile producers have welcomed the government's plan to set up a Baht20bn (US$770.4m) fund to provide low-cost loans until 1999 for upgrading of machinery.

Industry officials said the move will also boost business for polyester fibre producers which supply the textile producers.

A Tuntex official expects the fund to spur growth in the textile business, and is optimistic the loans will help the beleaguered Thai textile industry to recover by this Q4.

'Small textile producers with outdated equipment and high debts need the government's help before they can employ new machinery to help them compete with low-cost producers from Indonesia and China,' he said. Labour costs in China and Indonesia are one-third of the labour costs in Thailand.

He noted that machinery costs, particularly for high-end machines from Europe and Japan, can account for more than 50% of total costs. 'The high costs can be prohibitive, but the loan's low interest rates and the flexibility of the repayment period will ease the burden on textile producers who want to upgrade their equipment,' he said.

The fund has been established by the Ministry of Industry and the Bank of Thailand. The Industrial Finance Corp and the Thailand Export-Import Bank will also contribute to the fund. Approximately Baht1bn will be made available this year, and another Baht4.5bn next year, a Ministry of Industry official said.

The remaining Baht14.5bn is expected to be available only in 1999 after the economy picks up and when the high current-account deficit is lowered.

The loans will be offered at an interest rate of 9-10%, well below the market average of 13.7%. Companies will be given ten years to repay their loans, but a two-year grace period will also be given.

The Thai government will stop offering the preferential loan rates after 1999 as the economy is expected to have recovered by then.

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