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Thailand dips into cash cows to support economy
[BANGKOK] Thailand's military government is leaning on state-run enterprises to support economic expansion by speeding up investment, as risks loom from fizzling exports and tourism.
Outlays by state enterprises jumped almost by half to 310.9 billion baht (S$13 billion) in January through September, government data shows. Officials have set the firms a goal of disbursing 95 per cent of their annual investment target.
"These are huge companies that can drive the economy," Prapas Kong-led, director-general of the Finance Ministry's State Enterprise Policy Office, said in Bangkok on Thursday. "We're trying to boost investment by state enterprises for the rest of 2018."
Gross domestic product growth probably eased to 4.2 per cent last quarter, the slowest pace this year, according to a Bloomberg survey ahead of a Nov 19 report. The expansion remains robust, but two key engines - exports and tourism - are sputtering as the Chinese economy slows. That's putting the onus on drivers such as investment.
Assets of state firms - such as oil explorer PTT and airport operator Airports of Thailand - reached 14.3 trillion baht last year. That's almost equivalent to the value of Thai annual gross domestic product.
But the state is struggling to make government enterprises more efficient, even as it uses them as cash cows for investment: their profits have declined from a 2013 peak, and an index of listed government firms compiled by Bloomberg fell over the past five years while the wider stock market climbed.
"It's not good for Thailand to have such large state-owned enterprises, especially when they lack efficiency and are poorly managed," said Deunden Nikomborirak, a former Finance Ministry official who tracks economic governance at the Thailand Development Research Institute in Bangkok. "They are being run like the government, with lots of rules and regulations."
The military administration recently scrapped a plan to set up an investment holding company for government shareholdings - akin to Singapore investment firm Temasek Holdings Pte - following criticism that it was a step towards privatisation.
Efforts to change the way state firms are run have dragged on for years. Mr Prapas said legislation to reform their management will be finalised soon.
The generals that seized power in a coup in 2014 have focused on spurring investment through government-run companies and state projects, seeking to lift the pace of economic growth closer to the levels seen in neighbours such as Indonesia and Malaysia.
Criticism of the military administration's policies and project choices is intensifying ahead of a long-delayed general election now expected in late February.
Aside from growing political risk, the economy next month may also have to absorb the first interest-rate increase since 2011, after the Bank of Thailand on Wednesday signaled it's closer to normalising monetary policy.