Thailand's capital markets must continue to develop to help serve as a counterweight to the banking sector as a funding source for the private sector, said Finance Minister Korn Chatikavanij yesterday.

Mr Korn, a former chairman of JPMorgan Chase and long-time investment banker, noted that bank credit accounted for as much as 90% of gross domestic product, while the market capitalisation of the Stock Exchange of Thailand lagged at just 79% of GDP.

His speech at the SET emphasised that the government was ready to support the capital market to develop and expand.A healthy, efficient capital market would help bring down funding costs for companies by offering competition to the banking sector.

Mr Korn said while he had no plans to intervene in interest rates set by local banks, the oligopolistic nature of the industry and authority wielded by the largest banks was a constraint for the economy.

"Market dominance [by local banks] at times may lead to injustice or unfairness. The challenge is how we can make the equities market compete and encourage businesses to want to access capital from the market," he said.

Market confidence, whether on the part of investors or issuers, could only come through a clear and firm commitment to ethics and corporate governance, Mr Korn said.

Securities regulators, whether at the SET or the Securities and Exchange Commission, must also adhere to a high standard of conduct, he said, indirectly referring to widespread market concerns last year about the qualification of directors appointed to the two agencies by the previous government.

SET chairman Pakorn Malakul Na Ayudhya agreed that ethics and integrity was critical on the part of market regulators.

"I resigned from the boards of two listed companies as soon as I was appointed to the SET. While no rule says that I was required to do so, it simply isn't proper. We must give importance to corporate governance," said Mr Pakorn, who has also served as a former SEC secretary-general.

Mr Korn added that he favoured consolidating the Agricultural Futures Exchange of Thailand with the Stock Exchange of Thailand to strengthen the commodities market in the country.

He said Thailand's financial and corporate sectors remained strong, with low debt-to-equity levels and healthy balance sheets to weather the global economic downturn.

The challenge for the government, he said, was how to most efficiently and effectively use public funds to stimulate growth and buffer the public from the impact of the global crisis.

Mr Korn said tax obstacles related to debt restructuring or mergers and acquisitions would be removed by the end of the year to support the market.

Consumer demand and consumption would benefit from tax waivers for property transactions, small companies with annual revenues of less than one million baht and community enterprises.

Mr Korn said the government was also moving forward with the Southern Seaboard development programme, which would include a "landbridge" from the Andaman Sea to the Gulf of Thailand to facilitate international trade.

source : www.bangkokpost.com