Temasek the model for Thai splurge

BANGKOK - Thailand plans to set up an investment holding unit modelled on Singapore's Temasek Holdings to manage state assets and help pay for a 765 billion baht ($26.8 billion) Government plan to build subways, railways and irrigation schemes.

A law to create the so-called superholding company will be introduced in the session of Parliament ending early July, said Suparut Kawatkul, permanent secretary at the Ministry of Finance.

The Government also plans to improve management at state-owned companies through the unit, which will earn dividends from stakes in companies such as Thai Airways International.

Prime Minister Thaksin Shinawatra is looking for ways to fund the five-year public works spending plan aimed at boosting economic growth. Setting up the holding unit may also help the Government to get easier access to 52.6 billion baht ($1.9 billion) it earned in dividends from 60 state-run companies and agencies last year.

"Under the current structure, if the dividend is paid, it goes into Government coffers," Suparut said. "Taking it out is another matter."

The Government plans to spend as much as 765 billion baht on building subways and railways, 252 billion baht on energy-related industries, 142 billion baht on irrigation works and the balance on building low-cost homes, schools, hospitals and telecommunications.

Dividends and profit from the superholding company are expected to meet 35 per cent of the cost.

Still, some Thais might have concerns about how the new company would use the money it received, said Vichit Suraphongchai, chairman of the executive committee at Siam Commercial Bank.

"The concept makes sense, but people will ask, is it transparent?"

The public would accept it if the Government ensured that the money was used for economic, not political, purposes, said Vichit.

Thailand is accelerating its plans to build public work projects as economic growth slows.

Southeast Asia's second-largest economy expanded 6.1 per cent last year after growing 6.9 per cent in 2003, and the end of a freeze on diesel prices may cut growth to 4.7 per cent.

Consumer spending has also started to slow.

State assets transferred to the superholding company will not provide enough funds to pay for the planned public works, so the unit may also sell bonds and asset-backed securities, and seek private investment.

The Government has not yet decided on a name for the unit, which will be owned by the Ministry of Finance.

- BLOOMBERG