Progress on Thai infra trusts

The Thai regulator has announced it will allow companies to raise funds locally for infrastructure projects in neighboring countries.

The Thai regulator – the Securities and Exchange Commission (SEC) – has announced it will approve rules as early as this quarter for “international infrastructure trusts” to finance the construction of power plants, toll roads and other public works. The move was first reported on Bloomberg.

The SEC, which issued consultation papers in April this year, is responding to Thai and foreign companies which have expressed interest in setting up the proposed infrastructure trusts.

Retail trusts will be backed by revenues from infrastructure projects in neighboring countries under the condition that construction works involved in the projects be at least 70 percent completed and that the investee companies are listed on Thailand’s stock exchange.

The consultation papers recommended that these entities be allowed to invest in overseas infrastructure in the form of direct investment in infrastructure projects, investment in rights in the project’s future revenues or investment in the shares of the company operating the infrastructure project.

The statement accompanying the consultation papers also envisaged that, for trusts with investment in infrastructure projects under construction exceeding 30 percent, the unit trust will only be allowed to be offered to investors with a minimum subscription of 10 million baht (€0.2 million; $0.3 million). More details are expected to be issued shortly.

“Laos, Myanmar and Cambodia will require a vast amount of funds for the development of their infrastructure. The trusts help serve those needs and will be an attractive investment option,” Vorapol Socatiyanurak, secretary general of Thailand’s SEC, was reported to have said yesterday.

The measures aim for state-owned companies such as Airports of Thailand, Electricity Generating Authority of Thailand and Expressway Authority of Thailand to launch initial public offerings for infrastructure funds.

The Thai government is seeking to boost cross-border trade and address negative trade balances. According to local press, Cambodia, Laos and Myanmar together made up less than 4 percent of Thailand’s international trade last year.

However, Thailand is Cambodia's largest trading partner. Last year, the bilateral trade volume was worth $3.8 billion, up 40 percent year-on-year, according to an official statement published last November.

Kong Putheara, director of the statistics and planning department of the Ministry of Commerce, stressed that “the neighboring countries had many possibilities to increase their bilateral trade volume and that good transportation infrastructure [and] trade facilitation also contributed to the growth”.

Trade between Myanmar and Thailand was worth $5.57 billion, about 22 percent of all international trade worth $24.86 billion, during the fiscal year that ended in March 2014, according to the Ministry of Commerce.

Similar ratios apply to Thailand’s trade balance with Myanmar. Thailand’s exports to Myanmar were worth $4.2 billion, while imports from Thailand into Myanmar were worth $1.36 billion during the fiscal year that ended in March 2014, according to the Ministry of Commerce in Myanmar.

Myanmar’s large trade surplus with Thailand is due to important oil and gas exports. Overall bilateral trade between Myanmar and Thailand has risen steadily, from $2.9 billion in fiscal 2010-11 to $5.57 billion in March 2014.