Bangkok, Mar 12: Foreign investors, torn between temptation and fear, are holding back from taking advantage of cheap investments in Thailand, despite the plaudits the country has received from the International Monetary Fund.Although short-term portfolio investments have picked up, local and foreign analysts say much needed longer-term foreign direct investment is still not so forthcoming.While many feel Thailand is on track for economic recovery later this year, investors say they would rather wait for the dust to settle before charging in, after the country plunged into its worst-ever financial crisis.
The IMF sponsored a $17.2-billion bailout package for Thailand last August, and has launched a recovery programme. The fund believes Thailand has turned the corner.
Chief among investor worries is the stability of the baht, which has fluctuated wildly and lost about 40 per cent of its value against the dollar since flotation last July.
They are also concerned about when economic recovery will start and about Thailand's commitment to IMF-prescribed reforms.
Foreign investors are keen on seeing reform in property ownership, bankruptcy and foreclosure laws to enable corporates to restructure before they collapse.
And if restructuring fails, new foreclosure laws could speed up liquidation processes, which now take years to resolve.
Among the cheap pickings in Thailand for foreign investors are attractive stakes in commercial banks and finance companies ordered to raise capital by the central bank.
But Yukiko Ohara, senior analyst at UBS Securities Ltd in Tokyo, said: "Japanese banks, in general, are unlikely to move to invest in Thai banks at this moment as they are under strong pressure to slim assets in order to strengthen their financial conditions."
Also available on the block are cash-strapped companies engaged in a wide range of businesses in dire need of foreign fund injections to become liquid again and revive operations.
"Thailand overborrowed from foreign creditors to finance growth in the past years," said Suphavudh Saicheua, vice president at Phatra Securities.
"Now that we cannot meet the obligations, foreign creditors will turn into shareholders or owners of businesses. So it is important there must be laws to accommodate them and they are currently lacking," he added.
Thailand, for example, does not allow foreigners to fully own property.
"If I am a foreign investor, I can buy into an institutionthat has property backing a bad loan, for example, but I cannot sell that property on. It is an untradeable asset and a stumbling block," said Jacqueline Ong, analyst at Singapore-based I.D.E.A.
Thailand recently passed a more effective and new bankruptcy law which is awaiting gazetting. The foreclosure law is expected to be finalised in October.
"I think it is going to be some time before we see any evidence of successful acquisitions in Thailand," Ong said.
Long-term political stability is another key issue for investors, analysts said.
Although the three-month-old government of prime minister Chuan Leekpai is the darling of the markets and world bodies like the IMF, questions still linger about what sort of government might emerge after this one.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
