Bangkok--10 Nov--TRIS Rating
TRIS Rating Co., Ltd. has assigned the first rating to a local government organization, Bangkok Metropolitan Administration (BMA), at “AA+” with “stable” outlook. The rating reflects the status of Bangkok Metropolis (Bangkok) as the center of Thailand’s economic and social development. The continual growth of Thai economy based on a number of positive factors supports the rating. The rating also reflects BMA’s reliable and increasing tax revenue, prudent budgetary performance, and strong financial profile due to its debt-free position. The rating, however, is constrained by the huge demand for capital investment (i.e. public transportation and infrastructure), an increasing financial burden from assuming responsibilities delegated from the central government under the decentralization plan, and the absence of a concrete debt management framework. Moreover, the political risk is viewed as a factor that may impact the BMA’s management and shall be closely monitored.
The “stable” outlook reflects BMA’s reliable revenue sources and conservative budgetary policy.
TRIS Rating expects that BMA will continue proper financial discipline to ensure sound budgetary performance and a robust financial profile. Political tension is not expected to cause any immediate adverse impact. Leverage, if incurred in the future for capital investment, shall be well planned to match BMA’s revenue and debt service ability.
TRIS Rating reported that BMA is a local government organization and has the responsibility to manage the public services in Bangkok city to ensure the quality of services for both residents and businesses. Bangkok is the capital city and the business, social, and political center of the country. In 2005, the Gross Provincial Product (GPP) of Bangkok was the highest of all 76 provinces, amounting to Bt2,045,505 million or 28.8% of Gross Domestic Product (GDP). Local taxes and taxes allocated from the central government comprise about 95% of BMA’s revenue. Income from taxes is considered highly reliable sources of revenue for BMA, although the amounts vary with the country’s economy. Thailand’s economy is forecasted to continue growing, but at a moderate pace in the near term due to the political stalemate. BMA’s financial profile is very strong due to a balanced budget policy and its debt-free position.
In general, TRIS Rating said, Bangkok is the most developed city compared to other provinces in Thailand. However, more investment in public services and infrastructure is needed to serve the expanding population and to facilitate economic growth. The public investment requirements are to improve the responsibilities transferred from the central government and to develop new projects initiated by the BMA. These investments require a large amount of funds. BMA is granted a subsidy and a tax revenue allocation from the central government on an annual basis. However, these funding sources are somewhat limited and not sufficient for capital-intensive project investments. Currently, BMA’s management is studying an opportunity to seek funding in the capital market to finance some large infrastructure projects. Incurring new debt in the future may increase the financial risk and weaken BMA’s financial strength. As BMA has not yet established an official debt management framework, TRIS Rating will closely monitor the development of a debt framework and BMA’s debt service ability in the future.