Bangkok--25 Oct--TRIS Rating TRIS Rating Co., Ltd. has affirmed the rating to Bangkok Metropolitan Administration (a local government organization, hereinafter referred as “BMA”) at “AA+” with “stable” outlook. The rating is based on the strategic position of Bangkok Metropolis (Bangkok), as Thailand’s administrative and economic center, and continual economic growth. The rating also reflects BMA’s reliable and increasing tax revenue, consistently sound budgetary performance, and a strong financial profile due to its almost debt-free position. The rating, however, is constrained by the restriction from seeking additional revenue sources, despite the huge demand for capital investment for public transportation and infrastructure and an increasing financial burden from assuming public services delegated from the central government under the decentralization plan. The concerns to be monitored are the relationship with the central government and the absence of a concrete debt management framework, which BMA would need to achieve prior to raising debt in the future. The “stable” outlook reflects BMA’s reliable revenue sources and conservative budgetary policy. TRIS Rating expects that there will be no material adverse affect from the relationship with the central government. At the same time, BMA will continue to exercise proper financial discipline to ensure sound budgetary performance and a robust financial profile. 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 of developing public services for both residents and businesses in Bangkok. As the capital city of Thailand, Bangkok benefits from its position as the social, political and economic center of the country. In 2006, the Gross Provincial Product (GPP) of Bangkok was the highest in the country, amounting to Bt2,190,226 million or 28% of Gross Domestic Product (GDP). During the last five years, approximately 96% of BMA’s total revenue was from taxes, both local taxes collected by BMA (20%) and allocated taxes collected by other governmental departments and contributed to BMA (75%). The major component of local taxes is property tax, which accounts over 90% of total local taxes. Almost half of allocated taxes are derived from value added tax, while automobile tax and land transfer fees account for 20% each. Income from taxes is considered a highly reliable source of revenue for BMA, although the amounts vary with the country’s economy. Thailand’s economy is projected to continue growing, but at a moderate pace, in the near term due to the uncertain political situation. BMA’s financial profile is very strong, due to a balanced budget policy, which results in conservative expenditures planned, and its almost debt-free position.In general, Bangkok is the most developed city in Thailand. However, more investment in public services and infrastructure is needed to serve the expanding population and to facilitate economic growth. Those public services, including new projects initiated by BMA and the services transferred from the central government, require a large amount of funds for project development and ongoing expenditures. 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 are not sufficient to fund capital-intensive projects. Currently, BMA’s management is studying the possibility of seeking funding through the capital market to provide it with more flexibility to finance 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, said TRIS Rating. For more information please contact: TRIS Rating Co., Ltd. (TRIS Rating) Tel: 66 (0) 2231-3011 Ext. 500, Fax: 66 (0) 2231-3012 E-mail: [email protected]