Bangkok--28 Feb--SET Proposal on Capital Market Development “3 pronged approaches — 7 policies — 17 measures” By Association of Capital Market Academy Alumni (ACMA) Approach 1: Formation of national agenda on Thai capital market development (1 approach-2 policies-2 measures) 1.1 Upgrade the capital market’s participation in determining macro-economic policies Measure 1: Making capital market the fifth agency in determining macro-economic policies, along with the Ministry of Finance, Bureau of the Budget, Bank of Thailand, and National Economic and Social Development Board. 1.2 Establishing a National Capital Market Development Committee Measure 2: Establishing a National Capital Market Development Committee to push for a national agenda that promotes Thai capital market development, with the Deputy Prime Minister or the Minister of Finance as the chairman and related state and private agencies participating. The performance of the committee will be evaluated within a year of its conception. Approach 2: Adjusting future developments in the capital market to be in concert with the trends of financial globalization (1-3-12) 2.1 Supporting government policies that create savings and investment channels Measure 3: Backing government policies that encourage long-term savings and that create more local institutional investors, particularly through creating a national pension fund. This fund should focus on investment through various retirement funds, such as RMFs and LTFs, that have been proved successful. Government policies should also encourage investment in mutual funds so that citizens’ savings are professionally managed for maximum return. Measure 4: Supporting state enterprise privatization, which will result in widespread acceptance of the listing of state enterprises on SET. This is because privatization is a normal characteristic of countries whose financial systems are of a high level, will help improve the efficiency of the state-owned enterprises, and open opportunities for Thais to become owners of these organizations. However, all conditions and procedures must be seen to be transparent and not give a monopoly or oligopoly to a private body. Measure 5: Supporting state investment in basic infrastructure, which will promote both fund-raising on the Thai capital market and employment among local companies. Both will lead to more opportunities for ordinary Thais and the strengthening of the market. 2.2 Upgrading of the local capital market’s capabilities to accommodate financial globalization Measure 6: Creating greater depth within the equity, bond, and derivatives markets. Measures could include an increase in the numbers of Thai institutional investors and listed companies; the systematic creation of liquidity for government bonds; the cancellation of business tax and tax on capital gains from bonds; allowing securities firms to play more role in bond trading/dealing/underwriting; making the debt market an alternative for small- and medium-sized businesses with non-investment grade bonds available; and introducing new derivative products to provide investors with risk insurance tools comparable with what’s available in other regional markets. Measure 7: Reducing all costs related to capital-raising to enable the country to compete at the regional level. In this case, a thorough study into the costs at various markets in the region and timely plans to adjust costs carried by Thai businesses and investors should be conducted. Measure 8: Developing the personnel and knowledge base related to the capital market. Any added value in the future must come from the quality of services in the capital market; therefore, an improvement in personnel quality at all levels as well as among institutional auditors, listed firms and investors should be a permanent goal. Measure 9: Encouraging organizations to make more overseas investments. Because the capital market must play an important role in facilitating capital movement and alleviating pressure on the baht’s value, there should be a campaign to push for more investments by Thais overseas as well as the setting up of key mechanisms, such as a “Thailand Investment Corporation” to promote cross-border investment in international capital markets. Regulations should be adjusted to accommodate more capital inflow and outflow, while professional fund managers should help manage cross-border investment. An international investment analysis center is also recommended to introduce a knowledge base for all involved in overseas investment. Measure 10: Expanding ties between the financial and capital markets, with commercial banks as a catalyst, with consolidation among banks and reform of taxes on savings and investment to prevent overlapping between the financial and capital markets. Measure 11: Introducing corporate governance (CG) guidelines suitable for listed and non-listed companies that will lift the CG standards of the former and encourage the latter to adopt the policies now used by listed firms. Measure 12: Encouraging greater motivation to stay listed, by maintaining the existing corporate tax structure. A study should be conducted to clarify costs carried by both listed and unlisted firms, as well as setting special conditions that companies that have received government concessions, especially those related to public utilities, must list themselves on the Thai stock market. 2.3 Preparation for SET privatization and demutualization Measure 13: Study the requirements for SET privatization, particularly the legal aspects involved. Measure 14: Establishment of a clear direction for maximum benefits if SET is demutualized. Studies of all implications, both pros and cons, and public discussion would also likely lead to the best policy. However, SET can still be made more efficient whether it is demutualized or not; there is no conflict between demutualization and improving efficiency. Approach 3: Promotion of public confidence in the capital market (1-2-3) 3.1 The launch of a campaign showing the public that SET is working for the sake of the country and Thais in general Measure 15: A campaign under the concept of “SET for the sake of Thailand and its people”, through schools, teachers and students as well as by promoting understanding among people outside SET so they understand why some policies need changing. 3.2 The creation of legal clarification to build up trust and credibility Measure 16: Clarification in law enforcement in legal issues that are of wide public interest. For example, securities price manipulation or capital gains tax could be used as case studies to create understanding and correction of any flaws. Measure 17: Encouraging those involved in the capital market to participate in the passage of new laws and the amendment of existing financial and business bills that would affect the development of the capital market. An example of such an existing law might be the Foreign Business Act. All involved in the stock market must also possess clear understanding and take part in the process from the beginning.