State-owned Thai Credit Guarantee Corporation (TCG) plans to raise its loan guarantee ceiling for businesses investing overseas to encourage greater outbound investment.
Although some Thai businesses are viewed as sunset industries, such as apparel, there are opportunities overseas, especially in neighbouring countries like Cambodia, Laos, Myanmar and Vietnam (CLMV), said president Rak Vorrakitpokatorn.
“We should not let these sunset businesses die, as there are still opportunities elsewhere,” Mr Rak said.
Local businesses adopting cross-border loan guarantees will help them with easier loan access when investing abroad, he said.
But a law that governs TCG must be amended for corporations to provide cross-border loan guarantees, Mr Rak said.
At present, TCG can only provide loan guarantees for domestic borrowing and investment.
The Finance Ministry is deliberating the move to allow TCG to provide loan guarantees for Thai businesses that take out loans from Thailand-based financial institutions to invest in the CLMV market.
By providing loan guarantees for Thai businesses that invest overseas, TCG may not be required to accept all risks; it could adopt a reinsurance approach with state-owned banks such as the Export-Import Bank of Thailand, Mr Rak said.
For instance, if TCG collects a guarantee fee of two baht, it may reinsure to other organisations at one baht to diversify loan guarantee risk.
TCG is a government entity that shoulders loan guarantee risks at 100%.
TCG has to expand its business because it has been providing loan guarantees for Thai companies over the past 30 years, Mr Rak said.
