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Pandemic-hit Thai SMEs win new debt relief from government

Tourism slump and weak consumption continue to squeeze businesses

A DJ plays at an empty shop in Khaosan Road, a famous tourist destination in Bangkok. Financial assistance for SMEs, including deferred loan payments, ended last month.   © Reuters

BANGKOK -- Thailand's business community has finally prodded the government into extending assistance measures for small and midsize enterprises, which are still struggling due to the new coronavirus pandemic, after debt relief by the country's central bank expired in October.

The cabinet of Prime Minister Prayuth Chan-ocha approved on Tuesday the expansion and extension of some loan plans to support SMEs.

The government will raise the credit limit for each company under the state-owned Government Savings Bank's loan plan to 100 million baht ($3.2 million) from 20 million baht. The GSB will lend to commercial banks at a yearly interest rate of 0.01%, and commercial banks will lend to businesses at 2% per annum for two years.

The GSB will also ease qualification requirements to attract more tourism-related SMEs, which were pounded by the pandemic.

The decision followed outcry from the business community over the end of support for SMEs.

The Federation of Thai Industries, the country's prominent industry body, had asked for another round of government relief to bail out SMEs. FTI chairman Supant Mongkolsuthree said most SMEs have not fully recovered from the pandemic.

"Ending debt relief could have a serious impact on business, causing a liquidity crunch among SMEs and severely hampering purchasing power," said Supant.

The Bank of Thailand, the country's central bank, had introduced debt relief measures in April to help lessen the impact from lockdowns on SMEs, which faced a liquidity crunch. The measures included reduced interest rates, deferred loan payments, additional credit and debt restructuring.

The BOT had made it clear that it will not extend the measures, as it could lead to weak monetary discipline and damage the entire economy. There were 1.05 million loan accounts for the SMEs that joined the debt relief scheme, worth 1.35 trillion baht, according to the BOT.

Sangtawan On-nuam, the owner of a restaurant and art gallery heavily dependent on tourists, said his revenue dropped more than 80% due to the lack of foreign tourists. He participated in the debt-relief program but is still burdened by loans as tourists have yet to return in numbers.

"Debt relief helped me delay payments during the lockdown, but loans remain and I still need to pay interest, which is rising," Sangtawan said. "Tourism and purchasing power remain weak. There's no way I can repay my loans, and I think the government should issue another measure to help us."

According to the BOT, gross outstanding nonperforming loans totaled 509 billion baht at the end of June, equal to 3.09% of the country's outstanding loan balance and up from 3.04% three months ago. If too many small businesses cannot service their loans, banks and other financial institutions will take a hit, further dragging down the economy.

Efforts to revive the tourism industry -- one of the key pillars of the economy and one that involves many SMEs -- have just begun. Thailand welcomed just 39 Chinese tourists to Bangkok's international airport on Oct. 20, about seven months after it banned ordinary tourists from entering to prevent the spread of the coronavirus.

Rakti Yuankrathok, vice chairman of the Federation of Thai SMEs, who is also the owner of an apartment rental business, had said most SMEs are still facing a liquidity crunch and need more debt restructuring until business returns to normal. "We need more debt relief or payment deferments," Rakti said.

A new headache plaguing SMEs has also emerged, which may have led to the cabinet's decision; namely, the ongoing confrontation between the government and anti-government demonstrators, a situation that could further erode business sentiment and cut purchasing power.

Supant at The Federation of Thai Industries called on the government to implement the budget for fiscal 2021, which started in October. He has also requested that all government procurement involve local producers and manufacturers in order to support SMEs.

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