Thailand's Apisak tells foreign banks they can’t compete

By:
Eric Ellis
Published on:

Limited opportunity under military junta; domestic banks have retail dominance.

Thailand’s increasingly erratic military junta is desperate to kickstart the moribund Thai economy and wants the world to know that it’s open for business.

But if you’re a foreign bank, think again, because you’re probably not up to it, so it’s not worth even bothering. That’s the curious message from finance minister Apisak Tantivorawong in his first encounter with the foreign press a month after taking office.

In an interview at the finance ministry in Bangkok, Apisak is keen to underline the junta’s market credentials while stressing the need for foreign investment to get the politically riven economy moving again, as growth has slowed to around 2% to 3%.

apisake-160x186
Finance minister Apisak
Tantivorawong
at the August reshuffle
But Apisak, a long-time local banker, does not think the Thai banking sector will become any more amenable for foreign banks under the new regime.

That will not be the junta’s fault, he says, as he insists there is a free market. It is more down to the foreign banks themselves, intimidated by the protected domination of Thai banks in the market.

"The reason that foreign banks cannot operate in Thailand is because Thai banks pay very high concentration to their customer," he says.

But surely foreign banks can provide that service too, Euromoney asks, if they have an opportunity to expand beyond the representative offices most are limited too?

"No," Apisak insists. "They don’t have the network. The network that Thai banks have built is over 50 years. For retail, it’s very difficult for foreign banks. It would take a lot of money. It’s not worth it for them to do so.

"The market is open for anybody but it’s not easy for them to come in."

Such sentiment should not surprise foreigners trying to gain traction in one of the harder Asian markets for outside banks.

In Apisak, Thai banks have a powerful advocate inside the junta. Plucked from retirement to the ministry in August, he has long been a fixture of the Thai banking scene. He’s a former president of Krungthai Bank, one of Thailand’s big four banks, and was also a director of Siam City Bank, today merged into the mid-ranking Thanachart Bank.

He is also well connected to the influential Thai establishment too, stepping down as director of the royal family-linked Siam Commercial Bank after his elevation to the ministry.

Lobby connection

Also telling is his connection to the Thai Bankers’ Association, the influential industry lobby that he has chaired in the past. The TBA’s links to the junta are equally tight. Its current chair is Boontuck Wungcharoen, long-time CEO of TMB Bank, the former Thai Military Bank.

That’s the bank where former army chief and current junta leader-cum-prime minister Prayuth Chan-ocha was a longtime director, stepping down in June last year, a month after his coup over the democratically-elected Yingluck Shinawatra government.

Boontuck has become the banker to watch in Bangkok. In September, he was prominent in hailing a package of measures and handouts designed to stimulate the economy.

That package, to be implemented by Apisak’s ministry, has been described as a return to so-called 'Thaksinomics’, the economic policy that marked the five year rule of former populist PM Thaksin Shinawatra, until he was deposed in a 2006 military coup. Thaksin’s two-time finance minister, economist Somkid Jatusripitak, was recently appointed deputy prime minister, with responsibility for the economy.

Thailand banking remains dominated by its big four; Bangkok Bank, Siam Commercial Bank, Kasikorn and KrungThai, command around 70% of deposits.

Most foreign banks in Thailand are relatively light on the ground, with most restricted to representative offices or portfolio investments in local operations.

But outsiders have been nibbling away in Thailand in recent years, with much of the investment activity coming from regional Asian operators taking out small local banks, Malaysia’s CIMB took control of BankThai in 2009 and China’s ICBC took out ACL Bank the year after. More recently, Japan’s Mitsubishi UFJ bought a 72% stake in mid-ranking Bank of Ayudhya. Canada’s Scotia Bank has a stake in Thanachart, and ING in TMB Bank.