Thailand aims to become global financial hub

Thailand is making strides towards becoming a global financial hub by focusing on five key industries: banking, securities, derivatives, digital assets, and insurance. This move comes in the wake of the 1997 Asian financial crisis, as the nation aims to build a resilient financial infrastructure and elevate its status on the global stage.

Caretaker Finance Minister Pichai Chunhavajira highlighted the necessity of promoting Thailand as a financial hub amid rapid changes in the global financial landscape. As countries worldwide develop financial regulations and technology to remain competitive, traditional hubs like the United States, United Kingdom, and Japan continue to evolve.

Meanwhile, newer centres such as Singapore and the United Arab Emirates (UAE) are enhancing their ecosystems to support financial businesses and foster innovation, said Pichai.

“Now is the time for Thailand to leverage its financial infrastructure and services, which continue to be developed, to attract business groups, investment, financial transactions, and knowledge.”

Thailand’s transformation aims to create a more agile and innovative financial sector, aligning it with other global financial hubs. This initiative is part of the government’s Ignite Thailand development agenda, which focuses on strategic investments and bond market reforms. The ultimate goal is to position Thailand as a financial hub equipped to meet future financial transaction requirements and influence global finance.

Becoming a financial hub would drive both economic and technological growth. Increased foreign investment could boost the country’s GDP, creating high-quality jobs not only in finance but also in related industries like technology, real estate, and services. This should stimulate the economy and improve the quality of life for the Thai population.

Technological advancements as a financial hub would facilitate the transfer of expertise and knowledge from abroad, covering areas like financial services, fintech, artificial intelligence, data analytics, and regulatory technologies. This transformation could also impact global financial policy and practices, integrating Thailand as a significant player in the global financial sector.

Different countries

Different countries have taken varied approaches to becoming financial hubs. Japan, for example, introduced its vision of Global Financial City: Tokyo in 2017, aiming to attract investment and foreign talent by creating programmes to support the establishment of financial and fintech companies.

The Japanese government also introduced the Financial Place Japan policy, which relaxed various regulations and offered tax benefits to support the operations of the International Financial Center.

Singapore’s strategy involved integrated development covering regulations, tax benefits, and infrastructure development. The Monetary Authority of Singapore relaxed licensing rules for businesses providing financial services and imposed a corporate tax rate of 17%, with personal income tax ranging from 2% to 22% and value-added tax at 8%.

The UAE established the Dubai International Financial Centre (DIFC) in 2004, offering tax benefits as a tax-free zone and allowing companies with 100% foreign ownership to operate within the centre. The DIFC also promotes staff development through educational programmes and training events to attract tech startups from around the world.

Thailand’s financial hub would aim to facilitate business operations by introducing laws to ease cross-border transactions and establishing a One-Stop Authority (OSA) to improve efficiency and technological development. The OSA would serve as the focal point for businesses to apply for licences in various financial service sectors, making the hub investor-friendly.

The hub is expected to support five financial industries: banking, securities, derivatives, digital assets, and insurance. The structure requires ongoing discussions with regulatory bodies, including the central bank, to ensure a flexible and agile regulatory framework that attracts global financial transactions while maintaining stability.

Thailand’s strengths in its bid for hub status include its regulatory framework and comprehensive infrastructure development. The government and regulatory agencies have prioritised creating suitable and flexible regulations to foster technological advancements. The country’s financial infrastructure, such as electronic payment systems, is crucial for facilitating convenient and secure financial transactions, including international electronic transactions.

Specific legislation

Thailand was one of the first countries to enact specific legislation to regulate digital asset businesses and develop capital market products that support sustainability, such as a carbon credit market. The country’s financial sector is considered progressive by outside agencies.

Thailand’s hospitality services, including accommodation, tourism destinations, and convenient transport, are additional strengths that could make the country a top choice among investors.

International Chamber of Commerce Chairman Montri Mahaplerkpong pointed out the need for the Ignite Thailand finance arm to enable small and medium-sized enterprises (SMEs) to gain easier access to financial sources. He suggested that increased capital inflows could encourage local commercial banks to lower their net interest rate spread, reducing the financial burden for SMEs.

Thailand currently has a spread of seven percentage points, higher than regional neighbours such as Singapore and Malaysia, where the spread is around four percentage points. A high spread is not good for borrowers, Montri said. The government may need to set up a new SME bank to deal with the spread issue.

Under the Ignite Finance initiative, local banks may face more competition as transnational companies might opt to use the financial services of banks from their own countries with branches in Thailand. In this scenario, the benefits of economic development could be limited to large companies rather than SMEs, Montri noted, reported Bangkok Post.