Project Name: Capital Market Development Phase III
Project Description: Linkage to Country/Regional Strategy The 2007¿2011 country partnership strategy identifies capital market development as one of the three core strategic areas that are essential for enhancing the competitiveness of Thailand’s economy. The overarching objective of the CPS is twofold: (i) to support Thailand’s economic and social development agenda at the national level; and (ii) to strengthen Thailand’s role and capacity as a regional development partner. At the national level, ADB’s value addition lies in three core strategic areas that are essential for enhancing the competitiveness of Thailand’s economy: (i) infrastructure development; (ii) capital market development; and (iii) capacity development. Support for the development of infrastructure is being separately provided through a series of TAs over 2006-2009 with one more PATA being currently processed for 2010 aimed at mainstreaming public private partnerships for infrastructure development. On capital market development ADB has been actively involved through technical assistance over the last 3 years: (i) under the ADB advisory TA a diagnostic study was undertaken that identified weaknesses in important areas of capital market operations, and by initiating the implementation process of the required reforms laid the groundwork for the capital market to play an even stronger role in supporting Thailand’s economic development and creating a more resilient financial sector, and (ii) this was followed by TA to help design the overall framework for capital market reforms with sequenced implementation targets and milestones to lead to an internationally competitive capital market in Thailand that will facilitate funding of the basic investment needs without creating distortions in the form of currency and maturity mismatches. The Capital Market Development Master Plan (CMDMP) for 2009-2014 is thus one of the principal outcomes of these TAs and was to be the main anchor for the Capital Market Development Program that was processed in 2009 but deferred at the request of the Government. The request for the above CMDP is now been renewed for 2010. In addition, the TA also covered some of the more difficult practical aspects of the implementation program built on the work done under (i) above. The reform measures undertaken by the Government since 2007 reflects ADB’s engagement over the past years through TAs and advice in implementing the said reforms. ADB’s medium-term engagement program started with the diagnostic phase in 2006-2007, followed by the design phase in 2008-2009 and leading to the implementation phase, in line with the CMDMP over the period 2009-2012. It is expected that the Government would pursue the medium-term reform agenda towards meeting the overall objectives of the Government’s CMDMP 2009-2014. The CMDP processed in 2009 provided for a post-Program monitoring framework for follow-up policy measures that the Government and ADB agreed thereby creating the basis for continuous policy dialogue and engagement over July 2009 to March 2012 to follow through on specific policies required for long-term structural adjustments over the implementation period of the Capital Market Development Master Plan. A TA was programmed for 2010 and now being processed to support these measures. .
Impact The TA will lead to an increase in the size, depth, and liquidity of Thailand’s capital market leading to increased contribution by the capital market to domestic financing
Outcome The outcome of the TA will be diversification and resilience of Thailand’s capital market and enable Thailand to better cope with shocks and risks stemming from a protracted global credit crisis.
Outputs and Timeframe (i) Medium-term Reform measures pursued through implementation of core elements of the CMDMP, (ii) Strengthening Market Surveillance and investigation leading to better investor protection, (iii) Strengthened Market Infrastructure and Intermediaries, (iv) improved efficiency in government cash management, (v) New risk-mitigation products introduced, and (vi) case for mortgage credit insurance determined.
