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No serious impacts from Dubai, Dong

By Business Reporters
The Nation
Published on December 1, 2009

With only US$140 million of Thai investment in Dubai World financial papers, Thais should stop panicking over the crisis, said the authorities and private companies.

They also urged all to stay calm over the Vietnamese Dong devaluation.

Prasarn Trairatvorakul, president of Kasikornbank, believed that the debt problem in Dubai, one of the 7 states in the United Arab Emirates, would be solved given the bad loans of only US$60 billion against UAE's oil reserves worth $2.7 trillion.

"Kasikornbank did not loan to both Dubai World and (its subsidiary) Nakheel and most of our customers have no exposure in these two companies," Prasarn said. To the overall Thai economy, the impact is minimal, as only 1.6 per cent of Thai exports go to UAE.

Bank of Ayudhya yesterday announced it extended $25 million (Bt837.5 million) to Dubai World Group Finance. The borrower made last payment interest in October and the next payment is due on January 21. The borrower is to repay all in June 2010.

Suchart Sakkarnkosol, Bank of Thailand's senior official, said that on Dubai World, with only $140 million worth of papers held by Thais, impacts would be greater to Thai investors who are putting money directly in assets in the state. Meanwhile, the Dong devaluation will affect only labour-intensive industries like shoes and clothes, but this would not pose long-term problem to Thailand. Meanwhile, Thailand and Vietnam focuses on different markets to sell their rice.

Central bank official Atchana Waiquamdee added all agricultural products remain quoted in US dollar, and Dong is not a major currency in the region.

"Few Thai investors are in Dubai, but more from Dubai in Thailand. Dubai World's impacts, meanwhile, could hurt investor confidence," she added.

Korn reiterated the slight impact on Thailand on both fronts. While Dubai World debacle could cost about Bt100 million in damage to Thai construction firms, the weaker Dong would not hurt exports and imports. He emphasised that the Dong was devalued to address the current account deficit, and therefore, it would not hurt Thailand's rice exports which have advantage on higher quality.

Sopon Pornchokchai, president of Agency for Real Estate Affairs, noted that aside from contractors and professionals involved in business in Dubai, indirect impacts could be seen in declining purchasing power for Thai properties. And as the crisis hurts global economy, this could pressure inflows to Thailand.

To Thiti Tantikulanan of Kasikornbank,Vietnam is the only Asian country that is running both a budget and trade deficit which caused the Dong to weaken. Foreign exchange reserves fell from US$22 billion at the start of 2009 to $16.5 billion dollars. Vietnam's trade deficit has been growing at around $2.2 billion a month while the foreign direct investment into the country has fallen to around a 25 per cent of 2008 level.

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