The economy is expected to bound back next year, but the government may need to inject more money into the economic system if the economy remains stubbornly in the doldrums, says Finance Minister Apisak Tantivorawong.

A wave of stimulus measures, the global economic pickup and a stable political situation at home will place the economy on the road to recovery next year, he said in an interview with the Bangkok Post, adding that unexpected factors such as the more-severe-than-expected drought could delay the rebound.

Mr Apisak said if economic woes did not deepen, the governments recent measures to put money quickly and directly into the hands of low-income earners in rural areas who had been hit by soft farm prices amid the stuttering economy would be enough to drive growth.

A 136-billion-baht stimulus package to aid rural residents emerged as the first measure since Deputy Prime Minister Somkid Jatusripitak and his team including Mr Apisak took the helm late last month.

The measures comprise a 1-million-baht no-interest loan for two years to 59,000 Village Funds, a 5-million-baht budget for7,255 tambonsto implement any project related to building or repairs in the area and development projects in line with the sufficiency economy as well as acceleration of budget disbursement for small projects worth less than 1 million baht nationwide.

The central bank last week trimmed the economic growth forecast for this year to 2.7% from 3%, saying the recent stimulus measures to help rural people would not be sufficient to offset completely the impact from ebbing exports, domestic consumption and private investment.

Next years GDP growth estimate was also slashed to 3.7% from 4.1% projected previously.

However, the Bank of Thailands revised-down GDP forecast does not take into account another stimulus measure to help small and medium-sized enterprises (SMEs).

One week after the stimulus measures to assist rural residents were launched, the government approved measures to help SMEs gain better access to fresh financial sources from banks. Moreover, privileges to stimulate investment and for the property sector are on the cards.

Mr Apisak is optimistic the global economy has already bottomed out and said signs of recovery included the US economic rebound gaining pace.

Even though the US Federal Reserves rate lift-off is expected in the coming months and will trigger capital outflows from emerging markets, the Thai economy is expected to be able to cushion the headwinds thanks to high foreign reserves and low foreign debt, he said.

Mr Apisaksaid it could take awhile for Chinas cooling economy to gather recovery pace, but the worlds second-largest economy would still expand by no less than 7%, while the 19-nation euro zone was seeing some signs of improvement.

Meanwhile, the Finance Ministry will launch an infrastructure fund into which all projects will be pooled, and the government is likely to guarantee a return to attract investors.

The advantage of poolingfund-raising forall projects into one infrastructure fund is the government can raise funds for projects in which investors may not be interested such as greenfield projects, Mr Apisak said.

The government may offer some level of guaranteed return, possibly leading to a higher rating for the infrastructure fund and thereby enticing large funds to put money into it, he told a seminar hosted by the Stock Exchange of Thailand (SET) yesterday.

The infrastructure fund would be another fund-mobilising channel in addition to public-private partnerships toalleviate the governments burden of pouring hefty amounts into infrastructure projects.

The government is set to spend nearly 2 trillion baht in infrastructure projects through 2022 excluding water management.

The lions share of investment in the megaprojects will go to double-track railways, high-speed trains, electric trains and motorways.

In another development, Mr Apisak said he wanted foreign stocks to trade through the SET, with investors able to settle prices directly in other currencies.

The SET must coordinate with the Bank of Thailand on this issue. I think its possible to do so, as the country has free inflows and outflows, he said. If foreign stocks were tradeable on the Thai bourse, it would change the landscape of the SET -- brokers from neighbouring countries might shift their investment to Thailand, and our market could become an Asean hub.

The Finance Ministry is also mulling measures to jump-start local investment.



The Regulatory Asset Base expression was defined and established in 1990 in the United Kingdom to avoid financial difficulties of private companies who were in the energy business. It is now the time that this definition should be implemented into the local environment in Turkey to avoid possible bankruptcies. The Regulatory Asset Base (RAB) usually refers to the measure of the net value of a company#39;s regulated assets used in price regulation. It is used in calculating important elements of the revenue requirements (the basis for the tariff calculation), depreciation allowance and return on capital.
(Ref. Wikipedia)

An important article was released by The Hurriyet Daily on 8 September titled Growing Financial Difficulties of Private Companies in Local Energy Business.

Let us read the first paragraph of that article:

Companies have paid 21.1 billion USD for the privatization of electricity in Turkey since 2009. However, due to deteriorating economic indicators and extreme value increase in the USD with respect to the Turkish Lira, local companies are in a difficult financial situation in repaying their debts to lenders. Turkish private distribution companies are unable to pay their 7.7 billion USD debt, out of which 7 billion USD belongs to commercial banks. In the case of a collapse in the repayment of their debts to the electricity markets, havoc will occur in the banking sector. Ref. Hurriyet 8-Sep- 2015
http://www.hurriyet.com.tr/ekonomi/30011693.asp

Electric distribution companies are in default due to the fact that their debts are in USD but their income is in Turkish lira, which has brought them to the point of bankruptcy. They have asked public sources to help them; however, there is a misinterpretation of the situation. There#39;s no crisis in this regard. There is a mismanagement and miscalculation of the financial sources of the private companies who were exposed to high debts.

These companies have exaggerated the incident when commenting, saying, Contracts have been made in US dollars, but the collections were in Turkish Lira. The recent exchange rate differences brought financial difficulty. Well, all contracts referenced were written in the tender documents upfront. There is no change later. The companies should make the calculations correctly to avoid such exposure to risk.

Markets regulate the private companies. Wisdom says that our private investors know best, so why didn#39;t these investors avoid the increase in prices before the cutthroat exchange rates were in place, and thus stop moving forward in the tender process? What was preventing them? In the past, our electricity market was owned and operated by public institutions. We used to have harsh criticism of public institutions. Contracts were not progressing properly, they were not completed on time, and they were completed incorrectly with progress lacking. Thus, plants could not be run well.

Because power plants, transmission, distribution, and retail all were in public ownership, they belonged to the public, to the nation, to us. They were as if ours in the end. We, Turkish citizens, saw them as our own property, we wanted them and hoped the best for them. Authorities in the public companies were our friends, they agreed with and accepted our criticism; they brought our feelings, writings, and solutions to their in-house meetings, and they tried their best to make the necessary upgrades.

Now the property has been passed to private investors. It is their property. We have no obligations, no responsibility, no care. They may operate or may not operate; they may shut it down if it is not profitable. If they cannot operate it properly and they lose money and go bankrupt and their property will be taken by the lending commercial bank and resold to another competent company. We have no obligation. So why are we entering such conversation? Why does the regulatory agency EMRA enter into the conversation?

If an electricity generation plant or an electricity distribution system cannot be operated efficiently, loses money or goes bankrupt, then the lending bank gets the ownership and can sell it again to another competent operator. There is nothing lost in the market. There is no need to interfere with the ongoing commercial events outside. We should leave the market forces to regulate the markets.

On the other hand, we do not know any news regarding the necessary rehab works that need to be done in the existing privatized power plants. Environmental exemption continues for the existing plants. Plants are operated at full capacity at their highest availability in order to get high cash income without spending much on necessary environmental equipment. Necessary electrostatic dust filter ESP upgrades and flue gas desulphurisation FGD purchases are ignored. There is almost no additional spending other than operation costs, fuel cost and employee salaries. Most of them have inadequate Ash dams.

We have now more than 70K MWe installed on the records but most of the public plants are not in operation. For example, 6 units out of 8 total in Afþin Elbistan are not in operation. Rehab investments are necessary for the privatized power plants, but such investments have not yet been made. Yet the investors are going bankrupt in their operation due to unplanned, inappropriate operation. Most of them are operating with an unqualified and inexperienced engineering capacity. Work barely goes ahead or, most of the time, they cannot go forward at all.

In fact, it was a completely wrong decision to privatize the former state power plants. Old power plants would have been run by the public until the end of their useful lives. Private investors would be required to set up a new plant. Existing natural monopolies cannot be open to competition. Investors may win but society will surely lose.

The Minister of Energy of the past government left his job to a new appointee until the snap elections, which are scheduled for 1 November. We had the opportunity to work with an experienced minister who came from the energy business in the past. Now, we are in transition period. If an investor cannot operate a plant or a distribution system, we should let the market forces regulate the plant and we should not interfere. In the meantime, we should learn more about regulatory asset base terminology in order to run the business better in the future.

Prinkipo, Istanbul, 29 September 2015

Haluk Direskeneli is a graduate of the METU Mechanical Engineering department (1973). He has worked in public and private enterprises, in American, Turkish, and JV companies (Bamp;W, CSWI, AEP), in fabrication, basic and detail design, in marketing, and in sales and project management of thermal power plants. He is currently working as a freelance consultant and energy analyst with thermal power plants as well as using his basic and detailed design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the METU Alumni and the Chamber of Turkish Mechanical Engineers Energy Working Group.



(Adds futures prices, company news) LONDON, Sept 23 European shares headed for a lower open on Wednesday, extending the previous sessions slump to one-month lows, with poor manufacturing data from China again raising concerns about the pace of growth in the worlds second-biggest economy. A survey showed activity in Chinas factory sector shrank at a faster pace than expected in September, falling to its weakest level in 6-1/2 years as domestic and export demand continued to slump. At 0626 GMT, futures for the euro zones blue-chip Euro STOXX 50, Germanys DAX and Frances CAC were down 0.1 to 0.2 percent. The pan-European FTSEurofirst 300 index closed 3.3 percent lower on Tuesday after setting its lowest level in nearly a month. Commodity stocks are likely to come under further selling pressure, a day after the European basic resources index dropped more than 5 percent to its lowest level since early 2009. COMPANY NEWS: VOLKSWAGEN A panel of senior supervisory board members at Volkswagen will meet on Wednesday to discuss allegations by US authorities that the German carmaker rigged emissions tests, sources have told Reuters. The company said the scandal could affect 11 million of its cars around the globe as investigations of its diesel models multiplied, heaping fresh pressure on CEO Martin Winterkorn. FIAT CHRYSLER AUTOMOBILES Italy has asked Volkswagen to prove that the vehicles the carmaker is selling in the country do not contain the same devices that are at the centre of an emissions scandal plaguing the German group in the United States. SWISS RE Swiss Re AG said on Wednesday its business unit Admin Re would buy Guardian Financial Services from private equity firm Cinven for 1.6 billion pounds ($2.45 billion). EDF Delays and cost overruns at two nuclear reactors under construction in France and Finland have made potential investors wary of joining a consortium led by Frances EDF for a similar project in Britain, EDFs chief executive said. EDFs 900 megawatt (MW) Cruas 1 and Chinon 4 nuclear reactors stopped on Tuesday in an unplanned outage at 1543 GMT and 1700 GMT respectively, French grid RTE said on its website. DIAGEO The company said the year had started well and performance was is in line with its expectations. Its volume had grown mid-single digit, reflecting both improved volume growth trends and comparison against weakness at start of last year. [ID;nFWN11S025] TOTAL US federal energy regulators extended their years-long effort to crack down on a contested form of market manipulation on Tuesday, alleging that French firm Total and two of its traders rigged southwestern natural gas prices for years. SIEMENS Siemens will cut noticeably fewer jobs in Germany than planned as orders have improved and compromises were reached in labour talks, Handelsblatt reported citing sources close to the negotiations. SMITHS GROUP The Medical technology company said Philip Bowman will step down as CEO on Sept 24. Also, FY revenue 2.9 billion pounds, final dividend 28 pence per share, headline EPS up 5 percent. COLOPLAST The Danish healthcare product maker said on Tuesday it will take a further provision of 3 billion Danish crowns ($448 million) to cover potential settlements and costs in relation to litigation in the United States. . KORIAN French nursing home operators Korian and DomusVi are bidding for German peer Casa Reha as they seek to increase their presence in Europes biggest economy, people familiar with the matter said. BHP BILLITON BHP Billiton confirmed on Wednesday it paid no tax on its global marketing base in Singapore, but said it was not the only reason for using the island state as a commodities trading hub and that it paid a fair share of tax worldwide UBM Cision, a provider of public relations software and intelligence, is working on a bid to acquire press release distributor PR Newswire Association LLC, according to people familiar with the matter. SPANISH BANKS Spanish lenders would have to hold a minimum Common Equity Tier 1 capital ratio of around 10 percent on average according to new European Central Bank demands, El Pais reported on Wednesday, citing financial sources. The requirements will vary according to the banks. IBERDROLA The Spanish electricity group won a power project in Mexico with an investment budget of about $400 million, Mexicos Federal Electricity Commission said on Tuesday. ------------------------------------------------------------------------------ MARKET SNAPSHOT AT 0521 GMT: SP 500 1,942.74 -1.23 % -24.23 MSCI ASIA EX-JP 392.37 -2.77 % -11.18 EUR/USD 1.1129 0.1 % 0.0011 USD/JPY 119.63 -0.41 % -0.4900 10-YR US TSY YLD 2.132 -- 0.01 10-YR BUND YLD 0.600 -- 0.00 SPOT GOLD $1,123.40 -0.11 % -$1.20 US CRUDE $46.14 -0.47 % -0.22 gt; Asian stocks extend losses on weak China PMI survey; dlr strong gt; Wall St slides with commodity-related stocks, autos gt; US bond prices jump as stock market stumbles gt; Aussie dollar slides after weak China PMI, yen firms gt; Gold under pressure as dollar gains on US rate hike hopes gt; London copper weighed down near four-week low by China worries gt; Oil prices dip as China economic concerns pull down commodities (Reporting by Atul Prakash; Editing by Sudip Kar-Gupta)

A strange note discovered last in the 2013 financial results of CL World Brands, the Scotland-based holding company of CL Financial's alcohol empire, was a reminder of the fact that the resolution of the Clico collapse is one of the most pressing matters facing new Minister of Finance, Colm Imbert.

As soon as he gets past the 2016 budget exercise, the minister needs to focus his mind and energies on:

o Resolving the outstanding issues with regard to the shareholders' agreement between CL Financial and the Government, which was first signed in June 2009, by PNM minister, Conrad Enill

o Encouraging the Central Bank to complete the valuations of Home Construction Ltd, Angostura Holdings Ltd and CL World Brands as part of the transfer of the Clico shareholdings in those companies to the Government

o Pushing the Central Bank to complete the valuation and sale of Clico's 56 per cent stake in Methanol Holdings (International) Ltd, the Oman-based methanol producer, the proceeds of which have been allocated to pay off Clico's policyholders, both assenting and non-assenting

o Driving the Central Bank to complete the sale of Clico's traditional portfolio, which has been outstanding since May 2014, with no indication from the Bank that the first step in that process--the hiring of an investment bank to find a suitable buyer--has been completed

With the threat of an empire-recovery lawsuit from a gentleman by the name of Lawrence Andre Duprey, Mr Imbert would be well advised to treat this matter as extremely urgent and it would be helpful if he were to appoint a CL Financial Czar--someone like the redoubtable Alison Lewis, the retired permanent secretary in the Ministry of Finance--who knows this matter inside out.

Far be it for me to be perceived as offering unpaid advice to the minister--who has extremely competent, paid advisors--but it would also be useful for Mr Imbert to memorise Section 44 F(5) of the Central Bank Act, before he holds his first meeting with Central Bank Governor, Jwala Rambarran. 

Section 44 F(5), which has been quoted in this space on a number of occasions, states: "In the performance of its functions and in the exercise of its powers under section 44D, the (Central) Bank shall comply with any general or special directions of the Minister (of Finance) and shall act only after due consultation with the Minister."

My lawman's interpretation of that clause leads me to conclude that the current Minister of Finance would be well within his legal rights to assert sovereignty over the CL Financial issue by his ability to issue "general or special directions" to the Central Bank that it "shall comply with" and that it "shall act only after due consultation with the Minister."

That section of the Central Bank Act defines the relationship between the Ministry of Finance and the Central Bank on every or any issue touching on the resolution of the Clico matter, up to and including when reports should be delivered.

Had the former minister of finance, Larry Howai, chosen to assert the minister's right to issue "general or special directions" to the Central Bank on Clico matters, he could have directed the Central Bank Governor to complete and deliver the report into the termination of Gerald Yetming and Carolyn John, as the chairman and managing director of Clico respectively, within seven days.

Minister Imbert would also do well to take note of Section 50 of the Central Bank Act, which states: "The Minister may, after consultation with the Governor, issue to the Bank such written directives of a general nature as may be necessary to give effect to the monetary and fiscal policies of the Government."

If Minister Imbert, for example, were to issue a Section 50 directive to the Central Bank to introduce "greater flexibility with regard to the pricing mechanism" of the supply of foreign exchange to individuals and businesses, the response of the Central Bank would be most illuminating. 

But I digress from the issue at hand, the mysterious loan of US$100 million (some $637 million) of CL World Brands to CL Financial.

In scanning the CL World Brands accounts for 2013--which were only signed by the company's chairman Marlon Holder and director Gerald Yetming on May 28, 2015--my eyes fell upon a sentence, under post balance sheet events, on page 4 of that 30-page report, which stated: "In 2014, the company lent funds to its shareholder, CL Financial Ltd."

Both Holder and Yetming are CL Financial directors as well as being directors of its subsidiary CL World Brands.

CL Financial sources explained that CL World Brands had lent US$100 million ($637 million) to its parent company, CL Financial, in two tranches: US$75 million and US$25 million. 

Most of the US$100 million lent to CL Financial has been made available to Home Construction Ltd to repay a significant part of its debt to majority state-owned First Citizens. Home Construction borrowed over $1 billion, mainly from First Citizens, to build One Woodbrook Place.

So far, approximately $500 million (US$78.5 million) of the $637 million that was borrowed from CL World Brands has been used to pay the Home Construction debt with a further US$20 million being held for future debt payments. 

The CL Financial sources admitted that Home Construction's annual debt repayments to First Citizens amount to semi-annual payments of $77 million, a total of $154 million a year (US$25 million).

It was also disclosed that CL Financial will end up with a US$100 million receivable from Home Construction and CL World Brands will end up with a US$100 million receivable from CL Financial.

These disclosures raise some questions:

o If Home Construction's annual debt commitment is US$25 million, why would CL Financial borrow US$100 million from CL World Brands, representing four years of debt repayments, rather than borrow US$25 million a year for four years? 

o Will Home Construction ever be able to repay CL Financial and will CL Financial ever be able to repay CL World Brands, 42 per cent of which is owned by Clico?

o That question is particularly pregnant given the statement by Governor Rambarran on March 27 this year that $3 billion of the money owed by Clico to the Government would come from the valuation and transfer to the Government of the insurance company's shares in Home Construction (43 per cent), Angostura (32 per cent) and CL World Brands (42 per cent). 

How does the depletion of about £61 million (US$100 million) from CL World Brands for the loan from CL World Brands through CL Financial to Home Construction impact on the valuation of CL World Brands?

o Was the former line minister for CL Financial, Larry Howai--who would have been the CEO of First Citizens when the original Home Construction loan for the construction of One Woodbrook Place was granted--specifically told about and give approval to this milking of the CL World Brands cash cow?

o Home Construction sold Valpark and Atlantic Plaza were sold for $158.5 million in 2013 in order to repay the loan. Why did CL Financial move away from the idea of selling Home Construction assets in order to pay the bank loan? 

o Would there have been tax consequences if CL World Brands had chosen to make an extraordinary dividend payment instead of the related-party loan, which like other related-party loans in the CL Financial group, such as the $984 million Angostura loan to the parent, may never be repaid? 

o And with regard to taxes, do UK laws permit a Scotland-based subsidiary to lend money to its Trinidadian parent for on-lending to a third party subsidiary without reference to HMRC, the UK tax collector?

Disclosure: The author is a shareholder of Angostura.



Bosnias fragile public finances are on the edge of collapse with financial support from the International Monetary Fund, IMF, blocked since last September, indebted pension funds in both entities and a growing budget deficit on all administrative levels.

In short, all budgets are running out of the money to cover salaries, pensions, social benefits and other expenses.

According to several different officials, governments in both of Bosnias entities, the Federation and Republika Srpska, are desperately seeking alternative financial sources.

Without new outside financing, the Bosnian state, the two entities, the Federations ten cantons and most of the municipalities will run out of cash by the end of this year.

This problem has been building for years, as reckless and self-centred politicians maintained high public spending and kept financing it with IMF and the World Bank money, ignoring the question of how they would repay the loans.