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Fiscal Stimulus Package

Fiscal Stimulus Package. Ministry of Finance, Kingdom of Thailand. Current economic situation. Leading Indicator of economic segments showed negative trends. Real agricultural income. Real VAT revenue. 2007 GDP THB. 9.09 trillion. % YOY. % YOY. Retail. 2551. 2551. Agriculture. 13.9%.

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Fiscal Stimulus Package

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  1. Fiscal Stimulus Package Ministry of Finance, Kingdom of Thailand

  2. Current economic situation Leading Indicator of economic segments showed negative trends Real agricultural income Real VAT revenue 2007 GDP THB. 9.09trillion % YOY % YOY Retail 2551 2551 Agriculture 13.9% 8.7% Real estate tax revenue Export % YOY % YOY Manufacturing Real Estate 3.9% 39.6% 2.3% Construction 2551 2551 3.7% Hotels & restaurants 10.1% Industrial production No. of tourists Transport % YOY % YOY 2551 2551 GDP figures for 2009 have been revised down to 1% (from 4-5%) due to ongoing global and local economic slowdown

  3. Fiscal stimulus programs Economic stimulus package Main components of the government’s fiscal spending Supplementary budget THB 116.7bn 1 Tax measures 2 Utilize Special Financial Institutions to increase credit in the system by THB 300bn Approved budget 3 State budget THB 1.84trn Expedite disbursement of budget 4 SOE investment budget THB 308bn Municipal investment budget THB 366bn 2009 multi-year commitment budget extending to 2010, 2011, 2012 and 2013 areTHB 120bn, THB 50bn, THB 10bn andTHB 2bn, respectively Push forward investment projects 5 Mega ProjectsplanTHB 1.7trn (Mass Transit THB 440bn, Transportation and communication THB 440bn, Energy THB 370bn)

  4. Economic stimulus programs Policy and target groups Policy Target Short-term stimulus measures Medium to long-term stimulus measures

  5. Supplementary budget 1 Reduce living cost / Increase purchasing power / Distribute income and create rural employment (THB mm) Low-income earners • One-time living cost allowance of THB 2,000 for those earning < THB 15,000 per month • 8.1mm Social Security fund members • 1.3mmcivil servants (including retirees) 18,970 Households • Extend 5 public service subsidies program for 6 months 11,409 Unemployed • 1 month training and3 months wage subsidy • Approx.240,000 people 6,900 Parents/Students • Free education for 15 years • Approx.10mm students 19,000 Healthcare • THB 600 per month stipend for community healthcare workers • Approx.830,000 workers • Improve standards of 2,609 health service stations 3,000 1,095 Rural communities • “Sufficient Economy Fund for Improvement in Quality of Life” • Funds for 78,358 villages 15,200

  6. Supplementary budget 1 Reduce living cost / Increase purchasing power / Distribute income and create rural employment (THB mm) Senior citizen • Old-age support payment of THB500 per month • Approx. 5mm people 9,000 Infrastructure • Rural irrigation network • Small reservoirs construction • Rural roads construction 2,000 760 1,500 Police force • 532 public housing estate for low-ranked police force 1,808 Tourism • Support tourism industry 1,000 Others • Ministry of Commerce’s measures to reduce living expenses • Development of food industryandSMEs • Rebuilding confidence in and image of Thailand 1,000 500 325 Contingency fund • For emergency use or as necessary 4,091 Total THB 97,558 mm

  7. Tax measures 2 Reduce tax burden / stimulate spending in target sectors / encourage restructuring Real estate • Payment for new residential properties is tax-deductible up to THB 300,000 (transferred in 2009) • Property-transfer fee, special business tax, and withholding tax waived(until March 2010) • Mortgage interest expense is tax-deductible up to THB 100,000/yr (on-going) SMEs • Increase minimum taxable revenue to THB 1,000,000 (from THB 60,000) • Approx. 1,000,000 small & medium enterprises Community businesses • Increase minimum taxable revenue to THB 1,800,000 (from THB 1,200,000) • Approx. 58,000 registered community businesses Venture Capital • Minimum investment requirement in SME for the first year is waived for registered venture capital firms • Tax on transfer of SME shares is waived Tourism • Expenses related to domestic seminars in 2009 (including hotel rooms) are tax-deductible at twice their actual value Debt restructuring • Taxes and fees are waived for income from debt reduction or retirement, and from transfer of assets in connection to debt restructuring(2009) Business reorganization • Taxes and fees related to transfer of partial business reorganization are waived (2009)

  8. Special Financial Institutions 3 Increase liquidity for businesses by utilizing SFIs to support and guarantee loans Credit (THB mm) Government Savings Bank • Small personal loans • Non-collateralized loans for small businesses Bank for Agriculture and Agricultural Cooperatives • Rural Labour Repatriation fund • Loans to develop local communities • Support rubber prices • Increase subsidies for agriculture (currently 110,000mm) 10,000 25,000 4,000 12,000 EXIM Bank • Export credit insurance scheme 150,000 SME Bank • Soft loan to commercial banks to encourage lending 100,000 Small Business Guarantee Corp • Provide partial guarantees on loans to small businesses 12,000 Government Housing Bank • Mortgagesand reduce interest expense 10,000 Islamic Bank • Loans to develop communities in the southern region 10,000 Note – THB 10bn capital injection for SFIs (SME Bank THB2bn, EXIM Bank THB 5bn, SBGC THB3bn)

  9. Municipal investment budget State budget SOE investment budget Expedite disbursements 4 Increase purchasing power / Distribute income & create rural employment / Increase liquidity for businesses * Estimate from 2008 income of municipalities and average income and expenditure from past 5 years

  10. Approved budget Push forward investments 5 Medium to long-term stimulus measures 4 State budget THB 1.84trn Prepare a budget deficit SOE investment budget THB 308bn SOE investment Budget THB 355bn* SOE investment Budget THB 309bn* SOE investment Budget THB 257bn* Municipal inv. budget THB 366bn Amend rules on municipal spending Amend rules on municipal spending Amend rules on municipal spending 2009 multi-year commitment budget extending to 2010, 2011, 2012 and 2013 are THB 120bn, THB 50bn, THB 10bn and THB 2bn, respectively 5 State portion of investments Mega Projects plan THB 1.7trn (State portion = THB 1.16trn, SOE portion = THB 570bn) *Include SOE Mega Project portion

  11. Distribution of benefits Designed to provide even distribution of benefits Unemployed, Sufficient economy fund Living cost allowance Salaryman Community health workers farmers, Health service stations 5 measures 6 months Community loan Small personal loans Labour repatriation loan Small loan guarantees local communities Free education Job training Irrigation Senior pension Rural roads Mortgages Tax measures Tax incentives for home buyers Agricultural subsidies Tourism industry Food industry Tax measures SME SME loan Export insurance 1 Supplementary budget Tax measures Small personal loans 2 Private sector 3

  12. Fiscal discipline Retain fiscal discipline while provide room for more stimulus if needed 2009 borrowing limit (THB mm) Borrowing plan (THB mm) 2009 budget 249,500 Loan to finance budget deficit Economic and social development projects (committed) 437,940(1) 29,790 Economic and social development loan 132,000 Estimated decrease in 2009 revenue Efficient cash management can reduce borrowing requirement 183,500(2) 116,700 2009 Supplementary budget 621,440 527,990 93,450 Remaining borrowing capacity for Fiscal Year 09 Ratio of public debt to GDP is 42%/ Ratio of annual borrowing to total budget is 15% (1) 20% of 2009 budget including supplementary budgetof THB 1,935,000mm (including supplementary budget) + 80% of THB 63,676mm loan repayment budgeted (2) 10% of 2009 budget (excluding supplementary budget) 12

  13. Expected outcome 5 1 2 4 3 Expected impact on GDP growth Impact to GDP 1.0% / year Supplementary budget Immediate spending of THB 100bn 0.06% Tax measures / year Every THB 10bn of tax savings New loans 0.2% / year Every THB 300bn of increase lending Government budget 0.1% / year Every THB 25bn of spending over estimated investment plan SOEs investment Municipal budget 2009 budget 0.1% / year Every THB 25bn of government spending Mega Projects 13

  14. Goals of the stimulus package Immediate action as well as laying the foundation for long-term sustainable growth 1 Push forward investment projects  ’09 Supplementary Budget Increase GDP byat least 1% 5  Minimum GDP growth of 2% in 2009 Expedite budget disbursement 2 GDP  Unemployment between 2.0-2.5% Tax measures  Create THB 12,900mm in revenue for the State 4 Increase lending through use of SFIs  Maintain a disciplined and sustainable budget 3 The government will likely maintain an expansionary fiscal policy through 2010

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