TRIS Rating Co., Ltd. assigns a “AA+” rating with a “stable” outlook to Bangkok Metropolitan Administration (BMA). The rating reflects the status of Bangkok Metropolis (Bangkok) as the center of Thailand’s economic and social development. The continual growth of the Thai economy based on a number of positive factors supports the rating. The rating also reflects BMA’s reliable and increasing tax revenue, prudent budgetary performance, and strong financial profile due to its debt-free position.
The rating, however, is constrained by the huge demand for capital investment (e.g. public transportation and infrastructure), an increasing financial burden from assuming responsibilities delegated from the central government under the decentralization plan, and the absence of a concrete debt management framework. Moreover, political risk is viewed as a factor that may affect management of the BMA.
Dr. Warapatr Todhanakasem, President of TRIS Rating, said that raising funds by issuing bonds are popular among the local governments in developed countries to implement infrastructure projects. He said, the rating assigned to the BMA is the first credit rating for a local government in Thailand and is the initiative of an option in raising fund for the BMA in the future. Dr. Warapatr expects that this initiative could serve as a model for other large local governments in Thailand to raise fund as it would be a way that local governments can further serve needs of local people without obstacles from the process of getting allocations from the central government.
TRIS Rating’s President explained that the rating criteria for a local government focuses on four pillars: economy of the local government organization comprising demographics, economic structure, and growth prospects; intergovernmental system support, i.e. the allocation from the central government, the local government organization’s ability to enhance and manage the revenue base and debts as well as other supporting factors or political risks; management structure, systems, and controls, i.e. management, budgeting, and accounting systems as well as financial reports; and financial position, including budgetary performance and debt management.
Mr. Pongpanu Svetarundra, Director General of the Public Debt Management Office, Ministry of Finance (MOF), said that the rating assignment awarded to BMA by TRIS Rating is a significant start for the development of a bond market for Thailand’s local governments. Bond market development is part of the country’s capital market development plan. The rating assignment is also a model for other Thai local governments hoping to raise funds in the future. The MOF has the responsibility to establish borrowing criteria and rules for local government organizations to ensure that these organizations have proper financial discipline. The MOF must also set rules so that borrowing by local governments will not affect the future stability of the nation’s financial system. The MOF will establish a debt ceiling for each local government to ensure their ability to service their debts. The MOF will also standardize the accounting systems as well as the monitoring and internal audit systems for those organizations. The MOF acknowledges the drive toward independent administration and will allow the local governments to share in the process as much as possible.
Mr. Apirak Kosayodhin, the BMA Governor, said that Bangkok is very important to the country as it is the capital city, the center for economic and social development, and home to important governmental and private organizations. The BMA has to continuously improve the quality of public services to provide an appropriate environment for residents and businesses. Therefore, the infrastructure projects need to be constructed and improved (e.g. mass transit systems and water treatment systems). However, the BMA budget is limited to Bt38,000 million for the 2007 fiscal year, which is not sufficient for the new investments even though the BMA has a flexible budgetary practice and has managed its expenses within budget every year. Furthermore, securing central government subsidies follows a complicated and time-consuming process. The BMA is studying the possibility of raising funds in the capital market to allow more flexibility for its investment needs. TRIS Rating was hired to assign a rating. Mr. Apirak said the rating from TRIS Rating will help the BMA get prepared for fund raising and the rating is also one of several important indicators of the potential success of BMA’s fund-raising efforts. He hopes that the initiation of the rating for BMA will be useful and will serve as a model for fund raising efforts by other Thai local government organizations. — End
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
The rating, however, is constrained by the huge demand for capital investment (e.g. public transportation and infrastructure), an increasing financial burden from assuming responsibilities delegated from the central government under the decentralization plan, and the absence of a concrete debt management framework. Moreover, political risk is viewed as a factor that may affect management of the BMA.
Dr. Warapatr Todhanakasem, President of TRIS Rating, said that raising funds by issuing bonds are popular among the local governments in developed countries to implement infrastructure projects. He said, the rating assigned to the BMA is the first credit rating for a local government in Thailand and is the initiative of an option in raising fund for the BMA in the future. Dr. Warapatr expects that this initiative could serve as a model for other large local governments in Thailand to raise fund as it would be a way that local governments can further serve needs of local people without obstacles from the process of getting allocations from the central government.
TRIS Rating’s President explained that the rating criteria for a local government focuses on four pillars: economy of the local government organization comprising demographics, economic structure, and growth prospects; intergovernmental system support, i.e. the allocation from the central government, the local government organization’s ability to enhance and manage the revenue base and debts as well as other supporting factors or political risks; management structure, systems, and controls, i.e. management, budgeting, and accounting systems as well as financial reports; and financial position, including budgetary performance and debt management.
Mr. Pongpanu Svetarundra, Director General of the Public Debt Management Office, Ministry of Finance (MOF), said that the rating assignment awarded to BMA by TRIS Rating is a significant start for the development of a bond market for Thailand’s local governments. Bond market development is part of the country’s capital market development plan. The rating assignment is also a model for other Thai local governments hoping to raise funds in the future. The MOF has the responsibility to establish borrowing criteria and rules for local government organizations to ensure that these organizations have proper financial discipline. The MOF must also set rules so that borrowing by local governments will not affect the future stability of the nation’s financial system. The MOF will establish a debt ceiling for each local government to ensure their ability to service their debts. The MOF will also standardize the accounting systems as well as the monitoring and internal audit systems for those organizations. The MOF acknowledges the drive toward independent administration and will allow the local governments to share in the process as much as possible.
Mr. Apirak Kosayodhin, the BMA Governor, said that Bangkok is very important to the country as it is the capital city, the center for economic and social development, and home to important governmental and private organizations. The BMA has to continuously improve the quality of public services to provide an appropriate environment for residents and businesses. Therefore, the infrastructure projects need to be constructed and improved (e.g. mass transit systems and water treatment systems). However, the BMA budget is limited to Bt38,000 million for the 2007 fiscal year, which is not sufficient for the new investments even though the BMA has a flexible budgetary practice and has managed its expenses within budget every year. Furthermore, securing central government subsidies follows a complicated and time-consuming process. The BMA is studying the possibility of raising funds in the capital market to allow more flexibility for its investment needs. TRIS Rating was hired to assign a rating. Mr. Apirak said the rating from TRIS Rating will help the BMA get prepared for fund raising and the rating is also one of several important indicators of the potential success of BMA’s fund-raising efforts. He hopes that the initiation of the rating for BMA will be useful and will serve as a model for fund raising efforts by other Thai local government organizations. — End
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.