After recovering from the worst flooding in 50 years that shut down parts of Thailand’s industrial heartland last year, the country’s export-oriented economy is facing headwinds yet again amid a slowing global economy and tighter credit. In response, IFC has stepped up its lending to Thai companies to keep exporters on steady footing as exports fell almost 1.5 percent during the first five months of the year from the same period in 2011.
A $100 million IFC loan in May to TMB Bank, one of the country’s leading banks, will increase U.S. dollar liquidity for small and medium exporters. By borrowing in U.S. dollars, exporters can save on hedging costs and avoid foreign exchange volatility.
“We will distribute the IFC funds to small and medium enterprises that have U.S. dollar denominated inflows, providing them with access to long-term U.S. dollar funding to either import new equipment as part of their flood rehabilitation plans or expand their production capacity,” says Boontuck Wungcharoen, TMB’s CEO. “This is a rarity for small and medium enterprises in Thailand.”
IFC’s investments also help businesses affected by last year’s floods, including the Thai automotive industry, consistent with the first phase of our Thailand Flood Response Strategy. IFC provided a €35 million loan and mobilized another €35 million for Continental Automotive Thailand’s car parts plant in Rayong province. The plant will produce environmentally friendly car components for the region’s automobile manufacturers. The next phase involves working with infrastructure, manufacturing, agribusiness and services companies to assist in reconstruction projects.