to pursue dramatic market reforms. Third, with commercial banks having the biggest and most widespread distribution channels relative to other types of financial institutions, they offer a powerful tool for providing financial services, such as securities and insurance, to various underserved communities nationwide. Lastly, any development plan that covered the capital market would be potentially duplicate the Stock Exchange of Thailand’s (SET) Capital Market Master Plan.
Expansion of Objective: Focusing on the Underserved
Adding a new dimension to the project was the expansion of objective beyond purely increasing efficiency of the modern sector to also address the needs of Thailand’s dual economy and the urban and rural underserved communities.
Different from Singapore and Hong Kong, Thailand’s unique economy is characterized by the coexistence of highly industrialized and modern urban manufacturing sector with a traditional sector outside Bangkok, employing the majority of the workforce, which account for a relatively small portion of the country’s GDP.5 Thailand therefore needs a financial system that can use market forces to support feasible rural development policies and uplift rural income.
Following this policy shift, the project’s emphasis was divided into urban and rural parts. The latter of which entailed cross-country studies of countries with economic profiles similar to Thailand such as South Africa and Bolivia together with internal analysis of the role of government-owned specialized financial institutions (SFIs)6 and the manner with which private commercial banks and/or market forces can profitably cater their services to the underserved.
III. FROM PROJECT TO FINANCIAL SECTOR MASTER PLAN (FSMP)
With a clear scope and objective, the Bank of Thailand invited international experts to share their knowledge of financial sector development plans and new market challenges with local public and private sector practitioners. Up to that time, there had been a growing consensus among supervisors that carefully deliberated development plans offered a structured long-term approach to financial sector development. Although the objectives of each plan vary from one another given each country’s
5 As of September 2001 Thailand’s agriculture sector accounts for 51% labor employment and 10% GDP. 6 The Bank for Agriculture and Agricultural Cooperatives (BAAC) and the Government Savings Bank are examples of SFIs.