To help manage Thailand’s international reserves, like Norway, Thailand should form and independent unit, investing in private equity that provides high returns in the long term, which may entail hiring of foreign specialists to manage the investment tranche on the authorities behalf, said Dr Chodechai Suwannaporn, who works in the Fiscal Policy Office, reported on 7 August, 2007 by The Nation.
From the figures illustrated that Thailand’s international reserves of US$73 billion are now equivalent to around 40 percent of the GDP (6 percent for industrialized countries ), or 7.5 months of imports ( 3 months for industrialized countries ) The reserves are also equivalent to 415 per cent of the country’s short-term foreign currency debts (41 per cent for industrialized countries), it may conclude that Thailand has more than enough international reserves and the point is how should the country manage the surplus of the reserves for maximum return in the long term.
Rapid accumulation of international reserves can also pose a policy challenge to the authorities, particularly if the reserves are made up of currencies such as the US dollar that are seeing a fall in value. In this regard, Thailand’s assets will also face a fall in value with the declining value of the US dollar.
It is necessary for the Thai’s authorities to set aside a portion of the international reserves, which can be invested for higher return, instead of idly keeping them for low return as is now the case.
An offensive strategy for the management of international reserves should be draw up at this juncture. This can be handled by dividing the reserves into two tranches that are the liquidity tranche and investment tranche.
The liquidity tranche will aim to manage liquidity and investment in safe havens. The authorities are already investing the reserves in foreign assets or other short-term monetary instruments that are safe. But this represents passive management.
For the investment tranche, the authorities will have to assume a more active role in the management, which can be in the forms of mutual funds, hedge funds, listed companies overseas, real estate or other higher yield monetary instruments.
