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Transcript of State Street Presentation
Provident Fund Market in ThailandProvident Fund Market in Thailand
Jeremy Brahm, Punon PatsamanJeremy Brahm, Punon Patsaman Siwaporn Wudanuphan & Harrison HuhSiwaporn Wudanuphan & Harrison Huh
Firm Specific Advantage
World Leader inFinancial Services
IntegratedTechnology
Dominant inHome Market
Wide Variety of Clients
4 P’s
FSA
Profile
4 P’s of State Street
ProductVariety of financialservices from pre-tradeto post-trade
ProductVariety of financialservices from pre-tradeto post-trade
PriceNumerous pricing strategies depending on total asset value of funds
PriceNumerous pricing strategies depending on total asset value of funds
Place (Distribution)Direct salesStrategic alliances
Place (Distribution)Direct salesStrategic alliances
PromotionTechnology Media
PromotionTechnology Media
4 P’s
FSA
Profile
Motivation to Enter into Thailand
PoliticalFavorable regulationsBusiness attitudes of Dr. Thaksin’s government
EconomicGrowth stageFinancial liberalization
Social (Hofstede)Long-term orientationUncertainty avoidance
GeographicalPeople’s awareness Population growth
Motivation
Thailand Overview
GovernmentGovernment: DemocraticCapital: Bangkok
EconomyGDP per capita: $6,400Savings interest rate: 2%Unemployment rate: 4.5%
GeographyPopulation: 61.2 million
ThailandOverview
SWOT Analysis
StrengthsWide range of servicesAdvanced technologyFinancial stability
WeaknessesLow reputationLack of local knowledge
OpportunitiesFavorable regulationsGrowth of funds
ThreatsCompetitors’ presenceUneducated customers
SWOT
What are Provident Funds?
After
What
Graphs
Before &
Future
Provident FundMarket
Definition
Private retirement fund
Jointly established by employers & employees
Securities for death, termination of employment
Payments as annual annuities
Definition
Private retirement fund
Jointly established by employers & employees
Securities for death, termination of employment
Payments as annual annuities
7 4%
1 3%
1 3%
Social welfare fundProvident fundGovernment pension
Thai Pension SchemeThai Pension Scheme
Market Conditions
After
What
Graphs
Before &
Future
Provident FundMarket
Before Economic Crisis
Provident Fund Act was approved in 1987
Rapidly growing market
Fierce Competition with 36 asset managers
Before Economic Crisis
Provident Fund Act was approved in 1987
Rapidly growing market
Fierce Competition with 36 asset managers
After Economic Crisis (1999)
Growing with economic recovery
Regulating body was changed from MOF to SEC
After Economic Crisis (1999)
Growing with economic recovery
Regulating body was changed from MOF to SEC
During Economic Crisis (1997-1998)
Slow growth of the funds
Foreign Competitors enter Thai market
During Economic Crisis (1997-1998)
Slow growth of the funds
Foreign Competitors enter Thai market
Amount of Assets
After
What
Graphs
Before &
Future
Provident FundMarket
0
55,000
110,000
165,000
220,000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Mill
ion
s o
f B
ah
t
# of Employees & Employers
After
What
Graphs
Before &
Future
Provident FundMarket
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Em
plo
yees
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Em
plo
yers
Employees Employers
# of Employees & Employers
After
What
Graphs
Before &
Future
Provident FundMarket
0
125,000
250,000
375,000
500,000
625,000
750,000
875,000
1,000,000
1,125,000
1,250,000
Em
plo
yees
3,000
3,160
3,320
3,480
3,640
3,800
3,960
4,120
4,280
4,440
4,600
Em
plo
yers
Employees Employers
Future Prospects
After
What
Graphs
Before &
Future
Provident FundMarket
Short term (3 yrs) Growing
Long term (5-10 yrs) Stable Growth
12% - 14% market growth each year Increasing number of foreign competitors More standardized market place
12% - 14% market growth each year Increasing number of foreign competitors More standardized market place
Continued growth in assets, companies and employees 10% market growth each year Consolidation of competitors Amendment of regulations are necessary for the 2nd leap
Continued growth in assets, companies and employees 10% market growth each year Consolidation of competitors Amendment of regulations are necessary for the 2nd leap
Competitors
Chart
Big 5
Share
Minor
Provident FundCompetition
BIGFIVE
Competitors
Chart
Big 5
Share
Minor
Provident FundCompetition
Th
aila
nd
JVW
OS
Competition Chart
Chart
Big 5
Share
Minor
Provident FundCompetition
High Asset Average Per Fund
Low Asset Average Per Fund
High A
verage of Em
ployees Per F
und
Low
Ave
rage
of
Em
ploy
ees
Per
Fun
d
TFAM
BFIT
BANK OFAYUDHYA
TISCO
SCB
MFC
BANKTHAI
BBL
AIA
KTB
NAM
TMB
BOATHAILIFE
SCBASSET
SCHRODER
Market Share
Chart
Big 5
Share
Minor
Provident FundCompetition
Percentage of Total Assets Managed
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
KTB
TISCO
TFAM
BBL
MFC
Others
Market Share
Chart
Big 5
Share
Minor
Provident FundCompetition
Number of Employers Served
0
200
400
600
800
1,000
1,200
1,400
TISCO
TFAM
BT
SCB
BBL
AIA
MFC
Others
Market Share
Chart
Big 5
Share
Minor
Provident FundCompetition
Number of Employees Served
0
65,000
130,000
195,000
260,000
325,000
Jun-0
0
Jul-0
0
Aug-0
0
Sep-0
0
Oct
-00
Nov-0
0
Dec-0
0
Jan-0
1
Feb-0
1
Mar
-01
Apr-0
1
KTB
TISCO
TFAM
BBL
BFIT
SCB
MFC
Others
Key Government Players
Overview
Regulations & Laws
Players
Revenue Department
Ministry of Finance(MOF)
Bank of Thailand(BOT)
Commercial Registration Department
Ministry of Commerce(MOC)
Securities Exchange of Thailand(SET)
Securities and Exchange Commission(SEC)
Royal Thai Government
Laws Overview
Overview
Regulations & Laws
PlayersForeign Business Act B.E. 2542Foreign Business Act B.E. 2542
Act on the Undertaking of Finance Business, Securities Business and Credit Foncier Business B.E. 2522
Act on the Undertaking of Finance Business, Securities Business and Credit Foncier Business B.E. 2522
Thai-U.S. Treaty of Amity and Economic RelationsThai-U.S. Treaty of Amity and Economic Relations
Provident Fund Act B.E. 2530Provident Fund Act B.E. 2530
Licensing
Licenses
Limits
Procedures
LicensesPeriod (days)
Foreign Ownership
Limits
Minimum Capital
Required
Application Fees
License Fees
AuthoritiesLicenses
Period (days)
Foreign Ownership
Limits
Minimum Capital
Required
Application Fees
License Fees
Authorities
Foreign Business License
75-135 -44,000 US$
44 US$
-Commercial Registration Department
Foreign Business License
75-135 -44,000 US$
44 US$
-Commercial Registration Department
Finance Business License
N/A 49%1.3 million
US$11
US$220 US$
BOT & MOF
Finance Business License
N/A 49%1.3 million
US$11
US$220 US$
BOT & MOF
Private Fund Management License
210 N/A2.2 million
US$440 US$
6,600-22,000 US$
SEC & MOF
Private Fund Management License
210 N/A2.2 million
US$440 US$
6,600-22,000 US$
SEC & MOF
Limits on Provident Funds
Licenses
Limits
Procedures
Registration:Registration: Every fund must be Every fund must be registeredregistered
Contribution:Contribution: Between 2% - 15% Between 2% - 15% of wagesof wages
Management:Management: Asset Management Asset Management CompaniesCompanies
Investment:Investment: Employees’ ChoiceEmployees’ Choice
Redemption:Redemption: Over 55 years old Over 55 years old and and
At least 5 years At least 5 years participationparticipation
Under Provident Fund Act B.E. 2530
Possible Changes in Regulations
Provident funds could be made mandatory.
Overseas investment of provident funds could be permitted.
Provident funds could be made mandatory.
Overseas investment of provident funds could be permitted.
Future Trend
JV WOS Equity
L / M H L / M
H L None
H L L
M H L / M
H L None
L / M H L / M
M L None
M H L / M
M / H H L
Mode of Entry
WOS
Entry Strategy
JV
Equity
Amount of Investment ( $ )
Knowledge of Local Market
Local Connection
Investment Risk
Transfer Risk
Repatriation
Brand Image Improvement
Management Control
Learning Cost
Joint Venture
Scenario
Strategy
Mode
Partners
Recommendation
To meet all factors for success Knowledge of Local Market Local Connection Brand Recognition
To meet all factors for success Knowledge of Local Market Local Connection Brand Recognition
To reduce investment costTo reduce investment cost
To reduce investment riskTo reduce investment risk
To reduce learning time and costTo reduce learning time and cost
Possible Partners
Scenario
Strategy
Mode
Partners
Recommendation
Joint Venture
High Asset Average Per Fund
Low Asset Average Per Fund
High A
verage of Em
ployees Per F
und
Low
Ave
rage
of
Em
ploy
ees
Per
Fun
d
TFAM
BFIT
BANK OFAYUDHYA
TISCO
SCB
MFC
BANKTHAI
BBL
AIA
KTB
NAM
TMB
BOATHAILIFE
SCBASSET
SCHRODER
Possible Partners
Scenario
Strategy
Partners
Mode
Recommendation
Strong reputation
Wide distribution Channels
Tight relationship with government
Not an asset management company
Family business
Experience managing funds
Long relationship with government
Only a financial services company
Privately held
# of employees subscribing has dropped
Government owns majority of bank
State Street Ownership
Best domestic bank in Thailand
Segmented market share
Scenario
Mode
Strategy
Scenario
Partners
Recommendation
BestBest Get along well
with partner
Growth of funds
Government allows overseas investment
Provident funds are mandatory
ProbableProbable Growth of funds
Some conflicts with partner
Companies with >10 employees are required to have provident funds
Some overseas investment allowed
WorstWorst Does not get along
well with partner
No access to partner’s channels or clients
Government does not allow overseas investment
Strategy: Short-term
Scenario
Mode
Strategy
Partners
Recommendation
Gain Market ShareGain Market Share
Product:Product:Diversified Investment
Policies
Distribution:Distribution:Using
Partner’s Distribution
Channel
Promotion:Promotion:Multimedia
Blitz
Price:Price:Competitive& Flexible
ManagementFee
Strategy: Long-term
Scenario
Mode
Strategy
Partners
Recommendation
Market LeaderMarket Leader
Product:Product:Full Line ofDiversifiedInvestment
Policies
Distribution:Distribution:To Utilize
CurrentCustomers’
Network
Promotion:Promotion:Participating
In SocialPrograms
Price:Price:Equal to Direct
CompetitorsAverage
ManagementFee
Conclusion
for State Street.
The Time to Enter the Thai Provident Fund Market is
NOW
Questions?