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

http://www.cia.gov/cia/publications/factbook/flags/th-lgflag.jpg

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


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


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


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


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


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


Th

aila

nd

JVW

OS

Competition Chart

Chart

Big 5

Share

Minor


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


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


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


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?

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