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Thailand to set trade credit terms help smaller firms in pandemic

BANGKOK, Sept 25 (Reuters) - Thailand plans to set a rule that that trade credit must be paid within 30-45 days to help ease liquidity problems at businesses, particularly smaller companies, hit by the impact of the coronavirus pandemic, a central bank official said on Friday.

Southeast Asia’s second-largest economy suffered its biggest contraction in 22 years in the second quarter as the outbreak hit tourism and domestic activity.

The credit terms, expected to be in effect from December, should also reduce the disparity in bargaining power between small- and medium-sized businesses and large companies, Chitkasem Pornprapunt, a senior director at the Bank of Thailand, told a briefing.

The plan will need cabinet approval after being agreed by the government’s special economic task force last week, he said.

If approved, the rule will be first used with large companies with revenue of 500 million baht ($15.85 million) and more than 300 employees, Chitkasem said.

A study showed 96% of trade in Thailand is through credit and 4% in cash, and during the outbreak SMEs receive their payments in 60-120 days, compared with 30-45 days last year, Saowanee Thairungroj, advisor to the University of the Thai Chamber of Commerce.

“Large firms, in particular, tend to use their bargaining power to extend their payment periods to SMEs,” she said.

$1 = 31.5400 baht) (Reporting by Kitphong Thaichareon Writing by Orathai Sriring Editing by Ed Davies)