Asia Pacific Housing Journal: V13 2010

21st Century Urbanization
Coping with
By 2030, more than 5 billion people will live in cities (80% of humanity)
Presidents Message
As GH Banks new president, I am honored to welcome all of you to the Q4 2010 edition of the Asia Pacific Housing Journal. The Government Housing Bank of Thailands Research and Information Services Department has again done a great job in producing what I believe will be interesting reading for everyone in the region. The World Expo Shanghai 2010 was indeed an historic event for all us and its Better Cities, Better Lives theme interests all of us in the housing and housing finance industries. Chinas immense scale and how it handles its future urban developments is studied closely in APHJs review of McKinsey Global Institutes massive report on its urbanization. I would also like to thank UN-HABITATs Zhang for his Better Cities, Better Economies story that first appeared in Urban World. In closing, I congratulate to Thailands Taekwondo team for winning two gold, two silver and four bronze medals at the Guangzhou 2010 Asian Games. We have been most happy financial supporters of Thailands national Taekwondo team during the past five years. Again, it is my pleasure to welcome all of you to the Asia Pacific Housing Journal and please enjoy your reading.
Woravit Chailimpamontri President Government Housing Bank Bangkok, Thailand
Editorial Committee
With this edition of the Asia Pacific Housing Journal, we say a fond farewell to Khan Prachuabmoh, who has completed his maximum eight-year term as the Government Housing Banks president. We warmly welcome GH Banks new president, Woravit Chailimpamontri and have included an article on his innovative ideas for selling housing finance and savings products. The Better Cities, Better Lives theme of World Expo, Shanghai 2010 is our featured section this quarter and we are most happy to present a brief summary of McKinsey Global Institutes views on Chinas Preparation for an Urban Billion. In Global Issues, we are pleased to present Alex J Pollocks interesting article on the varying success of US Government State Enterprises (GSEs) (such as Fannie Mae and Freddie Mac) funding of US home loans. We also feature a brief article on Black Swan events and a complementary article on how organizations should be protecting themselves from frequent once in a thousand year disasters. This edition concludes with our popular Quality of Living section that includes articles on four additional National Parks that you may wish to visit in Thailand. Again, welcome and we hope you had a fantastic 2010 and a great 2011.
NOTES FROM
Editorial Committee Copyright 2010
Ballobh Kritayanvaj, K l Woo, Surachai Fangchanda, Apisuda Puangkaopong, Wichit Wong, Varangkana Satthaworasit, Araya Chientachakul, Anchalee Tummanon Government Housing Bank, All Rights Reserved. Asia-Pacific Housing Journal is published by the Government Housing Bank, Bangkok, Thailand. The opinions expressed in this publication are those of the authors and do not necessarily represent the views of the Government Housing Bank. E-mail : ballobh@ghb.co.th Tel. : +66 (0) 2202 1066 Fax. : +66 (0) 2202 1928 Design and Printing : Zeno Publishing (Thailand) Editorial Advisor : Pathfinder Asia Ltd.
Farewell Message
I would like to say a hearty farewell to all APHJ readers and welcome my successor Woravit Chailimpamontri as GH Banks new president. My maximum eight-year term as GH Banks president was completed on November 15 and I would like to thank all you for contributing to the Banks success. We are very proud and happy to have been able to start up the much-needed English-language housing GH Bank Housing Journal in 2007 that was aimed at supporting middle and lower income housing developments in the region. With UNESCAP and UN-HABITATs encouragement and support as well as the additional support of corporate sponsors, we were happy to change the Journals name to Asia Pacific Housing Journal in 2010. The APHJs success will continue and improve in the future with all your contributions and supports. I am happy to remain on the APHJs Advisory Board until the end of my current term in May 2011. Thank you again for all your support.
Khan Prachuabmoh Former President
APHJ Advisory Board

June 2010 to May 2011
Abdul Qadeer Fitrat, Governor Central Bank of Afghanistan, Afghanistan
Khan Prachuabmoh, Former President Government Housing Bank, Thailand
Xing Quan Zhang, PhD, Chief of Urban Economy & Social Development Branch UN-HABITAT, Kenya
Adnan H Aliani, Officer-In-Charge, Sustainable Urban Development Section UNESCAP, Thailand
Tsedendorj Enkhbayar, CEO RV Verma, Chairman and CEO Mongolian Mortgage Corporation, National Housing Bank, Mongolia India
Zaigham Rizvi, Consultant World Bank, USA
Features
Better Cities, Better Lives
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Preparing for Chinas urban billion
Better cities, better economies

Read Xing Quan Zhangs views on the positive relationship between economic growth and urbanization and that cities are driving forces for economic development.
APHJ takes a close look at McKinsey Global Institutes 523 page view of Chinas massive urbanization to a billion urban citizens by 2025.
Cities role in Thailands economic development

Ballobh Kritayanavaj tells us how cities in Thailand have been and will continue being key drivers of economic development.
Land readjustment in Thailand

Udom Puasakul explains how land readjustments, which are a relatively new concept in Thailand are being used to shape urbanization.
Housing Issues
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Selling innovative new housing loan and savings products

GH Banks new president tells how his Bank will drive innovative new housing loan and savings deposit sales.
44 49 53 58
Home mortgage lending drives economy

Surachai Fangchanda explains why home mortgage lending has often been used by various governments to stimulate economic growth during down business-cycles or crises.
Second-hand home sales and real estate agent profession development

Dr Somsak Muneepeerakul outlines how the second-hand home markets continuing development will be a growth springboard for the real estate sales agents profession.
Home building services in Thailand

Vibul Chantradilokrat, President of Home Builder Association looks at home building services in Thailand.
Thailands Escrow Act protects home buyers

Amornratna Charuratna looks closely at how Thailands Escrow Act can help home buyers.
Global Issues
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Government housing financial institutions dont guarantee higher home ownership rates
Read Alex J Pollock report that contrary to many politcal perceptions, Americas GSE home financing institutions have not resulted in higher home ownership rates.
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Black Swan Theories

APHJ attempts to explain the current common use of Black Swan theories and Black Swan events to explain once in a thousand-year-old events that seem to be happening frequently.
74 79
Self-immunity: critical risk management criteria in uncertain times

K I Woo outlines why organizations must develop self-immunity risk management systems to combat todays often frequent and disastrous unforeseen events.
Cross-border insolvency harmonizing treaties becoming important

Read Julian Males article on why cross-border insolvency treaties are becoming important in many jurisdictions.
Quality of Living
84 90
Four outstanding National Parks in Thailand

Araya Chientachakul introduces four great National Parks in different regions in Thailand that are easily accessible and are great examples of conservation and nature.
Medals galore at Guangzhou 2010 Asian Games

Read how the GH Bank sponsored national Taekwondo team successfully won 10 medals at the recent Asian Games.
Contributors and Personalities

Woravit Chailimpamontri
Worawit Chailimpamontri is GH Banks new president. Prior to becoming GH Bank president he was the Government Savings Banks CFO.
Dr Somsak Muneepeerakul
Somsak Muneepeerakul has been the President the Real Estate Brokers Association of Thailand since 2004.
Vibul Chantradilokrat
Vibul Chantradilokrat is the President of Home Builder Association. He is also managing director of Sahasutha Home Builder.
Udom Puasakul
Udom Puasakul is Director General of Department of Public Works and Town & Country Planning, Department of Public Works and Town & Country Planning.
Julian Male
Julian Male is an Australian solicitor and advises foreign investors in Thailand.
Xing Quan Zhang, PhD

Xing Quan Zhang is Chief of Urban Economy and Social Development
Branch at UN-HABITAT. He is the UN-HABITAT focal point for financial mechanisms.
Alex J Pollock
Alex J Pollock has been a resident fellow at the American Enterprise Institute since 2004. He spent thirty-five years in banking, including twelve years as president and chief executive officer of the Federal Home Loan Bank of Chicago, while also writing numerous articles on financial systems and management.
Contributors and Personalities

Amornratna Charuratna
Amornratna Charuratna is a director of Escrow Policy Division of Bureau of Financial Protection Policy, Fiscal Policy Office.
Ballobh Kritayanavaj
Ballobh Kritayanavaj is the head of GH Banks Research and Information Services Department. His articles are featured regularly in Thailand and overseas.
K I Woo
K I Woo has been a business advisor and financial journalists in South East Asia for more than a decade. He enjoys golf inbetween servicing his clients throughout the region.
Surachai Fangchanda
Surachai Fangchanda is a Vice President of GH Banks Research and Information Services Department
Pimol Srivikorn
Pimol Srivikorn is Secretary General of the Taekwondo Association of Thailand.
Araya Chientachakul
Araya Chientachakul is an editor at Pathfinder Asia Ltd.
Better cities, better economies Preparing for Chinas urban billion
Cities role in Thailands economic development Land readjustment in Thailand
Xing Quan Zhang, PhD
Better cities, better economies1

The world reached a turning point in 2008. For the first time in history, more than half its human population, 3.3 billion people, lived in urban areas.
Urban population grew from 220 million to 2.8 billion in the 20th century. The next few decades will see an unprecedented scale of urban growth. By 2030, this is expected to expand to about 5 billion. Such rapid urban expansion will be particularly notable in Africa and Asia where urban population will double between 2000 and 2030. By 2030, the towns and
cities of the developing world will make up 81 percent of urban humanity. Economic growth and urbanization are often positively linked. Cities are the driving force for economic development. Economic growth also stimulates urbanization. These positive relationships are clear in many countries.
This story is adapted from Zhangs article in Urban World, Volume 2, Issue 4, September 2010
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Asia-Pacific Housing Journal
Urbanization and absence of economic growth
Urbanization can occur in the absence of economic growth. For example, in some sub-Saharan African countries, urbanization occured without of economic development. Its processes and patterns are differentiated by institutional settings and policies from country to country and region to region. Despite the growing importance of cities in world affairs and national economic development, the citys position is regarded as marginal to current debates and development controversies. Negative over-urbanization impacts such as the concentration of poverty, slums and social disruption in developing cities are often overemphasized.
Driving force of national economies
They also provide more learning and sharing opportunities and facilitate trade and commerce by providing large market-places. Cities are production and services centers because goods and services are more efficiently produced in high-density urban environments. Cities also provide consumers with more goods and services choices and they are the agents of social, cultural, economic, technological and political change. These advantages make cities more productive than rural areas. No country has achieved sustained economic growth without the growth of cities.
Cities the best hope
However, cities represent the best hope for growth and opportunities as engines of national economic development. They provide large efficiency benefits, which result in unprecedented productivity and competitiveness gains. They are centers of knowledge, innovation and production and services specialization. Cities facilitate creative thinking and innovation. High concentrations of people in cities generate opportunities for interaction and communication and promote creative thinking, knowledge spillovers, new ideas and technologies.
Cities are the driving force of national economies. They generate a disproportionately higher rate of economic growth than rural areas. In developed countries, cities have higher productivity per capita than rural areas. For example, Tokyo has 26.8 percent of the national population and produces 34.1 percent of national GDP. London has 20.3 percent of the population and accounts for 25.4 percent of GDP. Paris, with 16.2 percent of the national population, accounts for 26.5 percent of the national GDP. Dublin with 25.9 percent of the population generates 32.8 percent of GDP. Auckland, Vienna and Helsinki generate about 50 percent higher GDP than their respective population share.
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Engines of migration
Cities in both developed and developing countries play crucial roles in driving national economic development. Statistics show that cities are much more productive than rural areas in developing countries. However, this does not mean that cities are more productive in developing countries. Productivity, is generally higher in developed countries cities. However the productivity gap and inequality of development between cities and rural areas are much larger in developing countries than in developed countries. The large economic productivity gap and imbalance of development between cities and rural areas in developing countries lead to enlarged rural and urban income gaps, which in turn encourages migration to cities to search for better opportunities and prosperity. The massive influx of rural populations to cities creates resource shortages to provide housing and services in cities. The engines of economic development then become engines of migration. Migration that out-paces economic development often results in urban slums. Manila, Karachi, Nairobi, Dhaka and Mumbai are engines of economic development but they are also cities of slums.
National economic growth

The contribution of cities to national economic growth is very significant in developing countries. The economic future of developing countries is highly dependent on the growth of its cities. However, cities are seriously under-resourced to fulfill their potential as drivers of national economic development and prosperity. Cities face many challenges, from accelerating growth, massive influx of rural migrants, deteriorating infrastructure, environmental degradation, social exclusion, violence, under-investment, lack of fiscal freedom and policy choices. Municipal governments often lack financial means to address the vast challenges facing them. For example, of the total government revenues in Canada, the federal government receives 39 percent; provincial governments receive 50 percent and municipal governments only get 11 percent. Municipal governments in most countries have less than a quarter of total government revenues. In many countries such as Afghanistan, Armenia, Australia, Chile, Cyprus, El Salvador, Greece, Honduras, Iran, Jordan, Lesotho, Malta, Mauritius, Mongolia, Morocco, Paraguay, municipal governments receive less than 10 percent of the government revenues. The international development community also ignores the needs of cities. For example, the total urban assistance to developing countries from 1970 to 2000 was about $US 60 billion, about $US 20 per capita - less than a dollar per capita per year.
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Cities work better if they have between-cities efficiencies but also in-cities efficiencies.
City regions
Cities need powers to generate revenue
To maintain vital economic growth and competitiveness cities (1) should have the power to generate revenues and make development decisions; (2) have sufficient investment to provide adequate infrastructure and services, such as transportation, communications, power supply, water and sanitation, housing, as well as financial and business services; (3) should develop and attract high quality human resources for technological innovation, entrepreneurship, and knowledge development; (4) should provide an enabling national environment for market development. Should we focus our attention on the development of cities and ignore the development of rural areas? The answer is no. The huge disparity and divide between cities and rural areas in terms of productivity and wealth are often signs of under-development. Developed countries experiences indicate that more balanced development between cities and rural areas occurs when national development reaches a higher level.
City regions have emerged as most important growth poles. Transport and communications technology improvements stimulate rapid city region developments. As modern products and services become increasingly sophisticated, producers and service providers gain significant advantages from new transaction networks. These networks facilitate products, services, technology and market information exchanges, and foster economic creativity and innovation. Network participants receive tremendous efficiency boosts by being part of tightly-linked and spatiallyconcentrated clusters. These networks, production and services modes foster the development of urban agglomerations and city regions. Today, city regions have emerged as economic development driving-forces in many countries. For example, the Tokyo city region has more than 40 cities and towns with a population of 33.2 million, and generates more than 34 percent of national GDP. The Pearl River Delta in China has a population of 30 million. New York city region has a population of 22 million; Sao Paulo, 17.7 million; Mexico city region, 17.4 million. Changjiang River Delta in China has emerged as the worlds largest city region with a population of about 100 million, generating 26 percent of national GDP.
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Cities and city regions are key sources of economic vitality and innovation for nations. Innovation and high efficiency are increasingly linked to the ability to associate economic activities in city regions. The comparative advantages of cities and city regions make them drivers of national global economic development. Better cities mean better regional and national economies.
Economic contribution of cities in developing countries
The central role of cities in national economies is more significant in developing countries than in developed countries. For example, Sao Paulo has 10.5 percent of the population and generates 19.5 percent of GDP. Shanghai, with 1.2 percent of the population generates 2.9 percent of GDP. Buenos Aires, with 32.5 percent of population produces 63.2 percent of GDP. Mumbai,
with 2 percent of the population, accounts for 6.3 percent of GDP. Nairobi, with 9 percent of the population, generates 20 percent of GDP, Dar es Salaam, with 7.9 percent of the population, accounts for 14.9 percent of GDP. Cities like Shanghai, Manila, Brasilia, Cape Town, Karachi, Nairobi generate more than 100 percent higher GDP than their population share. Dhaka, Yangon, Chittagong, Khartoum and Mumbai generate more than 200 percent higher GDP than their population share. Addis Ababa generates more than 360 percent higher GDP than its population share. Hanoi produces more than 460 percent higher GDP than its population share. Kinshasha and Kabul generate more than 500 percent higher GDP than their population share.
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Preparing for Chinas urban billion1

APHJ takes a close look at McKinsey Global Institutes view of Chinas massive urbanization
As western economies continue struggling, China and India continue growing at unprecedented rates. Rapid urbanization has been a key growth factor during the past three decades. The recently concluded Expo 2010 Shanghai China, which featured a Better City, Better Life theme turned the spotlight on how better future cities can result in harmonious and sustainable development. Some observers are however, wondering whether urbanizations past success as an economic driver and nation builder will continue in the next two decades. In March 2009, the McKinsey Global Institute (MGI) completed an extensive (525 page study) study Preparing for Chinas urban billion that revealed many startling statistics and interesting conclusions.2
Staggering scale of Chinas continuing urban growth
Everything about China evokes massive scale, from its 1.3 billion people to the thousands of containers filled everyday with electronic goods, clothing and housewares that are shipped to North America , Europe and elsewhere. The MGI report predicted that in 2030 more than one billion people will be living in Chinas cities and perhaps even more interestingly, 350 million people (current population in US) will be added to its urban population by 2025. MGI also estimated that China will have added more than 200 million new jobs and at that time, more than 500 million people will be working in its cities.
1 2
This report is adapted from McKinsey Global Institutes Preparing for Chinas urban billion, March 2009. For full report, www.mckinsey.com/mgi/reports/pdfs/China_Urban_Billion/China_urban_billion_full_report.pdf
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Rural to city migration will emerge as the clear driver of Chinas future urbanization. From 1980 to 2005, Chinas urbanization percentage doubled to 44 per cent and will reach 64 per cent by 2025.
Massive number of cities

Chinas urbanization has quickly resulted in an unprecedented number of large cities. By 2030 more than one billion people will live in Chinas cities and 221 will have more than one million people. (Europe has 35 cities today with more than one million people) The countrys burgeoning economic success and rapidly rising living standards, MGI said have resulted in an unprecedented urbanization surge that will continue. By 2025, 23 cities in China will have more than five million people. Moreover, Chinas urban economy will generate 90 per cent of its GDP and of the 350 million people added to its urban population in 2025, more than 240 million will be migrants. Urbanization will create pressure points for many cities including challenges of securing sufficient public funding for social services, dealing with demand and supply pressures on land, energy, water and the environment. Focusing solely on GDP growth will not achieve the harmonious development the Chinese leadership desires.
A massive transformation
infrastructure. Five billion sqm of road must be paved and 40 million sqm of buildings must be built in about five million buildings. About 50,000 of these buildings, the report said will be skyscrapers. It will be equivalent to constructing 10 New York cities. Perhaps most amazingly, China will need more than 170 new mass transit systems in the next two decades to ensure that its fast-growing population can move about efficiently and effectively.
Huge infrastructure needs
To ensure that these cities are livable, MGI said that China must continuously provide huge amounts of cutting-edge
MGI said Chinas closely intertwined economic and urbanization goals will yield unprecedented investment and business opportunities. President Hu Jintaos 17th Party Congress goal in 2000 to quadruple GDP by 2020 is highly dependent on Chinas continuous urbanization. Urbanization and Chinas development have grown hand-in-hand and the cities have been major drivers of GDP growth over past two decades and will become even more so in the next two decades. According to MGI, Chinas cities will generate about 95 per cent of the countrys GDP in 2025, rising from the current 75 per cent. Chinas rapidly growing urban middle class has spurred private consumption. Between 1990 and 2005, Chinas urban consumer market emerged as a significant economic growth driver, accounting for 26 per cent of GDP growth. By 2025 urban consumptions GDP percentage will rise to 33 per cent.
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Migration of the rural masses to Chinas cities has also driven growing urbanization. From 1980 to 2055, Chinas urbanization level doubled to 44 per cent. By 2025, MGI predicts that 64 per cent of Chinas people will live in cities.
Rapid urbanization pressures will intensify
Chinas rapid urbanization will also result in intense pressures on the countrys economic and social fabric. Adding 350 million people to Chinas cities in the next two decades will require land and spatial planning and developments. Unprecedented construction may threaten extensive urban sprawl, further intensive land development, and extreme congestion. In addition, MGI noted that urban Chinas demand for resources will double during the same period and air pollution could reach critical levels in most cities. Although migrant labor will still be plentiful in China during the next two decades, MGI noted that aspiring city officials will face challenges finding sufficient university graduates. As costs go up, it will be important to create higher value jobs necessary for top-line growth.
Funding urban growth in China will also become more difficult in the next 20 years, especially if revenues from land sales begin decreasing. MGI expects that cities will face increasing costs in providing services. An important increasing cost factor will be gradual pressures to extend services to migrant populations. By 2025 MGI estimates that almost 2.5 per cent of urban GDP will be required to extend public services and benefits including health care and education to migrants across China. MGI concluded that almost all cities apart from the very large ones, could face significant funding challenges.
Policy options for Chinas future
Policy choices made at national and local levels can significantly alter the shape of Chinas urbanization. MGI concluded that contrary to conventional wisdom among outside observers, decision making in China is relatively decentralized. Most tax revenues are retained locally and local governments can make decisions on everything from industry subsidies to retail licensing, subject to negative control from Beijing.
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Traditionally, Beijing has relied on and incentivized the entrepreneurial nature of local bureaucrats to identify and pursue growth opportunities. Therefore, in China, urbanization is implemented locally and policy choices enacted at the individual city level, under the national governments guidance, have strongly influenced Chinas growth. At the same time, however, a powerful urbanization national framework fundamentally influences the degrees of freedom at local levels. National land policy decisions, strategic infrastructure location, investment approval authority processes and limits, MGI said define the level of local authority. Differential treatment of local municipalities can tilt the playing field across cities as well. By refocusing on more balanced and productive growth concepts, the report said Chinas leadership can have a dramatic impact on the quality of life of its expected billion urban citizens.
Four urbanization scenarios - next 20 years
McKinsey developed four plausible urbanization scenarios for the next 20 years of Chinas urban development. Under a supercities scenario, a small number of very large cities with 20 million or more people could emerge and under a hub and spoke scenario, clusters of medium-sized or small cities could develop around larger ones Two other quite different scenarios involve patterns of dispersed growth. Under a distributed growth scenario, a larger number of cities with populations of 1.5 million to 5 million would spread throughout China and in a townization scenario, many smaller cities with populations of 500,000 to 1.5 million would emerge.
To compile this report, McKinsey visited 14 Chinese cities3 and interviewed hundreds of officials, business leaders, city managers and academics about the policy levers that were used to upscale and shape cities developments. It employed rigorous macro and microeconomic approaches through a city-level econometric model.
How McKinsey conducted research
Large concentrated cities perform more effectively
For various historical and local reasons, MGI said large concentrated cities in China perform more effectively than smaller cities. Concentrated growth would have many positive economic implications linked to higher productivity and efficiency. Supercities and hub-and-spoke scenarios would produce up to 20 per cent higher GDP per capital and result in more efficient energy use. Energy productivity would
Beijing, Cangnan, Changsha, Chengdu, Harbin, Huhhot, Nanchong, Shanghai, Shenzhen, Suzhou, Taiyuan, Taizhou, Xiamen and Xingping.
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be 20 per cent higher in concentrated urbanization models, although hub-andspoke would result in the highest energy use. Concentrated urbanization models would also produce lower arable land-loss rates. It will reduce arable land loss to only 7 to 8 per cent of current totals. They would also result in more efficient masstransit usage. In a supercities scenario, China would have to expand its current subway system eight times. Under distributed growth, light-rail system would need to grow 300 times. The report even states that although supercities face extremely serious peak pollution problems, enforcement of measures to regulate pollution is more widespread and effective in larger cities. Lastly, it concludes that talent is more likely to congregate to larger cities that will be the centers of economic growth.
What Chinas policy makers will do?
National policy makers can shift China toward concentrated urbanization. To encourage large concentrated cities developments, MGI said China will enact tighter land acquisition restrictions that will slow the growth of less-developed urban centers. Most of them depend on land sales to fund urban development. At the same preferential land policies will give more freedom for larger cities to maneuver and grow toward concentrated urbanization. However, China must monitor cities carefully to ensure preferential policies
Urban productivity policies - benefits in all scenarios
are not abused and lead to unmitigated urban sprawl. MGI also noted that Chinas Central government has options to determine local city autonomy levels that could encourage urbanization outcomes. It could grant more cities municipality status and give them more freedom to establish development policies. (Chongqing recently received municipality status). During the next two decades, MGI predicted transport and network infrastructure patterns will play greater growth-distribution and urbanization roles. Governments can develop highway grids or road systems focused on megacities and/or hubs. Strategic placement of heavy infrastructure such as refineries and ports, and the development of national education institutions will also make big regional economic development differences. Chinas current system, MGI said however, explicitly promotes city-level GDP growth, and favors distributed growth in particular and disbursed growth in general. Changes to todays incentives framework will be difficult.
MGI said urban productivity agendas should be encouraged under all scenarios with the prime objective of a productivity-based approach that incentivized efficient energy, water, and land use. Cities should focus on matching sufficient skilled labor to highervalue-added activities and improving public services.
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These productivity agendas would also reduce future funding pressures. MGI estimates that public spending could benefit by 2.5% of GDP per annum. Innovative cities with effective policies can be replicated and expanded elsewhere. Urban productivity policies implemented across the board, MGI said would open up unprecedented innovative opportunities in areas such as energy conservation, water recycling, and clean technology. The Central government could act as an enabler and distributor of best practices, encourage pilot projects and encouraging other cities to take up new solutions. The study concluded that concentrated urbanization patterns are most likely to mitigate pressures and increase urban productivity. By 2025, these policies could boost the growth of 15 supercities with average populations of 25 million people, or spur the further development of 11 urban networks of cities linked by strong economic ties, with combined populations of 60 million plus people, on average. Encouraging urban productivity initiatives such as implementing transit-oriented development or creating energy efficient
equipment incentives at the city level, the report said could generate substantial positive outcomes in all scenarios. Under all scenarios, businesses can leverage Chinas impending urban billion new consumer market, by becoming major investors in road and rail, public-transport systems, building the energy-supply infrastructure and providing energy efficient technologies.
Advantages of Chinas scale - the Shanghai case

Currently, Chinas cities are managed under four specific jurisdictions. Some of the largest including Shanghai are directly controlled municipalities under the Central Government. The other cities are administered as provincially controlled sub-provincial cities, prefectural-level cities, and county-level cities. Chinas big cities are economically powerful. Of Chinas 858 official and unofficial cities, MGI said 14 cities with populations of five million or more accounted for 33 per cent of Chinas GDP in 2007. History, location, economies of scale and broad preferences granted by the Central Government (including Special Economic Zone status) have contributed to their success.
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MGI said three other critical factors also favored cities. Large cities, its said attract the most talent.Shanghai access to 100,000 graduates from 60 institutions of higher learning each year and 28 per cent of Shanghais labor force has a college education - double a decade ago. Shanghai, MGI said also has a half a million expats. Large cities attract more investment especially foreign direct investment. City networks also stimulate economic growth. Large cities are always at the center of a cluster of smaller cities. Within China, Shanghai and the Yangtze River Delta is arguably the best example of an efficient hub-and-spoke model . The City in the middle of a very close knit cluster of economic centers on the delta, drives growth in the entire region.
Chinas built-up land increased 150 per cent in the past 15 years and acquired-land sales accounted for ten to 50 per cent of local government revenues. However, MGI said that aggressive land acquisitions have often caused rapid urban sprawl and depletion of arable land. To achieve dense development, MGI said cities need comprehensive strategic landdevelopment plan frameworks that optimize effective transportation infrastructure networks and strategic urban land planning.
2. Manage demand-for and not just supply-of resources
Chinas urban productivity agenda four major planks
MGI cites that China has four major planks to optimize its urban productivity agenda.
1. Plan for integrated dense

development
As stated earlier, one of Chinas key urbanization success ingredients that distinguishes it from other countries such as India has been its cities freedom to acquire land and sell it for redevelopment. Without these revenues, MGI said Chinas urbanization would not have been as rapid. Land purchases and their subsequent sales have allowed Chinas cities to be proactive in funding and building infrastructure.
MGI said China could be more effectively urbanized if cities could manage demand for resources rather than simply focusing on building the supply infrastructure needed to keep pace with demand. For instance, a plan to boost energy productivity will reduce the demand for electricity. However, to reap higher energy productivitys full benefits, MGI said China must develop standards and incentive programs that are backed by rigorous national level monitoring and enforcement. At the same time, local level policy and implementation are as critically important.
3. Investing in labor and skills

development
In addition to guaranteeing sufficient labor supply, Chinas cities, the report said must improve labor quality to maximize economic output and support a gradual shift to value-added economic activities. For instance, rather than the number of graduates produced, overall quality should be targeted.
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Labor productivity can also be measured by developing and implementing standardized systems.
4. Enhancing public sector

productivity
MGI said a rigorous program to enhance public sector productivity would provide China short-term opportunities with significant impact. To achieve this objective, however, the government should develop greater clarity around goals, accountabilities and measurement processes. For instance, in the heath-care area, it could promote more utilization of its primary health care programs that are currently at a 50 per cent utilization rate. China could also do much to improve capital expenditure efficiencies that often result from overoptimistic price or demand projections, improper designs or failure to consider competition.
Conclusions
Because of its sheer size and scale, Chinas urbanization in the next two decades will face many challenges. However, MGI feels that China has already demonstrated considerable understanding of the challenges it faces managing rapid urbanization. Its next test will be shifting its urbanization strategy from one of dispersed growth that aimed above all to maximize GDP to giving
priority to enhancing overall urban area productivity through more efficient use of financial, human and natural resources. The overall opportunity, MGI said is significant because the successful implementation of urban productivity strategies could reduce public spending by 2.5 per cent of GDP and the private sector resource bill by an additional 1.7 per cent of GDP. To achieve these goals, national and local level policy actions are necessary. At the national level, urbanization should be shifted towards a concentrated growth pattern and at the local level a mandate to adopt urban productivity policy initiatives should be encouraged to maximize urbanization outcomes and mitigate costs and pressures. Those cities, MGI said that are already successful can be at forefront of developing a long-term sustainable model for others to replicate. China can ensure its stature as rapidly growing and developing economic power that is following a sustainable path toward long term prosperity. Business, MGI said has a significant role to play in developing this huge new urban market and must look closely at the policies implemented.
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Ballobh Kritayanavaj
Cities role in Thailands economic development 1

Cities have played a major role in Thailands economic development, especially as people migrate to urban centers for better livelihood. Globally, countries have also become more urbanized. The worlds urban population will increase from todays 3.4 billion to about 4.5 billion in 2025 ( 57% of total population). Megacities of more than 10 million people will continue growing everywhere. Todays 21 megacities are expected to increase to 29 by 2025, of which 16 will be in Asia. In this globalization era, urban environments throughout the world, including Thailand have been drastically changing. Many cities will become more important and assume new roles.
Urban and rural populations of the world, 1950-2050
Source : World Urbanization prospects: The 2009 Revision

1
This article is based on Ballobhs presentation atthe UN Pavilion, World Expo 2010Shanghai, October 6, 2010.
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Bangkok - a primate city
Bangkok - Thailands capital city with almost seven million people is still an extremely primate city. It is about 24 times larger than Nonthaburi, the second largest city of Thailand and about 37 times larger than Chiangmai, a well known tourist city in the North. During the past several decades, along with five adjacent cities, Bangkok has expanded into a Bangkok Metropolitan Region - BMR with more than 10 million people. The BMR is a new regional urban
pattern developing to form a single continuous urban and industrial area which can be called a mega -region or conurbation. It is indeed an extended metropolitan region similar to many other metropolises. However, the majority of Thailands urban population will continue living in a large number of small towns (1,120 urban settlements) with less than 50,000 inhabitants and midsized cities with between 50,001500,000 inhabitants (36 urban centers).
Urban Population Less than 25,000 25,000 - 50,000 50,001 - 100,000 100,001 - 500,000 500,001 - 1,000,000 over 1,000,000 Totals
Region (number of towns and cities) BMR 41 10 8 3 0 1* 63 Central 177 12 2 0 0 0 191 East 105 6 5 0 0 0 116 North 244 4 5 1 0 0 254 North East 332 17 1 4 0 0 354 South 163 9 4 3 0 0 179 Total 1,062 58 25 11 0 1 1,157 % 91.78 5.01 2.17 0.95 0 0.09 100
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Thailands 76 provinces have about 68 million. people 19 provinces have more than one million people. The country has been transforming from a rural to an urban-based
society. Its urban population has grown steadily from about 27% in 1980 to 34% this year (2010) and is expected to reach 53% in the next 30 years (2040).
Thailand population 1950-2050
Source : Population Division of the Department and Social Affairs of the United Nations Secretariat
Urban population & rural population, 1950-2050
Source : Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat
The countrys urban population has been growing at a much faster rate than its rural counterpart.
The overall Thai population grew less than 1% per annum between 2000 and 2010. Average rural population growth was only 0.5%, while the average urban population grew 1.8% during the same period.
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Average Annual Population Growth - Thailand, 1950-2050
Compiled by : Research & Information Sevices Department GH Bank
Average Annual Growth - urban & rural population, 1950-2050
Compiled by : Research & Information Sevices Department GH Bank
Higher urban population growth rates are expected to continue, particularly in Bangkok and its surrounding cities that have been the countrys strongest economic growth centers. Although urban areas have been the major drivers of economic growth, their high growth rates will create more pressures and challenges to the government such as the need for additional infrastructure and transportation systems, housing and public facilities, traffic
congestion, pollution and waste disposal, energy consumption and environment problems as well as the encroachment of forests and the loss of arable rural land. Urbanization and economic development normally lead to economic wealth and productivity, but they also contribute negatively with increased waste, pollution and environmental degradation including climate change.
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Thailands modern economic development

Thailands modern economic era began with the launching of its first National Economic Development Plan in 1961. During the first 10 years between 1960 and 1970, GDP growth averaged about 8 per cent per annum. Predominantly urban- industrial sector growth outpaced ruralagricultural sector growth. The economy continued growing dramatically during the third decade of 1980-1990, highlighted by an unprecedented 13.2 per cent in 1988. It was then one of the worlds fasted growing countries. However, Thailand experienced numerous economic boom-and-bust cycles during the last two decades from 1990 to 2010, including an economic crisis during 1997-1998. The country again experienced an economic downturn in 2009 with a -2.2% GDP growth rate. However, the GDP is forcasted to grow 7.0-7.5% this year (2010) and will expand 4-5% next year (2011). Along with the growing economy, the transformation from an agricultural to industrial and services-based economy has continued during the past four decades. Agricultures share of GDP has fallen from about 40% in 1960 to 11.6% in 2009. Over the same period, the non-agricultural sectors share increased significantly to about 88% in 2009. Industrys share has increased from 18% in 1960 to 34% in 2009, clearly indicating a transformation from a ruralagricultural to urban-industrial and servicesbased economy.
Gross Domestic Product (GDP) of Thailand
Source : Office of National Economic and Social Development Board Compiled by : Research & Information Sevices Department GH Bank
2005 GDP (Million Baht) Agriculture (%) Non- Agriculture (%) GDP per capita (Baht) Population (Millions) 7,092,893 10.3 89.7 108,956 65.1
2006 7,850,193 10.8 89.2 119,715 65.6
2007 8,529,836 10.7 89.3 129,159 66.0
2008 9,075,493 11.6 88.4 136,511 66.5
2009 9,050,715 11.6 88.4 135,281 66.9
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Gross Regional Product (GRP) of Thailand in 2009
Source : Office of National Economic and Social Development Board
Gross Regional Product per Capita in Thailand in 2009
Source : Office of National Economic and Social Development Board Note : (1 US$ = 30.88 Baht, Rate on Aug 14, 2010)
Thailands larger cities have played major economic development roles. The Bangkok Metropolitan Region recently (2009) constituted about 42% of total GRP. The countrys four other regions contributed less than 10%. The gross regional product per capita is also highest in the Bangkok Metropolitan Region (Bt327,813) - about seven times higher than the Northeast region (Bt45, 661). The highest GDP per capita of Rayong province in the Eastern region is 27 times higher than that of the poorest North Easterns Srisaket
province. Bangkok alone contributed about 17% of total national income. These figures illustrate the high concentration of the countrys economy in Bangkok, uneven development and income imbalanced economic growth as well as disparity among the regional cities in Thailand. During the past decades economic growth and rising urbanization, the number of poor decreased continuously to only about 5.4 million in 2007. The ratio of the poor to total population declined significantly to less than 9% in 2007 compared to 21% in 2000.
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1988 Poverty line (baht/people/month) Poverty population (%) Poverty population (million) 633 42.2 22.1
1990 692 33.7 18.4
1994 838 19.0 10.7
2000 1,135 21.0 12.6
2004 1,242 11.2 7.0
2007 1,443 8.5 5.4
Population by income group 1

st
Ratio of population income (%) 1994 4.1 7.4 11.7 19.7 57.2 100 14.1 1990 4.2 7.6 11.8 19.9 56.5 100 13.5 1998 4.3 7.8 12.0 19.8 56.1 100 13.1 2000 4.0 7.3 11.5 19.8 57.5 100 14.6 2002 4.2 7.7 12.1 20.1 56.9 100 13.2 2004 4.6 8.0 12.4 2.02 54.9 100 12.1 2006 3.8 7.7 12.1 20.1 56.3 100 14.7 2007 4.3 8.0 12.4 20.2 55.1 100 12.8
Group 20% poorest (1 Quintile)

st
2nd Group 20% 3 4

rd th
(2nd Quintile) (3 Quintile)

rd
Group 20% Group 20% Total
(4 Quintile)
th
5th Group 20% richest (5th Quintile) Ratio of 5th group/1st group
However, the gap between the rich and the poor has not improved much during the past decades. About 20% of the country population (5th quintile) accounted for 55% of total aggregate national income in 2007 the 20% lowest income group (1st quintile) constituted only 4.3%. The income gap between the rich and the poor 13 times is still very high. Income distribution or income inequality must be further addressed.
Should Thailand adopt a concentrated urban growth policy or dispersed growth strategy? How should we promote the role of regional cities of various sizes? How can Bangkok become a better city and share its wealth with other smaller towns including rural areas of the nation? How can we encourage economically, socially and ecologically balanced and sustainable ruralurban developments in the rapid economic growth environments? How can we further reduce poverty of the people and reduce the income gap between the rich and the poor?
Bangkoks importance to future growth

Bangkok is clearly a primate city. It is the economic and financial center of the country. It is widely accepted as one of the world cities in the globalizing economy. Bangkok and other big cities will continue growing a faster than the smaller towns and will play on even greater role in Thailands economic growth. In this scenario, I would like to pose some questions not only for Thai authorities, but also for everyone that encounters similar rapid urbanization and economic growth disparity.
Develop comprehensive national development strategies

In dealing with such questions, I would like to propose that each country develop comprehensive national development strategies, including human settlement policies which address interrelated issues such as urban planning, urban infrastructure development, transportation, land use control, housing provision, natural resources conservation, environment protection, and employment creation etc.
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Balanced Development Policy Platform
A holistic and more balanced rural urban development approach should also be adopted. It should aim at developing a more equitable and sustainable society. The rural poor needs to be more care; natural resources need more conservation and the environment needs more protection. Thailands NATIONAL DEVELOPMENT VISION FOR 2057 envisions that the country will be a global leader in agriculture, agro-industry, food technology, health services and tourism. The Thai people will have a good quality of life and a healthy environment. The country will be highly-stable and secure with good infrastructure that ensures long-term sustainable development. In the interim, the countrys 2037 VISION, forecasts that Thailand will be a developed country that has created a comfortable balance between urban and rural development.
Thailand will also be a regional import-export and tourism industry hub. More importantly, Thailand will be developed into a knowledge-based society that is capable of continuous development of high technology and innovation. To reach this vision, Thailand, through the Department of Public Works and Town & Country Planning (DPT) recently introduced URBAN PLANNING POLICIES that will result in more balanced and harmonious urban and rural development. The master plan aims at linking Bangkok to the outside world and developing Bangkok into a modern world-class business center, It also includes developing regional centers and some border towns as gateways to the neighboring countries that will be critical elements for fostering Thailands economic growth.
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Bangkok - a global city

In a rapidly globalization era, Bangkok is closely linked with other global cities and is considered as one of the world cities in the global context. Recently, Bangkok Governor announced the vision for Bangkok 2020 as a sustainable worlds leading metropolis and a center of Asean region with good environment and high quality of life of its inhabitants. Bangkok and other large cities will continue to be the powerful economic growth engines for the country in the many years to come.
The plan also aims to redistribute development opportunities to all regional cities and reduce economic disparity throughout the country. Some regional cities such as Phuket, Chiangmai, and Hua Hin will be promoted as international tourism centers as well as health services and recuperation centers. Pitsanulok and Chiangrai in the North and Khonkaen in the North East will be regional multimodal transportation and logistic centers. Other regional cities such as Pathumthani, Khon Khaen, Songkla and Phuket will play major roles as education, research & development, information and communications technology (ICT) centers. The Thailand Master Plan will be used as a roadmap for conducting several development projects that comply with national development strategies and ultimately lead to better cities, better economies and better life that ensure sustainable development of healthy and happy environments for everyone.
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Greater Mekong Sub-Region

Thailand is also expected to serve as an important economic growth centre for South East Asia, particularly the Indo-China region. The government recently introduced the Greater Mekong Sub-region Economic Cooperation or GMS conceptual framework that includes creating special economic corridors and increasing cooperation among major cities in the Asian region. The GMSs North South Corridor is will connect Thailands Northern towns (at Mae Sai, Chiangsan and Chiangkhong) to southern China (up to Kunming) and to Myanmar.
The second Western- Eastern Corridor connects Myanmar to Thailand (through Tak and Maesod) and to Laos and Vietnam (through Mukdahan and Nakorn Panom and Nongkai border provinces). The Southern Corridor of Maekong connects Thailand (at Aranya Prathet and Trad) to Cambodia and Vietnam. These three main Greater Mekong Sub-region corridors are destined to greatly impact Thailand urban development and border provinces and will help spur tourism, economic growth and productivity in the entire Indo-China region.
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Udom Puasakul 1
Land readjustment in Thailand

In Thailand, LR has been effectively used to free-up previously land-locked landplots that have in many cases destroyed the value of neighboring properties.
Although land readjustments or land re-plotting have been used extensively for town planning for more than a century in Germany and Japan, it is a relatively new concept in Thailand. Currently, Thailand has 13 land readjustment projects in Bangkok, Nan, Lampang, Yala, Phitsanulok, Narathiwat, Suphanburi, Samutprakan, Phetchabun, Samut Sakhon, Phayao, Phetchaburi and Uthaithani. These projects are being conducted under the auspices of the Department of Public Works & Town & Country Planning, local government organizations and the National Housing Authority (NHA).
What is land readjustment?
Land Readjustment (LR) is a cooperativebased development strategy whereby irregular patterns of agricultural land
holdings or consolidated portions of cities are rearranged into regular building plots (replotting) and equipped with basic infrastructure such as roads and drains.2 In land readjustment projects, groups of landowners join forces to develop or redevelop land. Its a process whereby landowners pool ownership of scattered and irregular plots of land, build roads and main infrastructure, and then divide the land into urban plots.3 In most cases, land-owners contribute a portion of their previous land-holdings (usually about 30 per cent) to provide space for roads, parks and other public space and for reserve land. The reserve land is normally sold at the projects end to pay for planning, administration and construction costs.4 The land owners exchange their original land holdings for urban plots in the replotted project. Land readjustments projects can be very attractive for LR land owners because
1 2 3 4
Udom Puasakul is the Director General of Department of Public Works & Town & Country Planning
Blanco, Alba Carolina, The role of land readjustment in Japan and its possibilities of application in Colombia, Hokkaido University, page 2/. Sorenson, Andre, Land Readjustment, Urban planning and urban sprawl in the Tokyo Metropolitan Area, University of Tokyo, page 1 Ibid. page 2
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substantial land value increases can be achieved even if landowners receive a smaller plot when the project is completed. Planning authorities also benefit because LR projects provide more largely selffinanced land for public facilities and much needed infrastructure. With other land assembly methods such as expropriation or market land purchases, planning authorities require much more extensive up-front funding. In general, LR projects involve exchanging land-plots within a designated project area in which the original land plots are owned by a community group. LR projects therefore require little or no municipal or private investor land acquisition costs.
The land readjustment process 5
Community consensus
In any LR process, all land plots are added together into a land readjustment mass. From the total land readjustment mass all areas designated in the urban development plans for public facilities, such as roads, parking spaces, green areas and childrens playgrounds can be excluded and allocated to the municipality. The remaining mass is the redistribution mass which is ultimately redistributed to the original landowners. In general, two different criteria may be used to redistribute the land: the relative size or the relative value of their original plots.
Most land readjustment projects in Thailand are launched by community land-owners who must form a Land Readjustment Association under the Land Readjustment Act 2004. Following city planning overall guidelines, these land owners re-develop their own areas or communities. Under the Act, land readjustment is described as implementing the development of many plots of land by re-plotting, improving or constructing infrastructure, and jointly bearing the burdens and equitably distributing the returns.
History of land readjustment in Thailand

In developing its extensive land readjustment processes, Thailand has received much help from Japan. LR is particularly prevalent in Japan where approximately one-third of all urban areas have been developed with the method.6 From 1987 to 1989, The Japan International Cooperation Agency (JICA) through an Applied Technology for City Planning program provided academic and technical advice that helped to launch land readjustment programs in Thailand.
5 6
Muller-Joekel, Rainer, Land Readjustment a win-win strategy for sustainable urban development ,2004, page 2 Sorenson, Andre ibid page 1
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The Thai government asked the Department of Public Works and Town & Country Planning to oversee urban developments under the Land Readjustment Act. A Bt50 million revolving Land Readjustment Fund was established in 1993 to help launch LR projects. Today, the fund has about Bt75 million. JICA has continued providing academic and technical LR assistance to the Department of Public Works & Town & Country Plannings staff since 1992. More than 1,000 Planning Department employees have received JICA LR training during this period.
After provincial committees approve a Land Readjustment project, a land owner meeting must be convened. At the land owners meeting, a Land Readjustment Advisory Board is appointed. It must include representatives from the Provincial Committee, land owners elected among themselves and a qualified person selected by the committee. To ensure the communities retain power, Advisory Board members under the Act must vacate office when two-thirds of the land-owners petition them to leave.
The Land Readjustment Act 2004
Land readjustment implementation
LR in Thailand is governed by the Land Readjustment Act 2004. The Act outlines how the public and private sector along with active community participation can optimize urban planning in Thailand.
The Department of Public Works & Town & Country Planning has worked closely with local government organizations such as the Bangkok Metropolitan Administration and Municipal and Sub-District Administrative Organizations throughout the country. The Department has also encouraged each province to implement a land readjustment project to optimize its urban planning programs.
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We have discovered that LR is a useful and effective method for developing urban land and optimizing required community infrastructure such as roads, drainage and sewerage, water supply, electricity and public parks. LR has been used successfully for new city developments in Germany, Japan, Australia, Nepal, Taiwan and Indonesia. In particular Japan uses LR as its primary urban planning implementation method. It is widely referred to as The Mother of City Planning.
Community & urban recovery
All good community development plans must mitigate potential traffic congestion, overcrowding and environmental degradation.
LR plans have proven to be a very effective method to optimize a communitys infrastructure development or redevelopment. In Thailand, LR has been effectively used to free-up previously land-locked land-plots that have in many cases destroyed the value of neighboring properties. It has also been effectively used to help local authorities revitalize catastrophe-hit areas. It was used to redevelop tsunami ravaged Phi Phi Island in Krabi and Khao Lak in Phang Nga. We have also considered using LR to optimize land use for environmentally- sound highway developments throughout the country.
38
Housing Issues
Selling innovative new housing loan and savings products Home mortgage lending drives economy Second-hand home sales and real estate agent profession development Home building services in Thailand Thailands Escrow Act protects home buyers
Woravit Chailimpamontri
Selling innovative new housing loan and savings products

GH Banks new president talks to APHJ about his new corporate strategy
To effectively contend in an increasingly competitive Thai banking and finance environment, the Government Housing Bank (GH Bank) will soon be launching a new corporate strategy that includes developing a new marketing-oriented sales-culture that will be supported by a new operating infrastructure. Woravit Chailimpamontri, GH Banks president told APHJ that the new corporate strategy will concentrate on honing the development of Products, Process and People (three Ps)
and ensuring that an appropriate and effective selling infrastructure and platforms are developed to support them. When our new strategy is completed, all of our branches and new marketing channels will serve as sales windows for the Bank, he said. The key to GH Banks new strategy, he said will be carefully and meticulously developing the three Ps so that the Bank can address each customers specific needs.
40
Housing Issues
Products

1. Loan products
In the product area, GH Bank said that GH Bank will develop a wide range of new housing loan and savings deposit products to sell to specific customer groups. The innovative new loan products will further segment the market that the Bank currently serves by carefully matching borrowers specific needs. We will be developing new loan products that better suit each borrower, he said. In addition, new loan products will be developed by the Bank to help it execute the Ministry of Finances policy to provide more loans to low-income grass-roots families in both urban and rural areas. These loans will be developed by working closely with alliance partners such as the Bank of Agriculture and Cooperatives, the National Housing Authority and Community Organizations Development Institute (CODI), he said. By working closely with the NHA and CODI, GH Bank will be expanding its ability to reach urban low-income borrowers and by cooperating with the BAAC, it will be able to reach more lower-income rural borrowers. BAAC has 800 branches and we believe many of their customers want housing finance loans, he said.
Processes
new childrens and students savings programs that will encourage all parents to help their children develop long-term savings programs, he said. Childrens savings programs, he said may be provided with incentives such as permitting these long-term savers to acquire special long-term mortgages when they eventually buy new homes. These types of savings products also help the Bank build its long-term customer base, he said. New product development, he said will also look into developing innovative savings products that will attract people that may be looking at benefits beyond normal interest rates. Many savers seek other benefits that a GH Bank savings account can deliver.
2. Deposit products
Under the new corporate strategy, Woravit said GH Bank will develop new loan deposit products that will attract a wide range of new savers. We hope to develop attractive
To optimize the Banks ability to efficiently service its customers, Woravit said it was critical that the Banks infrastructure, sales platforms and marketing channels be upgraded so that its sales people can readily market and distribute its products. With our new strategy, our sales people will be pro-actively selling different innovative loan and savings products at branches. The branches will become the Banks major sales window to its customers, he said. To ensure the projects ultimate success, all incentive schemes will be adjusted to encourage a sales and services cultures development. The IT systems will also be continuously upgraded to handle new distribution channels such as mobile and internet banking that will inevitably become more important, he said.
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Even though the Bank will be introducing new products and processes, Woravit said that risk management will always be at the forefront of operations. We will be continuously upgrading our Credit Scoring models because we always want to be issuing higher quality loans, he said. In the highly competitive Thai market, Woravit said that another key emphasis is continuously improving service quality and efficiency. Excellent service is always a critical factor, he said. The Banks operating infrastructure including its IT systems, he added must consistently deliver speedy, good and efficient services if we want to attract and retain more long-term customers. We should also be constantly looking at developing new innovative marketing and distribution channels for our products. These new services will inevitably require IT systems to deliver them effectively and efficiently, he said.
GH Banks newly reorganized structure
To drive its new competitive strategy, GH Bank will reorganize its operating structure so that it can optimize its overall objective of effectively executing a marketingoriented sales platform that focuses on selling a wide range of the Banks products. The organization will be restructured into three specific operating groups: the front middle and back office groups.
Front office group
People
The front office group will be centered at the branches, that will be the Banks sales windows. Branch personnel will be trained and incentivized to sell GH Banks many innovative products. Individual branch managers and branches will be required to meet specific revenue, product sales and operating profit targets. The branches will become the Banks main revenue focal points, he said.
As the Bank begins its cultural shift, it will be launching and implementing training programs what will support its long-term growth and improve competitiveness. The ultimate aim is developing a new sales culture and platform along with supporting processes and infrastructure that can effectively and efficiently sell the Banks products. A critical part of any change program is reviewing the Banks overall compensation system and incentives. We expect that the overall transformation will be successfully completed within four years, he said.
Middle office group
The middle group will focus on new product development and marketing support for both of loans and deposits. A critical function will also be the continuous sourcing, evaluation and implementation of new marketing and distribution channels. Despite its key mission to create sellable innovative new products, an equally important performance success factor for the middle office group will be its overall risk management processes and performance. Risk management execution will be critical to the Banks longterm sustainable growth.
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Housing Issues
Back-office Group
The back office group will be the Banks engine room. It will be IT driven and must provide efficient and effective services. To remain competitive we must always remember that accurate and efficient service delivery is critical, he said. Auditing processes including effective internal controls as the Bank continues expanding will also be key to sustainable long-term success.
Funding
funding structure. We believe that many savers are not only attracted by the Banks interest rates because many other factors often come into play. The Bank therefore must identify these factors and develop products that can be sold to specific customer groups. Over the long-term, Woravit said that the Bank will also securitize part of its loan portfolio. We want to develop new capital-markets funding sources for the Thai housing finance market.
The Bank will introduce innovative savings and special saving accounts that will be pro-actively sold to optimize GH Banks
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Surachai Fangchanda
Home mortgage lending drives economy

As a result, the record sales in the first half of 2010 are expected to significantly dampen demand in Q3 and Q4. To combat the expected slowdown, developers have ramped up incentive packages to keep sales moving.
Annual new mortgage loans have always been a major driver of Thailands economic growth. In the past five years, outstanding home mortgage loans have equaled about 17.6 per cent of the countrys Gross Domestic Product (GDP). (graph 1)
Graph 1 : GH Bank Outstanding Loans and Market Oustanding Loans vs Thai GDP
Source : REIC, GH Bank, IMF
The Government Housing Bank (GH Bank) which began operations in 1953 has played a key role in the development of Thailands home mortgage market during the past five decades. GH Bank is a Specialized Financial
Institution (SFI) that is 100 per cent owned by the Ministry of Finance. Its main mission is providing home loans to middle and lower income citizens.
44
Housing Issues
During the past two decades, GH Bank has issued more than Bt1.4 trillion ($US46 billion) in home loans, primarily to middle and lower income borrowers. It has maintained its
position as the countrys leading mortgage lender and currently has the largest share of home mortgage loans outstanding with a 34.7 per cent market share. (graphs 2 and 3)
Graph 2 : GH Bank Outstanding Loans vs Whole Market
Source : REIC, GH Bank
Graph 3 : GH Bank New Loans vs Whole Market
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Home mortgage lending has often been used by various governments to stimulate economic growth during down business cycles or crises. During the 1997 Tom Yung Kung Crisis the Government relied on GH Banks mortgage lending capabilities to revive the flagging economy.
Home mortgage lending used to stimulate economy

In the midst of the crisis, GH Bank helped the government revive the bubble-stricken real estate market and the economy by opening up the mortgage market and reviving the stricken industry. The governments policy measures were successful and quickly led to a vibrant economic recovery.
Graph 4 : New Loan Growth Rates vs Thai GDP
Source : REIC, GH Bank, IMF
Thailands home loan mortgage market began surging in the last quarter of 2009 along with GDP growth which grew 12 per cent in Q1 2010. Many other factors including the governments stimulus package to combat the global crisis that included tax benefits and low interest rates contributed to the real estate markets rapid recovery. Aggressive competition among highly- liquid commercial banks were also key contributing factors in 2009 and 2010. Many commercial banks offered zero
2010 home mortgage loan market

per cent teaser interest rates for the first three-to-six months of loan terms and waived application fees and other costs. Special incentive-laden loan programs offered by developers and their commercial bank partners also enticed consumers into buying new homes. In H1/2010 new home loans rose to Bt206.051 billion expanding 11.9 per cent from the previous second halfs Bt184.183 billion. More importantly, the year-on-year increase for H1 was an amazing 53 per cent (H1/2009 new loans Bt134.683 billion.
46
Housing Issues
Commercial banks issued (65.9 per cent) of the new loans (versus 58 per cent H1/2009) while GH Banks market share tumbled from 32.2 per cent to 24.1 per cent for the same period last year.
Graph 5 : GH Bank new loan market share 1996-2010 (H1)
At the end of H1/2010, Thailands total home mortgage loans outstanding was Bt1.8 trillion, an increase of Bt104.061 billion or 6.1 per cent from the previous year. At the end of H1/2010,
Thai commercial banks held 57.5 per cent of total home loans outstanding (increase of 16.3 per cent year-on-year).
Graph 6 : GH Bank outstanding home loan market share 1996-2010 (H1)
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GH Bank home mortgage leader past two decades
Nevertheless, GH Bank continues being Thailands largest individual housing finance lender. During the past two decades its highest market share of new loan was about 50.7 per cent. (see graph 5) During the first half of 2010 GH Bank issued new home loans of Bt49,596 million, averaging about Bt8,266 million per month. At the end of 2010, GH Bank expects to reach its 2010 loan target of Bt90 billion.
Housing finance environment 2010
Because of tremendous liquidity both in the financial markets and strong developer balance sheets, new housing supply in 2010 has continued increasing, especially for condominium units built adjacent to Bangkoks mass-transit lines. Currently, many factors including an export led recovery are contributing to the housing markets expansion. The government also extended the real-estate stimulus incentives applied in 2009 to combat the global economic slowdown into the first half of 2010 because domestic political instability was seriously dampening consumer sentiment. With interest rates at near record lows, real estate sales surged ahead as consumer hoped to complete their purchases before the government decided to rescind the incentives. As a result, the record sales in the first half of 2010 are expected to significantly dampen demand in Q3 and Q4. To combat the expected slowdown, developers have
ramped up incentive packages to keep sales moving. We expect that total sales in 2010 will approach last years sales because of the following : Robust economic growth especially in
Q1/2010 ramped up consumers sentiment,
employment, and individual income levels.
These positive conditions will encourage
many consumers to purchase their dream
homes in the second half of 2010. Financial institutions and developers have launched innovative new promotions for the rest of the year to combat real estate stimulus incentives that expired in June 2010. Even though interest rates are expected to rise slightly in the second half of 2010, they will not significantly affect the consumers ability to purchase homes. Developers and financial institutions are instituting promotions such as initial zero interest rate loans and fee waivers to overcome the effect of any potential interest rate increases.
Potential uncertainties
Nevertheless, some uncertainties face Thailands surging real estate market. Domestic political uncertainty and the specter of a fragile global economic recovery may dampen sentiment. Surging oil and other commodity prices could drive up inflation and eventually deteriorate consumer purchasing power.
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Housing Issues
Dr Somsak Muneepeerakul
Second-hand home sales and real estate agent profession development

A real estate agent is a critical element of every home purchase. Most buying and selling processes are performed through agents.
The second-hand home markets (existing home) continuing development will be a growth springboard for the real estate sales agents profession and the further expansion of a vibrant and sustainable real estate industry in Thailand. As inner-city land prices continue rising, the second-home markets development will in many cases become the primary home-ownership entry-point for most middle and lower income citizens. In general, second-hand homes are homes that have been lived-in and are primarily being sold by owner-residents.
300,000 second-hand homes available
In addition to about 70,000 to 80,000 new homes built annually, the Thai market as a whole has about 350,000 second-hand homes available for sale. Government agencies such as the National Housing Authority through it Baan Eur-Athorn and other projects also offer tens of thousands of additional units for sale. The Real Estate Brokers Association believes that Thailands second-hand home industry will continue expanding in the future, especially because most of them are located nearer to city-centers and are normally more moderately priced when compared to new homes.
Our research indicates that many homesowners in Bangkok and surrounding areas would like to sell their current homes, so they can purchase new homes. We estimate that in Bangkok about 300,000 second-hand homes are currently being offered for sale by owners.
Changing public perception
Moreover, the Thai public has gradually changed its perception about second- hand homes. In the past, many Thais refused to purchase previously lived-in homes. However, during the past several years, interest has increased and more than 100,000 visitors are now attending numerous national second-hand home housing events.
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Many factors have contributed to the changing perception. Some second-hand home sales agents have encouraged sales by packaging renovated second-hand homes to prospective buyers. Purchasers dont have to bother with troublesome renovations and can move in just as if it were a new home. Some agents have even engaged architects to help completely redesign second-hand homes. As a result, prospective buyers have changed their attitudes about buying them. They are now considered chic, especially if location, price and transportation are also factored in. A concerted effort by the Government to encourage second-hand homes sales has also contributed greatly to the markets development. The markets growth invariably enhances support-industries such as financing, construction, interior design, paint and wallpapering, electrical appliances and furnishing businesses. The second-hand home industry employs many construction and related industries people and is fast becoming a significant contributor to the economys growth.
Another key development area is the need for more real estate agents that are familiar with the second hand home industry. A vibrant second-hand home real estate agent professions is being developed. In general, two groups of real estate agents occupy the Thai market. The 17-year-old Real Estate Broker Association (REBA) has more than 120 company members. Agents that work for REBA members only achieve membership when they have
Growth of real estate agent profession
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concluded training and passed association examinations. Consumers that incur problems with REBA member agents can seek redress from the association. To further develop the profession, REBA has established industry standards and professional ethics codes for its members as well as extensive continuing education programs. Members are encouraged to conduct sustainable and ethical practices and be of service to society. The real estate profession will continue growing with Thailands rising incomes levels. Housing is a key life requisite and most people consider buying a house as an important family investment. A real estate agent is a critical element of every home purchase. Most buying and selling processes are performed through agents. Because home values are relatively high and sales agents are paid a percentage of sales prices, the real estate agent profession can be a very rewarding profession. It is fast becoming a very attractive profession especially in large cities such as Bangkok. In the past, most real estate agents operated in resort cities such as Pattaya, Phuket, Chiang Mai, Hua Hin and Koh Samui. However, with the second-hand home markets growth, the real estate profession is expanding tremendously in Bangkok and it adjacent areas. The professions growth has nurtured international standards and practices that Thai consumers are quickly recognizing and accepting. Today more than 25 per cent of second-hand homes are purchased through agents.
Housing Issues
Successful agents must thoroughly understand consumer needs, the economy and especially the financing environment. For most home buyers, it will be the largest financial transaction of their lifetime.
Developing international standards
Real estate agents training
The fast changing real estate environment requires extensive real estate training programs. REBA has worked closely with private and public universities or related government sectors to develop and conduct training programs for real estate agents. We have also worked closely with GH Banks Research and Information Services Department to develop real estate agent business training courses at Ramkhamhaeng University (RE-308). REBA also conducts Professional Real Estate Sales courses (RE131) at the Thai Real Estate Business School. We also worked with the Real Estate Training School (Thailand) to conduct Sales Techniques for Professional Real Estate Professionals courses. Later this year, REBA expects to launch its first university New Real Estate Agent Creation courses. We are encouraging all universities to participate in this innovative new program.
A key REBA objective is encouraging the profession-wide establishment of international standards and practices. To ensure nationwide enactment and compliance we are currently seeking government support. We believe that a real estate agent industry with government licensed professionals will result in a more sustainable housing and real estate industry and ultimately the development of a more prosperous and sustainable economy and society. REBA is currently developing e-learning agents courses that will be available to everyone throughout the country. To encourage the development of international standards, we work closely with the US based National Association of Realtors (NAR) to conduct Certified International Property Specialist (CIPS) and Certified Residential Specialist (CRS) training courses in Thailand. These course when completed offer world-wide recognized designations. The courses held in Thailand have been widely attended by both foreign and local participants.
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Marketing to REBA members
To provide added value to its members, REBA regularly conducts marketing and sales promotion programs. We have developed a popular real estate data base (www.reba.or.th) that provides valuable buy and sell information for our members. The association also conducts regular members activities that encourage information and knowledge exchange. We have recently developed REBA Social Networking programs that used Facebook, Twitter or Hi5 to connect with our members.
Long-term licensing and professionalization
Initially, its short-term policy was establishing a Real Estate Broker Information Center and its long term policy is promulgating a Real Estate Broker Act. REBA is now in the process of building a REBA INDEX that will be a primary information source for buying and selling real estate. The REBA INDEX will collect and distribute actual buying and selling price information and distribute it to the general public. We will also be cooperating with the Department of Business Development to establish Real Estate Agents licensing qualifications and regulations.
In 2004, the Thai Cabinet enacted two major policies to encourage the development of the second-hand home industry.
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Housing Issues
Vibul Chantradilokrat
Home building services in Thailand

The home building business began expanding about 50 years ago in Thailand when individual land owners began hiring builders to build new homes.
Initially, home builders provided basic standard house plans as well as special designs for owners that wanted something different. They also managed construction permit processes and took care of various government requirements including connecting the property to basic infrastructure.
Home Builder Association

The Home Builder Association was founded in 2004 by leading home builders, Seacon Construction Ltd, Four Pattana Co Ltd and Royal House Ltd. Their overall objective was to raise the home building industrys profile by developing
Standardizing industry practices
product and service standards and enhancing its overall reputation and image, especially among key stakeholders and policy makers including government agencies, business organizations, home buyers and the general public.
Now in its seventh year, the association is continuously standardizing industry practices to enhance its members overall reputation among all stakeholders. It has established strict qualification criteria for member companies and has produced standardized contracts that focus on fair
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treatment for consumers and home builders. The standardized contract clearly addresses nine critical areas including: 1. Contracts objectives 2. Starting date and date of completion 3. Total costs of contract 4. Employees (of builders) roles and responsibilities 5. Employers (builders) roles and responsibilities 6. Quality of materials, equipment and tools (warranty work) 8. Contract termination and damages 9. Miscellaneous To promote its overall image, the association conducts marketing activities at numerous industry events held throughout the country.
At the beginning of each year, the association hosts a New Home Builders event at Central Ladprao where members can display their latest construction designs. We are also supporters of the annual Home Builder event at the Queen Sirikit Convention Center.
Houses built by landowners
In Thailand, the number of houses built by landowner-users annually seldom fluctuates as much as developer-built housing. During 2004 - 2009, land-owner built housing has stayed steady while the number of single detached homes and condominiums built by developers varied widely.
Chart 1 : Registered houses in Bangkok and surrounding areas
Source : Real Estate Information Center (REIC)
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Housing Issues
Land-owner built homes

The number of homes built by land-owners has remained steady in Thailand during the past decades because people are confident with the home building industrys skills and performance. Many institutions such as the Home Builder Association, The Association of Siamese Architects Under Royal Patronage, Department of Public Works and Town, Government Housing Bank , Bangkok Metropolitan Administration and some financial institutions have encouraged people to build their own houses. GH Bank provides special benefits to Home Builder Associations members.
The home building business
The home building industry has grown tremendously since the associations establishment in 2004. In addition to standardizing industry-wide practices and coordinated efforts to enhance its members overall reputation, the association has pro-actively promoted and instituted ethics programs for all its members and their employees. With the associations encouragement, many home building companies have developed and implemented many new value-added services that have enhanced the industrys reputation and image. For instance, it has encouraged and helped members establish after-sales services and warranty programs for it customers.
These services allow new home owners the option of selecting home builders warranties rather than seeking redress from contractors for any construction defects. The association has also established support channels so that unhappy customers can seek fair adjudication of their disputes with member companies. To further promote its members services, the association annually publishes a very popular New Home Design journal that highlights outstanding news homes built by its members. It also produces regular publications that alert consumers about the latest home building products that have come into the Thai market. These innovative new home building products often encourage prospective home buyers to call our members for quotations on new homes.
What the home building industry needs
The home building industry would expand much more quickly if the government would initiate policies to reduce interest rates, especially for the housing industry. Interest costs are major developer and home builder costs. For home purchasers interest costs over a 30 year amortization period are a very significant amount. The government should enact various policies that reduce interest costs to encourage home ownership.
Skilled labor shortage
In Thailand our construction industry labor market primarily consists of rice farmers who
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only work during their off-seasons. Most of these seasonal laborers immediately vacate construction sites when they are required on their farms. Home builders consequently must scramble to find replacement workers during the planting and harvesting seasons and many projects are delayed because no labor is available.
To address the labor shortage issue, many home builders retain a small core group of laborers that are skilled in many construction areas to keep projects slowly moving during planting and harvesting seasons.
Future trends
Since the associations establishment, six years ago, our statistics show that the home building industry has continued growing. (Chart 2)
Chart 2 : Homes constructed 2008 - 2010
Source : Home Builder Association
Table 1 : Preferred housing prices 2007 - 2009 (Home Builder Event)

Unit : million baht Details Most preferred housing prices Average house price Lowest house price Highest house price
Year 2007 1-2 4.3 0.86 65 2008 1-2 4.2 0.9 43 2009 2-3 4.7 1 60
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Housing Issues
Table 2 : Housing prices 2007 2009 (Home Builder Event)

Unit : house House price Bt 1 - 2 million Bt 2 - 3 million Bt 3 - 4 million Bt 4 - 5 million > Bt 5 million
Year 2007 96 72 57 31 68 2008 121 107 78 55 68 2009 108 121 94 48 138
We believe that higher income levels will encourage more Thai land owners to build their own new houses. Some home buyers will choose to build their own homes rather than purchasing one in subdivisions built by developers. To enhance our members businesses we have launched marketing programs that include developing cooperation with potential business partners, including land-owners. Recently, several landowners have asked our member companies to jointly develop the Baan Chuen Ratchada (at Prachachuen) and Baan Busaba (at Thanon Tiwanon) projects.
In the future, many home building companies will provide additional services including providing prospective home owners with land purchase and home construction services. As Thailands population ages, the demand for homes specially built for older citizens will become more prevalent. In the next decade, specially built homes for senior citizens will become a very important of the Thai home building market.
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Amornratna Charuratna
Thailands Escrow Act protects home buyers

Home buyers can reduce transaction risks by placing their agreed deposits into escrow accounts. Most importantly, by placing deposits into escrow, buyers will be assured that if their funds are only ultimately paid out only when the sellers can deliver good title to the properties.
Thailands Escrow Act which was enacted on May 20, 2008 allows home buyers and sellers to voluntarily select independent third-party escrow agents to hold documents and buyers deposits (or the full purchase prior) until the property can be legally transferred. The escrow agent must safekeep the deposits, assets or documents deposited by the parties, transfer the sums due under the agreements and arrange the transfer of ownership or rights to the assets when required. The written tri-party escrow agreement and the escrow agent must ensure that the parties fulfill their obligations under both the contract and the escrow agreement.
History of escrow law
During the 1997 Thai economic crisis, many home purchasers lost their deposits because some developers became bankrupt before they could complete the homes and transfer legal title. In most cases, home purchasers had provided contracted progress-payments to the developers. The developers used these
funds to fund their operations and when the housing market became overbuilt, many developers couldnt generate enough cash to complete contracted projects. Some of them went bust and many home purchasers lost their deposits. The would-be purchasers were left only with contracts from bankrupt developers that could not deliver the new homes. In most cases the developers didnt have enough cash to repay the deposits. Many people demanded that a new compulsory Escrow Law be put in place to protect buyers from future real estate bubbles and from unscrupulous builders. After much debate, a new voluntary Escrow Act was finally enacted in 2008. Under the Act, purchasers and sellers may voluntarily place contracted deposit-amounts into escrow accounts that will only be paid out when all contractual obligations are fulfilled. In general, developers will have no right to use the funds for construction and all purchasers deposits are held in trust by escrow agents.
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Housing Issues
The Escrow Agents Law
Under the new Act, the escrow business is conducted when an escrow agent supervises payment made by parties under an agreed escrow agreement. The escrow agent is paid equally by both buyers and sellers. The escrow agreement is made between the parties to the agreement and the escrow agent, under which the escrow agent agrees to supervise the parties debt payments. Escrow agents must ensure that the parties perform their obligations within the time specified, and in accordance with the escrow agreements terms. They must safeguard any funds, assets or documentary evidence that the parties deposit into the escrow account, including money transfers, and rights or ownership of assets to be transferred. Escrow agents may also provide other services, as agreed by the parties, and in accordance with regulations issued. Any person eligible to be an escrow agent must obtain a license from the Ministry of Finance. Only escrow agents may use the name escrow or other words of the same meaning in their names. Escrow agents will be monitored by the Escrow Committee, that includes the Permanent Secretary of the Ministry of Finance, Director-General of Department of Lands, Director of Fiscal Policy Office, Representatives of the Consumer Protection Board, Representative of Bank of Thailand and a maximum of five other experts (specializing in finance, accounting, tax, law, consumer protection and asset sales) appointed by the Minister.
Who may act as escrow agents
Only commercial banks, finance companies or juristic persons specified by the Ministerial regulations can apply for escrow licenses. Juristic persons eligible must provide security, and comply with financial requirements, or additional regulatory requirements. Anyone using the word escrow must be a licensed escrow agent. Initially, these licenses will be granted exclusively to financial institutions because of their credibility and financial security.
Procedural duties of escrow agents
Escrow agents must follow exact procedures designated within the Act. Initially, the parties must agree to make an agreement and appoint an escrow agent. The escrow agents then prepare an escrow agreement. The parties review the escrow agreement and sign together with escrow agents. The escrow agents then open an escrow account with a financial institution.
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Monies paid by a party must be deposited in the escrow account within one business day and the escrow agents must issue evidence
of monies deposited for each transaction to any paying party, and notify the other party in writing regarding monies deposited.
Chart 1 : Escrow procedures
House Buyer
Reciprocal Contracts
Mutually agree to appoint an escrow agent
House Seller
Escrow Agent
Escrow Agreement
Open Account at the Bank Fully follow agreements conditions Escrow Agent
money house
House Buyer
House Seller
Duty to obtain a license to operate escrow activities

Financial institutions eligible as escrow agents must obtain licenses from the Ministry of Finance. The Acts regulations specify the requirements and most importantly, the financial institutions must be stable, reliable and ready to perform. The Minister has issued escrow licenses to the following nine financial institutions.
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Housing Issues
Bank 1. Bangkok Bank 2. HSBC 3. Kasikorn Bank 4. Sumitomo Mitsui Banking Corporation 5. The Siam Commercial Bank 6. ABN AMRO, Bangkok 7. CITI Bank, Bangkok 8. Standard Chartered (Thailand) 9. Krungsri Ayudhaya Bank
Date / Month / Year of issuing 19 June 2009 19 June 2009 19 June 2009 19 June 2009 14 August 2009 14 August 2009 3 December 2009 5 March 2010 5 March 2010
Source : As of April 1, 2010, collected by Bureau of Financial Protection Policy
Criteria to issue escrow licenses

Financial institutions seeking escrow agents licenses must submit their applications to the Fiscal Policy Office (FPO). The escrow committee evaluates the application and submits its proposal to the Finance Minister. To qualify for an escrow agents license, the financial institutions must maintain adequate capital levels as required by law and possess efficient management policies. They must also demonstrate that they have high-standard escrow agent operating systems and adequate operational risk management controls. Financial institutions must also receive Bank of Thailand (BOT) authorization to enter the escrow business. In general, commercial banks designated with most-recent BOT inspection operational risk levels of low, rather low, or medium can conduct the escrow agent business without a license. However, they must submit
a business operation plans to the Financial Regulatory Department, Supervision Group, Bank of Thailand, at least 30 days before the start of business. Other commercial banks must submit escrow agent business plans to the Bank of Thailand and can only operate as escrow agents if they receive prior BOT permission.
Using Escrow Agents advantages

Home buyers can reduce transaction risks by placing their agreed deposits into escrow accounts. Most importantly, by placing deposits into escrow, buyers will be assured that if their funds are only ultimately paid out only when the sellers can deliver good title to the properties. Escrow accounts create a level playing field for small builders when they compete with large corporate housing developers for customers. Prospective buyers will be assured that their deposits will only be paid when the property can be delivered under all agreed-to conditions.
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Overall, the Escrow Agents Law will ultimately provide more assurances to consumers that their hard-earned savings earmarked for home purchases will be specifically used for that purpose. It will protect consumers from unscrupulous business practices and from the vagaries of frequent cyclical real estate bubbles.
Buyers
Buyers will be assured that if their funds are only ultimately paid out when sellers can deliver good title to the properties
Sellers
A mechanism for equalizing competition between small and large housing developers
Real Estate
Prevent dishonest sellers from entering the system - standardizing business prectices
Economy
Promote real estate investment post overall economy
Future of escrow agents business

As the escrow agent business develops, juristic persons other than commercial banks will be permitted to enter the business. With more competition, services should be improved and overall costs should be reduced. In time, the escrow agent business will develop further as consumers understand its value and how their services can further protect their hard-earned savings.
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Global Issues
Government housing financial institutions dont guarantee higher home ownership rates Black Swan Theories Self-immunity: critical risk management criteria in uncertain times
Alex J Pollock 2
Government housing financial institutions dont guarantee higher home ownership rates1
Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac did not result in the worlds highest home-ownership rates for US citizens as often implied by their supporters.
As we begin the last quarter of 2010, our housing finance system (as well as those of some other countries) is still struggling in the wake of the great housing bubble of 2000-06 and its collapse into the panic and serial crises of 2007-09. Housing finance cannot be considered apart from its effects on house prices. When you push a lot of credit at an asset class, its price tends to rise. American housing finance practices and subsidies helped inflate house prices during the bubble. Then U.S. average house prices
1 2
fell by more than 30% from peak to trough: something which was previously considered impossible. This brought them back to their long-term trend line and to the levels of 2003, with all of the losses and turmoil with which we are so familiar. A memorable decade! One of its lessons is to try to remember that things considered impossible can nonetheless happen. As we develop other lessons for the next decade, there is no doubt that it is educational and useful to examine American housing finance from on international perspective.
This article was adapted from Alex J Pollocks presentation to the United States Senate Committee on Banking, Housing, and Urban Affairs , (September 29, 2010) Alex J Pollock is an American Enterprise Institute resident fellow
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Global Issues
Comparing our housing finance system to other countries, we discover that one thing remarkable and indeed unique in the world about American housing finance was the dominant and disproportionate role played by government-sponsored enterprises, namely Fannie Mae and Freddie Mac, wielding their implied government guaranty. Based on this implied guaranty, massive amounts of their debt securities were sold around the world, so that foreign institutions could help inflate U.S. house prices without worrying about the risk and later be bailed out as creditors by American taxpayers. Of course the implied guaranty always was a real U.S. government guaranty, as events have amply demonstrated, but it did not have to be accounted for as one. In the days of Fannie and Freddies pride, their representatives and political supporters used to say frequently, American housing finance is the envy of the world! It really wasnt, at least based on my discussions with housing finance colleagues from other countries. But many Americans-including members of Congress-- thought it was, just as they mistakenly thought and said that the U.S. had the highest home ownership rate in the world. We didnt and dont.
Comparative home ownership rates

This is apparent from the table of Comparative Home Ownership Rates below. The U.S. ranks 17th of 26 economically advanced countries, or about two-thirds of the way down the list. I think we can agree that we would like our society to have a property-owning democratic citizenry, which includes widespread home ownership. But the international perspective makes it clear that many countries achieve home ownership levels as high or higher than ours with no GSEs. It turns out that these levels can be achieved without tax deductions for the interest paid on home mortgages, without our very unusual practice of making mortgages into non-recourse debt, without government mandates to make creative (that is, riskier) loans, without 30-year fixed-rate loans, and with prepayment fees on mortgages. Of course, as bubbles and busts in other countries show, you can also get in trouble with different systems. At a minimum, we should never assume that the particular historical development so far of the U.S. housing finance system is definitive.
Comparative Home Ownership Rates

Rank 1 2 3 Country Singapore Spain Iceland Ownership Rate 89% 85% 83% Date 2009 2008 2005 Source Statistics Singapore European Mortgage Federation Statistics Iceland (HES survey)
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Rank 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Country Belgium Norway Portugal Luxembourg Ireland Chile Italy Israel Australia England Canada Sweden New Zealand United States Japan Finland Czech Republic France Netherlands Austria Denmark Germany Switzerland
Ownership Rate 78% 77% 76% 75% 75% 73% 72% 71% 70% 68% 68% 68% 68% 67% 61% 59% 59% 57% 57% 56% 54% 46% 35%
Date 2007 2001 2007 2008 2009 2002 2007 2004 2006 2010 2006 2008 2001 2009 2003 2008 2007 2007 2008 2009 2009 2007 2000
Source European Mortgage Federation UN Economic Commission for Europe European Mortgage Federation European Mortgage Federation European Mortgage Federation UN Housing Policy INSEE and Eurostat UN Economic Commission for Europe Australian Bureau of Statistics Building Societies Association Statistics Canada European Mortgage Federation Statistics New Zealand US Census Bureau Japan Statistical Yearbook 2005 Statistics Finland European Mortgage Federation European Mortgage Federation European Mortgage Federation Statistics Austria European Mortgage Federation INSEE and Eurostat Statistics Switzerland
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Global Issues
Canada
The better credit performance of Canadian housing finance over the last several years has become well known. The proportion of Canadian mortgage loans more than 90 days delinquent in the Q1, 2010 was less than %. It was about one-tenth the ratio of U.S. mortgages over 90 days delinquent at that time, which was 4.9%. If we add mortgage loans in foreclosure the number jumps to 9.5%. Quite a contrast, as many people have remarked. Canada makes a pertinent comparison for the U.S. Its population and economy is much smaller (about one tenth in both cases) but is in many ways very similar. Both are rich, advanced, democratic, and stable countries that have sophisticated financial systems and pioneering histories that stretched from the Atlantic to the Pacific. But Canada has no housing GSEs; mortgage loan interest is not tax deductible; it does not have 30-year fixed rate mortgages; it does have prepayment fees. Mortgage lending is more conservative and creditor-friendly. Canadian mortgage lenders have full recourse to the borrowers other assets and income, in addition to the security interest in the house. Underwater borrowers have much less incentive to walk away from their houses and mortgages. No tax deduction for interest payments probably increases the incentive to pay down debt. Most Canadian mortgage payments are made by automatic debits of borrowers checking accounts and can be matched to paycheck frequency - a technical but important behavioral point. Canadian fixed rate mortgages typically are fixed for only
up to five years. Subprime mortgages were a much smaller part of the market. This relative conservatism has meant that Canadian banks, the principal mortgage lenders, while experiencing some pressure, have come through the international financial crisis in much better shape than their U.S. counterparts, with (as observed above) mortgage delinquencies so far well-behaved. There does not appear to have been a home ownership price to pay for this relative credit conservatism. Canadas home ownership rate is 68% vs. 67% for the U.S. Two very different hosing finance systems, one, as it turned out, much riskier than the other, produced virtually the same home ownership rate.
The Canada Mortgage and Housing Corporation (CMHC)
It is important to recognize that Canada does have an important government body to promote housing finance, which has a substantial role: the Canada Mortgage and Housing Corporation (CMHC). Among its principal activities is insuring (guaranteeing) mortgage loans, another is securitizing some of the insured loans. So you could think of it in one sense as a combination of FHA and Ginnie Mae. (its mortgage insurance program was originally modeled on the FHA in 1954.) CMHCs mortgage insurance is a major factor in the market, covering about C$470 billion out of total mortgage debt of about C$950 billion, or roughly half of Canadian mortgages. This is the same proportion as the combined Fannie and Freddie in the U.S. (over $5 trillion out of about $10 trillion). Whether or not you like the idea of such a scale of government financing, you have to
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say that, in contrast to the American GSEs, at least CMHCs status is completely clear and honest. It is a 100% government-owned and controlled corporation. Its government guaranty is explicit, so it operates with the formal full faith and credit of the government of Canada. It also provides housing subsidies which are on budget and must be appropriated by Parliament. Canada in this respect looks superior to the U.S. in candor, as well as credit performance. However, CMHC does obviously represent a large government intervention in the housing finance market. Recalling our previous point about the interaction of housing finance and house prices, one Canadian criticism is that this intervention has caused excessive inflation in Canadian house prices. Indeed, Canadian house prices measured relative to a base of the year 2000, have now risen higher than U.S. relative house prices at the top of the bubble. A general rule is that as long as house prices are rising, mortgage loan performance will be good. Some Canadian commentators worry about whether their house prices are in a bubble. The Fraser Institute, a Canadian free-market think tank, has called the Canadian mortgage system a high taxpayervulnerability model. In response to these worries, Canadian regulators have taken important countercyclical actions to lower the maximum loan-to-value (LTV) ratios on some of the riskier classes of mortgage loans. In other words, they now require larger down payments and allow less leverage. Such countercyclical movement in LTV limits, in my opinion, is an excellent idea and
necessary to moderate the inevitable cycles in real estate credit. We should stay tuned to the highly interesting Canadian housing finance story.
Matching mortgage assets and mortgage funding
The traditional and still typical Canadian mortgage has a long-term amortization schedule (up to 35 years for CMHC-insured mortgages), but with an interest-rate fixed for five years, after which the interest rate is re-set for another five years, and so on. Shorter fixed periods are also common, but the debt service to income ratios are to be approved based on the prevailing five-year rate. About two-thirds of mortgages remain on the balance sheet of the lenders, which are dominated by five nationwide banks. The five-year fixed rate mortgage loans are often funded by the issuance of five-year fixed rate certificates of deposit, which gives a very good natural matching (that is, no derivatives required) of the banks assets and liabilities. Obviously, such matching is also available for shorter fixed rate periods. This is a straightforward answer to a fundamental problem of every housing finance system: how to match the nature of the mortgage asset with an appropriate funding source, so that you are not lending long and borrowing short. Different approaches distribute the risks among the parties involved, including lenders, investors, guarantors, borrowers and the government, in various ways.
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Global Issues
The classic example of not achieving the needed match is the infamous collapse of the American savings and loan industry in the 1980s. There are clearly some basic variations: Variable rate mortgages funded with shortterm deposits. Medium-term fixed rate mortgages funded with medium-term fixed rate deposits or bonds. Long-term fixed rate mortgages funded with long-term fixed rate bonds or mortgage-backed securities. In general, variable rate mortgages put the risk of rising interest rates in the first place on the borrowers. To have long-term fixed rate mortgages requires funding by some form of access to the long-term bond market. Every housing finance system must address this fundamental asset-liability question; the answer results in a particular distribution of risks.
Denmark
The most perfect solution in theory, which also functions very well practically in its national setting in an admittedly small country, is that of the housing finance system of Denmark. It has been admired by many observers. Explicitly governed by what it calls the matching principle, the interest rate and prepayment characteristics of the mortgage loans being funded, which include long-term fixed rate loans, are passed entirely on to the investor in Danish mortgage bonds. At the same time, there is a total skin in the game requirement for retention of credit risk by the mortgage lenders. The mortgage banks retain 100% of the credit risk of the loans, in exchange for an annual fee, thus insuring alignment of incentives for credit performance.
Deficiency judgments, if foreclosure on a house does not cover the mortgage debt, are actively pursued. The fundamentals of the Danish mortgage system go back over 200 years. There are no GSEs or government housing banks. This is a private housing finance system built on what appear to be quite robust principles. It generates a home ownership rate of 54%, below that of Canada or the U.S. Some years ago, when the proud hearts of Fannie and Freddie had not yet had their fall, I participated in an exchange with the Association of Danish Mortgage Banks. They explained their mortgage bond- and skin in the game-based system to me, then I explained the American GSE-centric mortgage system to them. When I was done, the CEO of one of the leading Danish mortgage banks said this: In Denmark we always say that we are the socialists and America is the land of free enterprise. Now I see that when it comes to mortgage finance, it is the opposite!
England
England has a large economy, is financially very sophisticated, and has an entirely different housing finance structure. It also has no GSEs. The traditional and still typical English mortgage is a variable-rate loan financed by deposits in banks or mutual building societies. The interest rate on these loans can be changed up or down at the will of the lender, so everybodys rate changes at the same time. This is a natural asset-liability matching for the depository institutions, but is risky for the borrowers.
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England had a housing boom and bust in the 21st century cycle, as we did. Indeed, the first casualty of the financial panic was an English mortgage lender, Northern Rock, which was a well-known securitizer of mortgages. Northern Rock failed in 2007, long before Bear Stearns, when the wholesale investing market refused to continue investing. This was followed by first by a retail deposits run, then by the banks nationalization. England also had a unified financial regulator, the Financial Services Authority, whose jurisdiction included mortgage lenders as well as all other financial intermediaries. This unified regulatory structure did not avoid the crisis. Still, England has a home ownership rate of 68%, just ahead of the U.S.
Germany
Some Germany banks got into serious trouble in the housing bubble by investing in U.S. mortgage securities and other foreign mortgages, not in their domestic mortgage lending market, which is quite conservative. It generates a home ownership rate of 46% which would not be politically acceptable in an American setting. Nevertheless, there are two German housing finance ideas worthy of study. One is its mortgage covered bond (Pfandbrief). With a statutory basis more than one hundred years old (and it is claimed, a history going back to Frederick the Great of Prussia), the covered bond has provided a relatively stable bond-based mortgage financing source.
Covered bonds allow fixed rate funding for fixed rate mortgage loans, and keep the credit incentives of the lender intact, since the lender remains responsible for 100% of the credit risk and the loans stay on its balance sheet. But they provide access to the bond market, in addition to deposit-based funding, and are indeed a major component of the German bond market. The mortgage loans serve as collateral for the bonds, which are also senior obligations of the issuing mortgage lender. Many people have proposed, and I agree, that the U.S. should introduce covered bonds as a mortgage funding alternative- one which does not involve a government guaranty. The German experience suggests these lessons: A statutory basis for is needed for these bonds, not merely a regulatory one, to insure the bond holders rights to the collateral are truly protected. The mortgage loans serving as collateral (the cover pool) should be subject to conservative credit standards, to reduce the volatility and uncertainty of their credit behavior. A second German housing finance idea for consideration is emphasizing (we should say, rediscovering the needed emphasis) on savings as part of sound housing finance. Thus, the German building and savings banks (Bausparkassen) continue to practice the traditional savings contract, by which the borrower commits to a regular savings program as part of qualifying for a mortgage loan.
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Global Issues
I am not recommending their specific program, but the general principle. We have completely lost the emphasis on savings as part of housing finance. We need to rediscover it.
Switzerland
Switzerland may just be mentioned as a case of the variety exhibited by housing finance in international perspective. It is a wealthy country with a very large and sophisticated financial sector. It has mortgage debt outstanding of about 100% of GDP, somewhat higher than in the U.S.
Yet Switzerland has a home ownership ratio of only 35%, the lowest on our list. It is an unusual housing finance example. So is the American GSE-centric system, which has collapsed at heavy taxpayer expense, as did the American savings and loan system which preceded it.
Conclusion
The variety of international experience suggests that there is every reason to think broadly and openly about the possibilities for developing a better, post-GSE U.S. housing finance system for the future.
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Black Swan Theories

APHJ looks at unexpected once in a thousand-year events that seem to be appearing regularly
During the current prolonged global economic crisis, the terms Black Swan Theory and Black Swan events continue appearing in all sorts of media. The terms have been attributed to economist and investor Nassim Nicholas Taleb who used the term to explain unexpected once in a thousand year events that seem now to be appearing regularly. These Black Swan events seemingly come out of nowhere to wreak untold havoc in areas such as the global financial markets. In his rather complicated and hard to read book, The Black Swan, Taleb explained the origins of his Black Swan theory. Apparently, in 16th century England, everyone assumed that all swans were white because all historical records showed that they had white feathers. In this context, black swans were impossible or at least non-existent. However, when a Dutch explorer discovered black swans in Australia in the late 1600s, the Black Swan theory term became to
mean that a perceived impossibility might
be proven wrong at a later time.
Black Swan Events
In his book, Tassim has widened the term Black Swan events to characterize most major scientific discoveries, historical events, and artistic accomplishments as black swans that are undirected and unpredicted. He characterized the internets rise and the September 11 attacks on New York citys twin towers as Black Swan Events. According to Taleb, Black Swan events usually have three distinct attributes. First, the events usually lie outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Who could predict that a few terrorists would be able to evade Americas trillion dollar air defensive-shield and permanently frighten everyone? Second, it carries an extreme impact and lastly, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. Who could explain how a few sub-prime mortgages in central Cleveland ghettoes could develop into a global economic crisis that may linger for more than a decade?
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Global Issues
How do we cope with Black Swan events?
Many leading thinkers including Taleb and Joshua Ramo Cooper have talked about how we may cope with Black Swan events. However, they do not try to help us predict when they may occur. Instead, Taleb and Cooper talk about building robust self-immunity systems to prepare for these seemingly unexpected events that have become part of our common operating fabric. According to Taleb, banks and trading firms are very
vulnerable to hazardous Black Swan Events and are exposed to losses beyond that predicted by their defective models. For instance, how many financial risk management models predicted that AAA-rated securities issued by companies such as Lehman Bros and apparently guaranteed by AIG could become virtually worthless overnight.
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K I Woo
Self-immunity: critical risk management criteria in uncertain times

Todays unstable global environments increasingly require all companies to question whether their risk management policies and systems ensure their businesses are sustainable.
Most organizations are realizing that conventional risk management frameworks that merely identify and address potential risks can no longer be relied upon to protect them from the vagaries of an inextricablylinked globalized world. Companies must develop risk management frameworks that provide immunity from unforeseen and often externallyinduced enterprise-threatening disasters. These unthinkable but devastating thousandyear unknown calamities are now seemingly occurring every few months. In the housing industry, we recently witnessed how a few bad inner-city US sub-prime housing loans triggered an unprecedented global economic crisis. Many large financial institutions in major economies had to be bailed out by their governments. No one can predict whether or not local financial disturbances that hit countries such as Greece and Ireland will somehow seriously affect totally-unrelated business operations elsewhere.
Learning from Thailands 1997 housing crisis
Closer to home, Thailands housing-bubble burst triggered the 1997 Asian economic crisis that eventually wreaked financial havoc in many other parts of the world. Within days, the bustling Russian equities market tanked and other markets globally also quickly tumbled. These unknown crises require new risk management models that provide resilient complex-adaptive systems that will allow companies to cope with these seemingly enterprise-threatening crises and then immediately snap-back and become stronger.
Self immunization resilience-based cultures

A key principle of Thailands HM King Bhumphol Adulyadejs Sufficiency Economy Philosophys (SEP) is inculcating self-immunization practices into our organization cultures.
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Global Issues
Corporations with self-immunization policies and cultures use management approaches that build resilience rather than develop resistance-based risk management frameworks that try to identify and then prevent disasters. Resilience-based risk management frameworks and cultures recognize that we cant possibly anticipate or prevent all future dangers, especially in todays fast-pace interlinked globalized world. They assume that most future events that can seriously affect a companys well-being will be unexpected. In his best seller, The Age of the Unthinkable why the new world disorder constantly surprises us and what we can do about it, Joshua Cooper Ramo said these new resilience-base risk-management systems must allow organizations to withstand inevitable unforeseen crises and more importantly provide them with the ability to absorb any disasters worst nightmares. Organizations must be able to learn, adapt and at the same time walk away with their core attributes intact, he said.
Globalization - many new inextricably linked networks
Globalization has inextricably linked everyone through banking, electronicallylinked networks and the ultimate world- wide financing of debt-related instruments. These networks include massive financial, banking and stock market networks as well as electrical and telecommunications grids. As these networks become more inextricably linked, they have become less resilient.
We can all remember how a wrong order punched into the New York Stock Exchange trading system by a disgruntled trader almost precipitated a global financial meltdown several months ago. Globalizations interlinked networks have further amplified risks in many unrelated areas. For instance, long-distance flights that span the globe mean that life-threatening diseases or plagues can be easily transported by often unsuspecting human time-bombs. For instance, a tourist-reliant economy such as Thailand must be prepared for the real possibility that a tourist from thousands of miles away may inadvertently carry a widely infectious virus that could not only damage our tourist industry but put millions of our own citizens at risk. A self immunization strategy would not only encompass stocking our medical shelves with vaccines that may not help us because it is more than likely we will not be able to quickly identify which one of thousands of viruses the visitor may be carrying. We can however immunize ourselves by strengthening our overall health-care delivery system so that it is broad-reaching and will provide immediate and speedy identification of potential problems. The systems would quickly identify and isolate any potential carriers while at the same time vaccinating those mostly likely to be infected by the carrier and most likely to infect others.
Developing self-immunizing risk management cultures
Companies today need to implement selfimmunization risk management cultures
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because globalized fast-moving inextricablylinked networks often produce unwanted consequences that normal organizational processes and procedures cannot see or understand. Any Thai organization that relies on tourism for its primary income source must seriously implement resilient self-immunization risk management strategies to address such risks. The strategies may be more complicated than just diversifying customer bases to several widely-separated countries. It may include building highly-flexible tourism platforms and infrastructures that will allow companies to quickly change target markets and business models during inevitable unforeseen crises. Companies can develop resilience cultures initially by adhering to HM The Kings SEP three core middle-way pillars of moderation, reasonableness and self-immunity. In its simplest scenario, companies can withstand unforeseen externally-induced financial crises by ensuring that their debtequity ratios are at very safe levels so that any one thousand year financial or capital market disruptions can be safely withstood. For instance, no one can predict exactly when or where a country will experience political turmoil that can shut down its economys operations for extended periods. Maximizing a companys return on investment by using large amounts of debt-financing will not be a self-immunization alternative in todays environment. More importantly, pro-active resilient selfimmunization strategies will allow companies to initially cope with any unforeseen crises by utilizing flexible alternatives than can use
the chaotic environments to develop new competitive advantages. At the same time, financial institutions involved in the housing industry are now also closely linked to globalized networks, many of which may not be readily identifiable. We all realize that interest rates may be closely tied to global financial markets and rising interest rates in other countries may affect local financial institutions funding costs and what they must ultimately charge their home-buying borrowers. These risks are normally addressed by most financial institutions risk management systems. However, we must ask how many risk management systems take into account foreign political crises that may seriously affect the ability of many borrowers to repay their loans.. For instance, if an economy is highly reliant on automobile manufacturing, what risks would be associated with a long-term political disruption of oil delivery from major Middle East suppliers to global automobile drivers. Any long-term oil delivery disruptions will immediately increase oil prices exponentially and eventually result in slumping global new cars sales. In Thailand, the long-term effect of this disruption would reverberate throughout the economy. It would not be limited to the primary automobile manufacturers that must lay off thousands of workers. It would also include support industries employees that constitute a much higher number of employers that must also be laid off. The auto-financing industry, car insurance, TV advertising industry and many other industries would also be badly hit.
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Global Issues
In todays unstable environment, no one can assume that the cessation of Middle East oilflows can be a one in a thousand year event. Any well-run organization must have in place a self-immunization risk management plan that will allow it to quickly adapt to the crisis. For instance, thousands of middle income auto-related industries home borrowers will quickly become non-performing borrowers. Financial institutions must have in place self-immunization risk management plans in place to address such crises. The plan must include pro-active policies that address the crises head-on and yet be prepared to ensure the long-term sustainability of both the financial institutions customer base and its own ultimate sustainability.
Sustainability: a critical self-immunization mantra
A critical self-immunization strategy is ensuring that all our actions lead to a sustainable long-term organization future. For instance, the current global economic crisis has highlighted how the stock markets desire for unsustainable short-term quarterly earnings eventually drove many companies into bankruptcy. The drive for short-term profits and misplaced incentives drove many financial institution leaders to develop and implement unsustainable high-risk strategies that eventually failed. To achieve continuous rising quarterly profits, many financial institution leaders decided to ignore clear signs that the highly profitable sub-prime securities market was turning bad. To keep the market flowing,
they leveraged their already-bloated balance sheets, held on to sub-prime securities that couldnt be sold and eventually succumbed when the market came to grinding halt in 2008. When the musical chairs stopped, these highly-leveraged financial institutions that had gone through all types of machinations to ensure their off-balance sheet vehicles were legal, wrote off billions of dollars. Some large institutions such as Lehman Bros and Bear Stearns disappeared off the map. In the housing industry, many publicly-listed developers are often driven by the value of their stock market prices that are often dependent on unsustainable key performance indicators such as continuously increasing quarterly earnings even in rising interest rate environments or increasing leveraged landbank purchases during boom times. While these actions may have satisfied the equity markets short-term needs, they inevitably led to disasters when real-estate growth cycles begin receding. A self-immunization strategy would include keeping leverage ratios low, maintaining or reducing costs with innovations and developing a flexible platform that will allow you to enter related businesses or compete successfully in other markets.
A properly functioning corporate immune system

An efficiently functioning immune system should also include adhering to HM the Kings Sufficiency Economy Philosophy principles of moderation and reasonableness. Any corporate decision should shy away from decisions that will result in extreme positive
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or negative outcomes. In todays unstable networked global environment, the middle way that mitigates high-risk decisions will inevitably lead to sustainability. A companys management approach based on resilience should also emphasize the need to keep options open. We have to assume that future events will inevitably be the unexpected. Our self-immunity risk management system must allow our organizations to quickly learn from any inevitably chaotic crisis and become stronger. For instance, some analysts said that China learned much from its initial disastrous handling of the SARS disaster in 2003. According to Ramo, SARS demonstrated that China could withstand a massive external shock to its economy, erasing a lingering fear of nearly everyone in China. (Though the country was all but shuttered for eight weeks during SARS, it posted near record growth for 2003 and crucially passed the $1000 per-capital income mark laid out by Deng Xiaoping as a development goal in 1978/23.) 1 Moreover, SARS gave the new Hu Jintao and Wen Jiabao government a chance to establish itself. It helped the Chinese see the cracks in their decrepit public health system in a more urgent light, it led to an overhaul of information reporting inside the government and accelerated the process of media reform. 2
As a result of SARs, many observers view that the Chinese government could respond to and learn from the kinds of jolts it will inevitably feel in coming years. All organizations must develop self-immunity risk management systems that can deliver sustainability over the long-term.
Resilience is very different from resistance

The normal risk management process of resistance is normally an attempt prepare for every possible contingency - which is of course is impossible and exhausting. It forces into a a reactive mode. We are always to be hit which is very draining, Ramo said. When resistance policies fail, it often leaves organizations more afraid, insecure and vulnerable. On the other hand, resiliences processes acknowledge that we cant possibly anticipate or prevent all future dangers. Management accepts uncertainty and seeks to build resilient sustainable socialecological systems, during periods of transformation following disturbances, Ramo said.
1 2
Ramo, Joshua Cooper, The Beijing Consensus, Foreign Policy Center, Page 17 Ibid, Page 18
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Global Issues
Julian Male

Prior to the 1997 Asian economic crisis, insolvency laws in most regional economies were generally out of date and totally irrelevant to modern commercial needs.
In many cases, a countrys insolvency laws, such as Thailands Bankruptcy Act of 1940 which prior to 1998 provided a liquidation (for bankruptcy) and a composition process but no rescue or reorganization process. 1 Because of the Asian crisis, Thailand along with many other countries in the region reformed their bankruptcy laws and introduced Business reorganization processes that are now being used in most developed countries. After more than a decade of reform, many countries are now promoting Cross-Border Insolvency processes in an attempt to harmonize different insolvency regimes. Most countrys insolvency laws require that domestic laws prescribe processes and procedures for any bankruptcy. The major cross border insolvency complication is the difference between the form and implementation of national insolvency laws. These differences often
1
appear because of the strong influence of political, cultural and social factors that underpin the laws. Generally speaking, domestic insolvency regimes such as conflicts of law legislation and private international laws are by far the only legal mechanisms used to resolve cross-border insolvency jurisdictional issues. However organizations such as ADB, IMF, Insol International as wellas insolvency practitioners and legal scholars recognize that many insolvency regimes cannot adequately deal with the sophistication of new global economic environments. In a bid to resolve the jurisdictional issues, international treaties such as the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency (Model Law) have been adopted in an attempt to ensure most cross-border insolvency legal conflicts of laws are harmonized.
Report of the office of General Counsel on Insolvency Law Reforms TA 5795-REG, Asian Development Bank, page 24
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To date the UNCITRAL cross-border insolvency model has been adopted by Australia (2008); the British Virgin Islands, overseas territory of the United Kingdom and Northern Ireland (2005); Canada (2009); Colombia (2006); Eritrea (1998); Great Britain (2006); Japan (2000); Mauritius(2009); Mexico (2000); Montenegro (2002); New Zealand (2006); Poland (2003); the Republic of Korea (2006); Romania(2003); Serbia (2004); Slovenia (2008); South Africa (2000); and the United States (2005). However, many countries such as Thailand are still evaluating whether it should sign the UNCITRAL Model Law.
Insolvency laws - not much interest historically
Throughout history insolvency laws rarely attracts much more than a fleeting interest and rank low on any governments reform agenda. The commercial community, though sometimes aroused, is also largely disinterested in the subject. Legal and other scholars rarely concern themselves with insolvency low issues. It is thus quite remarkable that, during the past decade of the last century, corporate insolvency laws and related practices should have assumed an unparalleled national, regional and global importance. 2
The new globalised economy
However, the 1997 Asian economic crisis which was ignited in Thailand made many
2
people aware that antiquated Bankruptcy Laws were serious impediments to future economic growth in many countries. Consequently, most governments in the region immediately began revamping their bankruptcy and insolvency laws. More importantly during the past decade, these new laws have been regularly tested and interpreted in thousands of Bankruptcy Court cases in each countrys respective Courts. As a result, most business people are now becoming more familiar with how each countrys insolvency courts process individual cases. However, as globalization takes hold and as ASEAN free-trade becomes more entrenched in the South East Asian economies, more companies are expanding their businesses into neighboring countries. How cross-border insolvencies affecting trading partners will be processed and ultimately resolved in different countries is becoming a major business issue. During the past decade, Thailands middleincome housing development industry has gained recognition throughout the region for efficiently producing high-quality well-priced homes. Consequently, many developers are venturing overseas often teaming-up with foreign joint-venture partners. While most publicly-listed Thai developers are currently well-capitalized they may face cross-border insolvency risks if joint venture partners are not as financially robust or if market conditions could suddenly change. A clear understanding of these potential
Report of the office of General Counsel on Insolvency Law Reforms TA 5795-REG, Asian Development Bank, page 10
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Global Issues
risks and their ultimate resolution is a key corporate governance issue.
What is Cross Border Insolvency?
Cross-border insolvency is a term used to describe circumstances in which an insolvent debtor has assets and/or creditors in more than one country. 3 Many businesses in the region now operate in multiple jurisdictions with different trading partners. With the advent of sophisticated internet technologies and reliable independent outsourced supplychains, cross-border trade is no longer the bailiwick of multi-nationals. Companies large and small are now subject to cross-border insolvency risks.
Local priority rules may also depend on jurisdictions. For instance, are employees claims excluded from bankruptcy assets? Perhaps, most critically, how does each jurisdiction apply transaction avoidance provisions?
The UNCITRAL Model Law
The United Nations Commission on International Trade Law (UNCITRAL) was initially created in 1966 with a mandate to further the progressive harmonization and unification of international trade law. As part of its mission, UNCITRAL decided to develop a cross-border insolvency legal instrument called the Model Law that was adopted and ratified on May 30, 1997. 4
Cross border insolvency risks
What is a Model Law?
A major cross border insolvency risk is the failure of a trading partner. Domestic laws prescribe the processes for resolution in most jurisdictions. However, additional complexities arise in cross-border insolvencies. For instance, local creditors may have priority to local assets before any funds go to a foreign administrator. In other cases, local creditors claims may not be recognized by a foreign administrator.
A model law is a legislative text that is recommended to States for incorporation into their national law. A State may incorporate the text of the Model Law into its domestic law or it may modify or omit some provisions. The model laws inherent flexibility is particularly desirable if a State wants to make various modifications before enacting it into national law. However, in order to achieve a satisfactory degree of harmonization and certainty, it is recommended that as few changes as possible be made.
3 4
Cross Border Insolvency, promoting international cooperation and coordination, Corporate Law Economic Reform Proposal for Reform, Paper no. 8, Commonwealth of Australia, page 7 Yamamoto, Kazuhiko, Professor of Law, Hitosubashi University, New Japanese Legislation on Cross Border Insolvency as compared to UNCITRAL Model Law, page 1
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General approach of the Model Law 5
The UNCITRAL Model Law reflects a universal approach to cross-border insolvency. It is based on the principle that a countrys domestic courts should try to cooperate with other countries courts in cross-border insolvencies. The Model Law is modest in its objectives because it doesnt impose substantive laws or rules and is essentially procedural in nature laying out a framework for administrating cross-border insolvencies. It provides for judicial cooperation between States, access rights for foreign insolvency administrators and recognition of foreign insolvency proceedings.
Greater certainty for trade and investment Fair and efficient administration or crossborder insolvencies that protects creditors, other interested parties including debtors Protects and maximizes value of debtors assets Facilitates rescue of financially troubled businesses, thereby protecting investment and employment
Conclusions
Main features of the Model Law
The Model Laws preamble states that the Laws purpose is providing effective mechanisms for dealing with cross-border insolvencies. The overall objectives include: 6 Encouraging cooperation between Courts and competent authorities of different States
Any companies venturing overseas should ensure that they have a clear understanding of a particular foreign countrys cross-border insolvency laws. As more countries fully modernize their bankruptcy and insolvency laws, particularly their corporate restructuring and reorganization provisions, we believe many of them will adopt international treaties such as the UNCITRALs Model Law on Cross-Border Insolvency.
5 6
Cross Border Insolvency, promoting international cooperation and coordination, Corporate Law Economic Reform Proposal for Reform, Paper no. 8, Commonwealth of Australia, page 21 Ibid. page 22
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Quality of Living
Araya Chientachakul

This year-end edition of the Asia-Pacific Housing Journal features outstanding National Parks from different regions in Thailand.
Its all part of GH Banks continuing efforts to improve everyones quality of life though conservation and sustainable development. We hope that all of you will be encouraged to visit these great National Parks.
Khao Sam Roi Yot National Park

mountain range caves along the Gulf of Thailand

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Quality of Living
Attractions
Khao Sam Roi Yot National Park, Thailands first coastal National Park is located on the western edge of the Gulf of Thailand in Prachuap Khiri Khan Province. The name Khao Sam Roi Yot can be translated into The Mountain With Three Hundred Peaks, a series of magnificent grey limestone mountains, which rise dramatically from the Gulf of Thailand and adjacent coastal marsh to a maximum height of 605 meters. The park features three distinctive characteristics : the Central part comprising steep lofty limestone mountains, the West is flood plain and the East has sandy and muddy beaches. The limestone-landscape area is highlighted by many large caves, filled with stalactites and stalagmites; namely the Phraya Nakhon, Kaeo and Sai caves. The Phraya Nakorn caves ceiling features a large opening, that allows sunlight to shine upon Khuha Kharuehat, the Royal Pavillion constructed under King Rama Vs Royal Command. The park is reportedly one of the best locations in Thailand to observe shorebirds. Between September and November hundreds of migratory shorebirds from Siberia, China and Northern Europe arrive at the mudflats to feed and rest, before continuing their southern journey. Some of these birds will spend the winter months (November to March) here. These birds will begin the long return journey to their northern breeding grounds between March and May.
How can we get there?

peak is 605 meters above sea level. The most fascinating are Khao Yai, Khao Tham Prathun, Khao Daeng, and Khao Khan Ban Dai. Over the years, nature has shaped the limestoneladen area into magnificent caves or abysses including Tam Kaeo, Tam Sai and Tam Phraya Nakhon Caves.
By Car
Khao Sam Roi Yot National Park is located 63 km. south of Hua Hin in Prachuap Khiri Khan Province. Driving from Bangkok, take Highway 4 (Petkasem Road) to Pranburi (approx. 3.5 hrs.), and then a further 37 km. Turn left at Pranburis main intersection, drive 2 km., at which point the road forks right, continue for 2 km. and turn right at the police substation. From here its 19 km. to the parks check post, and then another 14 km. to the parks headquarters. Driving from the south enter the parks southern entrance off Highway 4; 36 km. past Prachuap Khiri Khan. Turn right at km. 286.5, at the Khao Sam Roi Yot National Park sign and continue 13 km. to the parks headquarters.
By Bus
Geography
The area features high steep limestone cliffs that overlook vast deep abysses. The highest
Air-conditioned buses and regular buses regularly leave Bangkoks New South Transport Station to Pranburi District, Prachuap Khiri Khan Province. At Pranburi, there are local buses that will take you to the National Park headquarters. Rental cars are available at the park.
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Budo-Su-ngai Padi National Park

the realm of golden leaves
The Sankala Khiri Mountain Range that forms a natural border between Thailand and Malaysia feature undulating mountains and the fertile evergreen Budo-Su-ngai Padi forests. It is an important source of biological diversity. Budo-Su-ngai Padi National Park consists of rugged mountain ranges covered with thick evergreen forest where birds and wild animals are abundant. The forest is divided into two parts - Budo forest and Su-ngai Padi forest, which are located close to one another. It also features one of the worlds rarest plants that was first found in Thailand - golden leaves and widely known among local people as the Yan-da-o in the Leguminosae family. This remote forest is the origin of the Bang-Sura Plam, another rare plant. Their large, diamond-shaped fronds, some of which are a meter wide, grow in clumps on the ground and spread out around the clumps. If visitors trek to the middle of Su-ngai Padi Mountain they will find clusters of these palms, This area is a true paradise for forest explorers, bird watchers and those who love to study plant life.
Geography
The highest mountain Ta Wei is 1,182 meters above sea level and the area is the source of many rivers including the Sai Buri, Klong Ba Jur and Klong Ka Young. Generally the soil is clay mixed with sand. Most of the area is covered with lava stones but some areas feature limestone and larger rock formations.
Climate
The areas features two major seasons. Rainy season starts from May to December, summer starts from January to April.
From Narathiwat take Highway 42 to a forked road at Bacho District and drive 2 kilometers further until you arrive at Budo-Su-ngai Padi National Park (Pa Cho Waterfall).
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Quality of Living
Phu Kradueng National Park

pine forest paradise on a mountain top
Phu Kradueng National Park is in Si Than Sub-district, Phu Kradueng District, Loei Province and was designated Thailands second National Park on November, 23, 1962. It is best known for its sandstone plateau on the Phetchabun Mountain Range and is a favored destination for many trekkers. Lucky visitors will catch glimpses of sunsets and sunrises along the cliffs, especially on a clear day during the cold season. Another distinguishing feature of Phu Kradueng is the variety of plants that flourish in temperate climates including red and white Rhododendrons and red Maples. There are also many waterfalls, including Khun Phong, Phenphop, Phenphop Mai and the Thansawan.
Geography
Phu Kradung is a sandstone mountain with a vast plateau on top, surrounded by smaller hills. The highest peak is 1,316 m above sea level. It is the watershed for the Pong River, which feeds the reservoir of Ubonrat Dam and Nong Wai Dam in Khon Kaen Province. The Phu Kradung plateau has pine forests and grasslands, which have a variety of flowers, creeks, waterfalls and rocky fields. These features make the park most pleasant.
weather can change quickly. Fog and low clouds tend to hang low over the landscape. Cliffs may collapse under their own weight after the soil underlying the sandstone caps are eroded by heavy rain. Heavy rains can also cause flash floods from the streams which run down the mountains. Thus, the park is closed during June and September every year for visitors safety and restoration.

By Car
Climate
Phu Kradung is cool and comfortable all year round. The average temperature is 15 degrees celsius. In the cool season, temperatures in the coolest evenings reach O degrees celsius.. In the rainy season, the
BY CAR. Drive your car past Saraburi, Pak Chong district, after which you turn left onto highway 201 toward Chaiyaphum province, Phu Khiao district; then, turn left to highway 12 passing Chum Phae district and turn right into highway 201 passing Phu Pha Man district and Pha Nok Khao. From there, you turn left onto highway 2019 which leads to the park.
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By airplane
BY AIR. Daily flights from Bangkok to Khon Kaen and Bangkok to Udon Thani.
By train
Phu Kradueng Bus Terminal. From there you can catch a local bus ( Song Thaeo) to the park.
BY TRAIN. Take the train from Bangkoks Hua Lamphong Raiway Station to Khon Kaen Railway Station. Then, take the Khon KaenLoei bus and get off at Pha Nok Khao or
By Bus
BY BUS. Take the Bangkok-Loei bus at the Northeastern Bus Terminal (Mo Chit 2) and get off at Pha Nok Khao and then take the local bus (Song Thaeo) to the Park.
Huai Nam Dang National Park

spectacular seas of mist

This area was formerly known as the Doi Sam Muen highland development project which was initiated by His Majesty the King to mitigate forest encroachment and poaching, as well as to enhance the lives of the local hill-tribe people. This area is filled with natural beauty and its virginal forests provide vital watersheds.
The parks scenic splendor is located amidst the Thai-Burmese borders high rugged mountains, Mae Hong Son province lies adjacent to Chiangmai. It is well-known for having the most beautiful seas of mist in Thailand.
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Quality of Living
Most nature lovers are fascinated by the spectacular Huai Nam Dang National Parks seas of mist. The whole area is blessed with a pure, natural beauty which is rarely seen. .
Geography
Huai Nam Dang National Park is situated on top of a ridge of hills and is located on the Chiang Dao mountain range. The highest peak, Doi Chang is 1,962 meters above sea level. It is the vital source of important streams that flow into the Pai, Ping and Taeng rivers.
Climate
Start at Chiang Mai province. Huai Nam Dang National Park is situated on the road 1095 at Km. 65-66. It located about 109 kilometers northwest of Chiang Mai on the way to Mae Hong Son province. Several buses leave Chiang Mai bus stations each day and cover the journey in about three hours. For private cars: take road number 107 north about 37 kilometers to Mae Malai Market; from there turn left on road number 1095 and head for the hills for about 65 kilometers then take a right turn that leads to a checkpoint that is about 6 kilometers from the park.
The climate is comfortably pleasant. The average year-round temperature is 20 degrees C dropping to 8 degrees C in October to February and soaring to between 12 and 28 degrees C from March to April. The wettest months are between May and September.
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Pimol Srivikorn

TKDO has become one of the most popular in Thailand, with more than one million active club members. In mid-November Thailands national Taekwondo (TKDO) team brought glory to the country by bringing home two gold medals from the 2010 Guangzhou Asian Games in China. When 19-year-old Kasetsart University freshman Sarita Phongsri won the 49-kilo womens gold medal and 22-year-old Chatchawal Kaew-laor won a last-minute come from-behind victor gold medal with a tremendous head-kick, everyone in Thailand roared in approval. In addition, the 11 member Guangzhou 2010 TKDO team also won two silver medals and four bronze medals, a record haul. Back in Bangkok, everyone at GH Bank was glued to their television sets as the finals appeared. GH Bank has been a major sponsor of Thailands national TKDO team since 2005 and has seen the team rise to among the worlds best. Most importantly, as a participative sport TKDO has become one of the most popular in Thailand, with more than one million active club members. In 2005, GH Bank began sponsoring the national Taekwondo team with a three-year Bt51 million program that supported training facilities, coaching costs and travel expenditures for all national team members. Since then, the TKDO teams international success has improved continuously and GH Bank has continued to be an active financial supporter. We support the Taekwondo national team not only because they have brought honor to the country by winning many international medals but because we believe that active participation in sports especially by younger children adds to the quality for life for all Thai families, said Woravit Chailimpamontri, GH Banks president.
Thailands elite TKDO training program
Pimol Srivikorn, the Taekwondo Association of Thailands secretary-general said that the association fully funds elite programs that train and support the top 30 taekwondo athletes in Thailand as well as up-and- coming junior team members. To ensure a pipe-line of global-class elite athletes, top junior champions aged 15 and 16 are selected from throughout the country to join the program. Beijing Olympics 49-kilo womens silver medalist, Buttree Puedpong was a 17 years old high school senior and Asian Games gold medalist, Sarita is 19.
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Quality of Living
They all live and train at our facility next to Kasetsart University, said Khun Pimol. In addition to training at the facility, many of the elite athletes attend the university and receive room and board and a monthly stipend. The association gives each athlete Bt10,000 per month, he said. Another major annual expense is hiring global- class coaches and trainers. To successfully compete globally, top athletes need the best coaches in the world and perhaps more importantly, they need a world-class support structure, he said. The support structure includes doctors, trainers, physiotherapists, nutritionists and sports psychologists. These full time experts insure that the athletes bodies and minds are properly tuned for important competitions, Pimol said.
According to Pimol, it costs about Bt1 million to take the top TKDO members to major events such as the Asian or Olympic games.
A major CSR effort
GH Banks Woravit said the Bank was happy to allocate a small part of its marketing and CSR budget to support the TKDO national team. We have achieved several key objectives for our many stakeholders By supporting the national TKDO team, Woravit said GH Bank is pro-actively helping develop a popular and healthy family sports activity for the people of Thailand. At the same time, we are helping develop national pride for our athletes that compete successfully in global-class international competitions, he said.
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GOVERNMENT HOUSING BANK (Headquarters) Research and Information Services Department 63 Rama IX Road, Huaykwang, Bangkok, Thailand 10310 Telephone : +66 2202 1297, 2202 1066 Facimile E-mail Website : +66 2202 1928 : Ballobh@ghb.co.th : http://www.ghbank.co.th
http://www.ghbhomecenter.com
Government Housing Bank, Bangkok, Thailand All Rights Reserved Asia-Pacific Housing Journal is published by The Government Housing Bank, Bangkok, Thailand The opinions expressed in this publication are those of the authors and do not necessarily represent the views of the Government Housing Bank
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Asia Pacific Housing Journal: V13 2010

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21st Century Urbanization

Woravit Chailimpamontri President Government Housing Bank Bangkok, Thailand

Editorial Committee Copyright 2010

Khan Prachuabmoh Former President

APHJ Advisory Board

Abdul Qadeer Fitrat, Governor Central Bank of Afghanistan, Afghanistan

Khan Prachuabmoh, Former President Government Housing Bank, Thailand

Adnan H Aliani, Officer-In-Charge, Sustainable Urban Development Section UNESCAP, Thailand

Zaigham Rizvi, Consultant World Bank, USA

Better cities, better economies

Cities role in Thailands economic development

Land readjustment in Thailand

Selling innovative new housing loan and savings products

Home mortgage lending drives economy

Second-hand home sales and real estate agent profession development

Home building services in Thailand

Thailands Escrow Act protects home buyers

Black Swan Theories

Self-immunity: critical risk management criteria in uncertain times

Cross-border insolvency harmonizing treaties becoming important

Four outstanding National Parks in Thailand

Medals galore at Guangzhou 2010 Asian Games

Contributors and Personalities

Xing Quan Zhang, PhD

Contributors and Personalities

Better Cities, Better Lives

Better cities, better economies Preparing for Chinas urban billion

Cities role in Thailands economic development Land readjustment in Thailand

Xing Quan Zhang, PhD

Better cities, better economies1