Thai firms aim to cut provident funds
By: NUNTAWUN POLKUAMDEE
Published: 19/05/2009 at 12:00 AM
Newspaper section: Business
A total of 229 companies held talks to close their provident funds or to reduce contributions due to financial stress in the first quarter, said the Association of Investment Management Companies.

The AIMC said in the first quarter, 36 companies with provident fund assets of 137.45 million baht closed their funds altogether, with another 21 companies holding talks to do so.

A total of 134 companies with provident fund assets of 2.3 billion baht held discussions about reducing contribution rates, with 24 companies with assets of 2.77 billion actually cutting contributions.

Overall, the AIMC said 229 companies with assets of 5.579 billion baht on behalf of 50,606 workers closed their funds, held discussions to do so or entered talks to change contribution rates.

As of the end of March, 519 provident funds were registered with the AIMC, with net assets of 471.3 billion baht on behalf of 10,028 companies and 2.06 million workers.

This compares with 514 funds and assets of 465.29 billion baht for 9,750 companies and 2.056 million workers at the end of 2008.

Araya Thirakomen, chairwoman of the Provident Fund Association, said the global financial crisis had affected the financial position of companies across the world, including Thailand.

Cutting labour costs, including provident fund contributions, is increasingly explored by firms under financial stress.

"Based on the first quarter figures, more companies are expected to look to halt contributions to provident funds," she said. "This of course will affect employees. If a fund temporarily cuts contributions or even moves to close, retirement savings will certainly be affected."

The phenomenon is not limited to Thailand, Mrs Araya said. In the US, 225 listed companies as of April 30 had requested temporary suspensions or reduced contributions to employee 401(k) pension programmes, including General Motors, Motorola, Federal Express, Coca-Cola, Consolidated and Starbucks.

Provident funds in Thailand are a key element of retirement savings. Funds are established voluntarily by companies, with contributions of 3% to 15% of worker income made equally by employers and employees. Contributions by individuals to provident funds of up to 15% of income with a limit of 500,000 baht are deductable from personal income tax liability.