TRIS Rating Affirms Company Rating of “BMA” at “AA+” with “Stable” Outlook

TRIS Rating Co., Ltd. has affirmed the rating of Bangkok Metropolitan Administration, a local government organization, hereinafter referred as “BMA”, at “AA+” with “stable” outlook. The rating is based on the importance of the Bangkok Metropolis (Bangkok) as Thailand’s administrative and economic center, which despite an economic contraction in 2009, the Thai economy is expected to rebound in 2010. The rating also reflects BMA’s reliable tax revenue, consistently sound budgetary performance, and a strong financial profile as it is nearly debt-free and has a large amount of cash on hand. The rating, however, is constrained by the negative impact that the recession is having on revenue collection, the huge capital investments needed for public transportation and infrastructure, and an increasing financial burden from assuming public services delegated from the central government under a decentralization plan. Despite the undertaking of various costly responsibilities, BMA faces a restriction in seeking additional revenue sources. In addition, several issues need to be monitored: the availability of an audited financial report in a timely manner, and the preparations for future fund raising, including the development of a concrete debt management framework.


The “stable” outlook reflects BMA’s reliable revenue sources and conservative budgetary policy. TRIS Rating expects that BMA will continue to receive support from the central government at all times. Nevertheless, BMA should maintain proper financial discipline to ensure sound budgetary performance and a robust financial profile. Leverage, if incurred in the future for capital investments, should be well planned to match BMA’s revenue and debt service ability.TRIS Rating reported that BMA is a local government organization and has the responsibility of providing public services for both residents and businesses in Bangkok. As the capital city of Thailand, Bangkok benefits from its position as the social, political and economic center of the country. In 2008, the Gross Provincial Product (GPP) of Bangkok was the highest in the country, amounting to Bt2.29 trillion or 25% of Thailand’s Gross Domestic Product (GDP). During fiscal year 2005-2008, approximately 93%-95% of BMA’s total revenue was from taxes, both local taxes collected by BMA (20%) and allocated taxes collected by other governmental agencies and remitted to BMA (73%-75%). The major component of local taxes is property tax, which accounts for over 90% of total local taxes. Almost half of the allocated taxes are derived from value added tax, while automobile tax and land transfer fees average at 19%-20% each. Tax revenue is considered a highly reliable source of income for BMA, although the amount varies with the nation’s economy. In 2009, the Thai’s economy was negatively impacted by the global economic crunch and an intensifying political situation, resulting in a significant reduction in allocated taxes. Consequently, for the first nine months of fiscal year 2009, revenue collection accounted for 61% of the total Bt46,000 million budget, and declined 16% compared with the same period last year. However, BMA could revise its expenditures down to 51% of the budget during the same period in order to comply with revenue collection and a balanced budget regulation. BMA’s financial profile remains very strong with high liquidity, virtually no debt, and cash on hand of over Bt20,000 million as at the beginning of fiscal year 2009.

TRIS Rating said, Bangkok is the most developed city in Thailand; however, more investment in public services and infrastructure is needed to serve the expanding population and to facilitate economic growth. Public services, including new projects initiated by BMA and the responsibilities transferred from the central government, require a large amount of funds for project development and ongoing expenditures. In addition to a tax revenue allocation, the central government also grants BMA an annual subsidy. However, these funding sources are somewhat limited and are not sufficient as BMA has planned to invest in many capital-intensive public transportation projects. Currently, BMA’s management is studying the possibility of seeking funding through the capital market to provide more financial flexibility. Incurring new debt in the future may increase the financial risk and weaken BMA’s financial strength. TRIS Rating expects that BMA will put in place a practical debt management framework in order to sustain a liquidity and healthy financial position, at the same time, provide the timely audited financial report.