Thailand's Bt200 billion ($4.7 billion) Government Pension Fund plans to submit a proposal to its board of directors to allow it to invest up to 10% of its assets overseas in the next two months or so, says Singha Nikornpun, deputy secretary-general in Bangkok.

The apparent bureaucrat hurdles are daunting. While no parliamentary approval is needed, the existing rules for how institutions can invest must be changed by the Ministry of Finance, and then the Bank of Thailand must agree to waive its foreign exchange controls. GPF officials said they would do this two years ago and nothing came of it.

On the other hand, both the MoF and the central bank are represented on the fund's board. Should the board actually approve management's request, getting permission from other authorities should be easy, says Singha. He believes the GPF may be in a position to start investing overseas by the end of this year.

Moreover the GPF now has Mercer Investment Consulting in its employ. It didn't have a consultant when it initially sought to invest overseas. Mercer officials declined to comment.

Singha says the emphasis offshore would be international equities, not fixed income. "Equities investment would be a hedge against domestic inflation," he says.

Inflation in Thailand is low but, according to Bank of Thailand statistics, spiked in the fourth quarter last year from 0.3% to 1.4% due to higher oil prices. The central bank anticipates inflation will rise continuously for two years, hitting 0.5% to1.5% in 2003 and 1% to 2.0% in 2004.

A secondary consideration is the low interest-rate environment. But the GPF's liabilities are not as long-term as, say, a life insurance company's. With average liabilities just over 12 years, the domestic bond market can handle GPF's needs, says Singha.

The GPF is a defined contribution scheme for over 1.2 million civil servants. MoF rules limit its domestic equities exposure to 10%. The remainder is invested mainly in government bonds and bank deposits.