Private sector lends its weight to Bt2 trillion mega project

Tanit Sorat, secretary-general of FTI

Transparent implementation demanded

Business leaders support the government's massive infrastructure investment plan but expressed concerns over its transparency, financing and execution.

Referring to comments from foreign investors, Paiboon Nalinthrangkurn, chairman Federation of Thai Capital Market Organisations, said this investment would strengthen the economic outlook in the short and long terms.

"However, issues remain on its implementation. If this is efficiently executed, it will definitely boost the long-term outlook," he said.

Paiboon Ponsuwanna, chairman of the Thai National Shippers Council, agreed that the investment plan was good but noted the government had yet to specify clear completion dates for each project. Without clear schedules and clear borrowing plans, the project could be changed at any time.

"The government needs a clear plan for the integration of all transport systems for bringing agricultural products from the farm areas into the market, especially water or marine transport. It has not given any indication of which rivers will be used as the main transport routes to connecting with the track system to be developed by the government," he said.

Tanit Sorat, secretary-general of the Federation of Thai Industries, urged clarity over which agency will take charge of the rail network, given the weaknesses of the State Railway of Thailand.

Yutthachai Soonthronrattanavate, president of the Association of Domestic Travel, hailed this as a turning point for Thailand and a big challenge to the economy. Clearly, it will help boost the country's competitiveness in the region. Then the tourism industry will benefit, especially by allowing tourists the option of travel on a high-speed train service.

However, further clarification is necessary before and after the construction of each project, he said, noting that the borrowing bill and projects involved were new to Thai society. Thus it is vital for the government to choose the right technology and to ensure transparent spending.

"If the project fails, that will force the country's gross domestic product to drop," he said, adding that it would increase the country's debt burden in the long run.

Wachirasak Tungtrongchitr, adviser to the Land Transport Association of Thailand, said an infrastructure project of this nature should be the responsibility of any government. The project might have cost only Bt1 trillion if it had been started 10 years ago. However, if the current government had not started the infrastructure project now and delayed it for another five years, it might have cost as much as Bt3 trillion or even more.

"In my personal opinion, the government should start the project immediately and the budget should be allocated strictly along the investment plan. The government will take a long period of time to accomplish such a huge investment project and it needs to follow the plan continuously.

The expansion of transport routes will make transportation itself more flexible and less costly, and that will benefit both manufacturers and consumers."

On the financing issue, the Thailand Development Research Institute's Nipon Poapongsakorn suggested that the government reduce the repayment period from 50 years to be 30 years to reduce the risk from fiscal crises. It could also win more support if it could specify the source of money to repay the loan.

Kittiya Todhanakasem, first senior executive vice president of Krungthai Bank, said the government's borrowing would strain the domestic market.

However, as the borrowing will be in line with the level of construction work completed, the impact will be slight. Moreover, this investment will boost the economy.

"The liquidity in the local banking industry can serve the borrowings if the government takes the loans gradually, and not all at once," she said.

The banking industry will consider funding projects by both the government and the subcontractors, so it is possibility that the financial requirement will exceed Bt2 trillion.

Banluesak Pussarangsi, an economist and executive vice president at CIMB Thai Bank, said the government should extend the seven-year period of the programme to 10 years to ease the annual financial burden.

Borrowing Bt2 trillion for seven years accounts for 3 per cent of GDP, making the cost of the investment too high: even if the government can keep the programme on track, the country will face a huge of balance-of-payments deficit, he said.

Vietnam once announced a large infrastructure project funded by borrowings of 25 per cent of GDP but it failed because of the huge of balance-of-payments deficit.

Thailand might not be the same as Vietnam, but the government should adjust some high-cost projects such as high-speed rail, as that project does not support the logistics of the business sector much because of the higher fares.

The project is likely to benefit travellers, but such trasport demand is behind that of the business sector, he said.

Thai Real Estate Association president Kittipong Pramote Na Ayudhya, who is also managing director of Sammakorn, said the project would develop the country's infrastructure and improve the logistics system. This is in turn would expand the country's development in the long term.

"This also good for the property business, which will expand investment outside Bangkok following the new infrastructure routes," he said.

However, he was concerned about the repercussions from the borrowing bill, and whether this would lead to poor oversight.

"If the government uses this approach to fund the infrastructure projects, it has to state how it will monitor their implementation and prevent corruption," he said.

Housing Business Association president Issara Boonyoung agreed that the projects would encourage the property business to expand from Bangkok into the provinces, leading to decentralisation. However, it is crucial to monitor the projects against corruption.

Sermkhun Kunawong, chairman of the Event Marketing Association and chief executive officer of event organiser CMO, called for public accountability and transparency in the government's spending once the Bt2-trillion borrowing bill is approved by Parliament.

"The effectiveness and efficiency of public spending are the most important. The government must allow [oversight by] all key parties such as Parliament, civil society and state agencies," Sermkhun said.

He added that the essential details of each project under the borrowing bill remained unclear. The government must clarify all important details and the need to pass this bill first.

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Source: http://www.news.thethailandlinks.com/2013/03/29/private-sector-lends-its-weight-to-bt2-trillion-mega-project/