With the Bt2-tn Infrastructure Act, prioritisation a virtue

Going back in time, our public investment as a proportion of gross domestic product peaked in 1997 at 11.6 per cent, compared with today’s meagre figure of 4.8 per cent. While other economic sectors have grown to surpass the levels seen before the Asian financial crisis, our investment on roads and rails received just enough money to maintain existing networks.

Our logistics costs far surpass our competitors’, sitting at around 15 per cent of GDP, almost twice as high as Japan, the US and Singapore. So, on this ground, almost everyone agrees that logistics investment has moved up the government’s priority ladder both in importance and urgency.

This does not automatically vindicate the Bt2-trillion Infrastructure Act passed by Parliament last week. As always, the devil lies in the details of what are on and off the proposal. 

Many weaknesses have already been pointed out by both the parliamentary debate and by outside media through experts’ comments and opinions.

This amount, Bt2 trillion, amounts to almost a whole year of the government’s budget. It is 17 per cent of GDP, bigger than the combined size of the agriculture and fishery sectors. This will be the largest fund ever committed to investment in the history of Thailand, whether public or private.

Given the scale of the undertaking, it’s understandable why the bill came under close scrutiny. Any leakage or failure just by 1 per cent could mean funds equivalent to missing one whole line of the Skytrain.

But if more than 200 years of economics studies have taught us anything, they teach us that there is always a trade-off in all choices. One definition of economics is the efficient allocation of scarce resources. The scarce resource here is of course the Bt2 trillion that will be borrowed over the next several years.

Of the projects listed in the plan by the government, some are more urgent than others. It might be worthwhile to revisit these proposals in order to carve out the most efficient and effective path of targeted spending. 

If the objective of the spending is to reduce our logistics cost to a level comparable with peers’, investment in the dual-track railway system must receive priority, while the high-speed train can probably wait. 

If the goal is to connect with neighbouring economies before the advent of the Asean Economic Community, then road networks will need first attention as well as the improvement of border controls and customs. Other things can probably wait. 

All in all, we must acknowledge the fact that we are still a developing country. Despite our upgrade to the middle-income group, our GDP per capita is still only 10 per cent of what the developed world has. So going all out on all projects at the same time will be too costly for a small country like Thailand. Or else, something that needs to be done right away will be delayed by the diversion of resources. 

We must take into account what’s not on the list for this act as well. Investments to overhaul education and healthcare are still missing from public attention. Not only do we need to improve our logistics costs to increase our competitiveness, our human capital also requires a push forward and probably on the same scale and intensity as what we have for infrastructure.

At this point, no one doubts the need for infrastructure investment in Thailand. This is a nudge forward from what has been severely lacking ever since the Asian crisis. Now that it receives overwhelming attention, it will be worthwhile to start prioritising our needs. 

After all, prioritisation is one of the seven habits of highly effective people. We can make that for an effective government as well.

 

_  Views expressed in this article are those of the authors and not of TMB Bank or its executives.

 

_ Benjarong Suwankiri, team head of TMB Analytics, the economic analysis unit at TMB Bank, can be reached at [email protected].