State firms will be key investors in mega-projects

He said up to 45 per cent or Bt1.08 trillion would be borrowed by state-owned enterprises, either by issuing bonds and or through bank loans guaranteed by the Finance Ministry, while another 10 per cent or about Bt240 billion would come out of the SOEs’ working capital.
Some 20 per cent of the total or Bt480 billion would come from the general budget. Another 20 per cent would come through public-private partnerships, and 5 per cent or Bt120 million would come via infrastructure funds, he said.
The infrastructure mega-projects include urban mass transit lines, the national rail network, road and water transport, highways, and customs facilities.
Suwit said the SOEs’ funding instruments would run the gamut of benchmark bonds, savings bonds with tenors between three and 10 years, innovative bonds with tenors between 10 and 30 years, bank loans with terms of two to four years, and promissory notes with tenors of four to 45 years.
Innovative bonds would in-clude inflation-linked, floating-rate and amortised bonds.
Based on preliminary projections for the infrastructure plan and other investment needs of the SOEs, as well as fiscal policies aimed at reducing the budget deficit, public debt should stay below the sustainability framework limit of 60 per cent of gross domestic product throughout the next seven years, while the debt-service ratio would not exceed 15 per cent, he said.
“Though we expect many revisions until there is a clearer budget-deficit plan and investment-budget projections from the Transport Ministry, we believe that there is enough room to allow flexibility in accommodating funding needs accordingly as well as absorption of unexpected risk if needed,” Suwit said.
He said that for the duration of the infrastructure-investment programme, public debt should remain lower than 50 per cent of GDP, based on forecasts of real economic growth of 4 per cent a year and an annual inflation rate of 3 per cent.
Given favourable market liquidity, the government could use a full range of funding instruments to raise as much as Bt1.15 trillion per year. The Bank of Thailand has estimated that there is sufficient liquidity to absorb government and SOE borrowing next year of around Bt1.43 trillion. But Suwit said the mega-projects would not need that much market liquidity.