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ADB calls for sustainable  funding for transit systems 

May 28. 2019
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THE ASIAN Development Bank has urged the Thai government and other governments in developing Asia to manage their debt carefully.


The ADB has also proposed sustainable financing solutions for the rapid mass transit system in mega-cities like Bangkok, Jakarta and Manila.

Meanwhile, a Thai land developer complained about regulations discouraging the private sector from participating in the mass transit and related businesses.

“The government must manage public debt carefully,” said Bambang Susantono, the vice president for knowledge management and sustainable development at ADB, during giving an exclusive interview to The Nation on the sidelines of the High-Level Round Table Discussion: “Sustaining Transit Investment in Asia’s Cities” hosted by ADB yesterday.

ADB has been helping developing Asian countries to build their mass transit system by providing financial support and technical assistance. It recently launched a report called “Sustaining Transit Investment in Asia’s Cities: A Beneficiary-Funding and Land Value Capture (LVC) Perspective”.

The report said the increasing urbanisation in developing Asia highlighted a significant need for infrastructure financing – estimated at $26 billion (Bt828 billion) from 2016-30 – despite a funding gap that can be as much as 5 per cent of gross domestic product in some Asian countries. 

A constrained funding base has stifled long-term urban planning, and ambitious mass rapid transit provision schedules are needed to reduce congestion and foster increased economic performance in ever-growing Asian cities, the report said.

“The LVC is one of the solutions that many large cities such as Tokyo, Hong Kong and Singapore have applied,” said Susantono.

“Some measures applied in developed countries may not be 100 per cent applicable to developing countries, but the same principle can be applied,” he said.

According to the ADB, five proven LVC mechanisms can provide a practical pathway to successful funding of major transit initiatives:

n value capture through the mainstream taxation system. 

n fees and levies

n auction of development rights

n a comprehensive transit-oriented development and urban renewal agency with value capture capacities.

n A direct property-rail agency as developer in the East Asian Style.

Due to massive upfront investment in mass transit projects, relying solely on revenue from operating the system is not enough hence property development and other activities along the routes are crucial, according to ADB.

Asked about the willingness of citizens to pay tax for rapid mass transit investment, Susantono believes that if local and central governments could explain the benefits of the projects to the public, and create a transparent system, then people may be willing to pay.

He praised Thailand’s initiative to draft a bill on windfall tax, levied on the rising value of land and property from the mass transit projects due to their proximity to the location.

“ADB also discusses with policymakers about the possibility of earmarked tax for financing mass transit projects,” he said.

Chai Srivikorn, president of Ratchaprasong Square Trade Association, said that he had spent about US$10 million for building skywalks connecting the BTS Skytrain stations with hotels, shopping malls and markets in the Ratchaprasong business area. He plans to build more skywalks; the next one would be over Phetchburi Road alongside the Airport Link rail.

He said it took him many years to deal with officials before he could build those walkways, as they agreed to make some changes to related law and regulations. “But previous legal changes were not enough,” he told the round-table . He said private companies currently run the walkways by keeping them clean and safe for users.

Pichet Kunahamraks, the director of the Bureau of Rail Project Development Office at Transport and Traffic Policy Planing Office, said Thailand has learned a lot from using different types of public-private partnership models in order to share returns and risks stemming from investment among public agencies and investors. Some models failed to work, some work well and each project needs specific solutions, he added.


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