Thailand secures AIIB loan for U-Tapao Airport expansion amid U.S. scrutiny concerns

Academics have warned that while there are no current signs of pressure from the United States, the Thai government should be prepared to explain its rationale if questioned about why it chose to borrow from a bank in which China holds a major stake.

At its meeting on April 22, the Thai Cabinet approved a proposal for the Ministry of Finance to secure a loan from the Asian Infrastructure Investment Bank (AIIB) worth $423.05 million (approximately 13.89 billion baht) to fund the construction of a second runway at U-Tapao Airport in Rayong Province. This project is a key part of the airport’s infrastructure expansion and is integral to the future development of Thailand’s Eastern Aviation City.

However, U-Tapao Airport has long held strategic importance for the United States, having been used since the Cold War, during the Vietnam War, and for various missions in the region to this day. The airport’s location in the heart of Southeast Asia further underscores its strategic value.

Given that the AIIB is a bank where China holds over 30% of the shares, Thailand's decision to borrow from this source is drawing interest—especially during a time of heightened trade tensions and protectionist policies under the Trump-era influence still shaping global trade narratives.

Assoc Prof Dr Somchai Pakapasvivat, an independent scholar in economics and politics, told Krungthep Turakij newspaper that governments worldwide now weigh multiple factors—such as terms and conditions—when borrowing for infrastructure development. Thailand’s decision to borrow from AIIB likely considered low interest rates and favorable loan conditions, he noted.

Another factor may be currency risk, he said, adding that with the current volatility and weakening trend of the U.S. dollar, borrowing in dollar-linked currencies could increase exposure. Given recent market concerns over the U.S. economy and rising long-term bond yields, Thailand’s move could be seen as a hedge against dollar depreciation.

When asked whether this loan from a China-led institution could attract U.S. scrutiny, Somchai acknowledged the possibility but believed it would not escalate to serious pressure. 

“The U.S. may take note of Thailand borrowing from AIIB but is unlikely to use it as leverage in trade negotiations,” he said. “Their main concern is not Thailand’s infrastructure investment, but rather preventing misuse of origin labels for exports to the U.S.”

“This is a technical financial decision. The government should prepare clear explanations in case of inquiries from the U.S. If we can present a solid rationale for this choice, it’s unlikely the project will disrupt Thai-U.S. trade talks,” Somchai concluded.

The AIIB loan approved by the Cabinet carries a floating interest rate based on the SOFR (Secured Overnight Financing Rate) plus a variable spread, currently at 1.04%, with adjustments made every January and July. Interest payments are due semiannually, on June 15 and December 15.

Key fees include a 0.25% front-end fee, payable within 60 days of the loan taking effect, and a 0.25% annual commitment fee on undisbursed funds, starting 60 days after contract signing.

The loan has a 15-year term, with a 4-year grace period on principal repayments and an average loan maturity of 9 years. Principal repayments begin on December 15, 2027, and will also occur on June 15 and December 15 each year.