China’s loan terms rejected

FINANCING details of the Sino-Thai high speed train remain unresolved, although the two governments have agreed that the first phase of the new route will be the Bangkok to Nakhon Ratchasima route, said Minister of Transport Arkhom Termpittayapaisith in an exclusive interview with Thepchai Yong, group editor-in-chief of the Nation Multimedia Group. 
Negotiation of loan terms continues with both sides holding different views about details related to Thailand borrowing funds from China to finance the 253-kilometre Bangkok-Nakhon Ratchasima route, which will need an estimated Bt179-billion investment. 
“China wants to put tough conditions on the loan contract, demanding that the Chinese government could seize other assets of the Thai government if the Thai government defaults on debt repayments,” said Arkhom. Thailand proposes to borrow about 25 per cent of the total project cost. 
China’s negotiators argued that it would apply the same conditions agreed to by the Lao government for financing a high-speed rail linking that nation to southern China. The Chinese government will be able to seize five mine assets if Vientiane fails to repay the debt.
“We, the Thai government, will not yield to China’s demand, because in our history we’re a very honest debtor and have never failed to pay back foreign debts. If China insists on this asset guarantee, we will not borrow from China,” Arkhom said.
China’s government is also demanding a high interest rate from Thailand, higher than it granted Indonesia for a similar project.
Given Thailand’s high credit rating for government bonds, the Thai government has been demanding a lower interest rate for the project, while the global financial market could provide relatively cheap loans if the government chooses that route.
The international rating agency Moody’s Investors Service has assigned a sovereign credit rating of Baa1 to Thailand and Baa3 to Indonesia. Standard and Poor’s and Fitch Ratings have also assigned an investment grade to Thailand two notches higher than that for Indonesian bonds. 
Current yields of 10-year bonds issued by the Thai government are slightly over 2 per cent, comparing favourably with the nearly 7 per cent per annum of Indonesian government bonds.
“Our sovereign credit rating is higher than Indonesia and some other countries in the region,” Arkhom said.
Thailand needs to import rolling stock, rail tracks and a rail traffic-light system, all made in China. The two sides have put aside the financial issue for the moment, as they still have time for further negotiations. 
Arkhom also defended criticism of the government for rushing to yield to Chinese pressure by resorting to the powerful Article 44 of the interim constitution. Prime Minister Prayut Chan-o-cha used the clause to overrule normal laws, allowing the deal to be concluded after several rounds of negotiations.
According to the normal legal process, Chinese engineers would first have to pass tests in the Thai language before they could get licences to work in the country, but the Article 44 invocation overruled that condition. However, the government was being very careful in doing the deal with China, Arkhom said. 
Arkhom said about 100 Chinese engineers would work on the project, and Thai people should not worry about a large number of Chinese workers taking jobs from Thai workers.
The route is divided into four sections, with construction on the first 3.5 kilometres planned to start in October. After the first contract is signed, the two sides will start to work on a construction plan for the second phase, the 355-kilometre section from Nakhon Ratchasima to Nong Khai province, Akhom said. 
The high-speed rail service between Bangkok and Nakhon Ratchasima would start around 2021 or 2022, he added. Then the service between Nakhon Ratchasima to Nong Khai province will open in 2022 or 2023, the same year as the route from southern China to Laos starts service.
Arkhom said he expected China would transport both goods and tourists via high-speed rail, as it could export its products to deep seaports on the eastern coast of Thailand.
He admitted it might take 30 years or longer before financial returns would be positive. However, a fast service would greatly boost economic returns, he said.
He added that he expected that the fare between Bangkok and Nakhon Ratchasima would be Bt535 per trip and would take about 90 minutes. The total travel time between Bangkok and Nong Khai would be about three hours.
Meanwhile, Suwit Rojanavanich, director-general of public debt management, said the Finance Ministry had recently borrowed Bt1.7 billion on the local market to pay a Chinese firm responsible for detailed construction of the Bangkok-Nakhon Ratchasima portion of the railway.