Thailand 2020: Our future after we pay for infrastructure development?

In my view, the Bt2 trillion programme is an integral part of the government’s overall national strategy, with the main objective of achieving “growth and competitiveness”. Prime Minister Yingluck Shinawatra has stated that the government aims to ensure that Thailand can achieve consistent growth rates of around 4-5 per cent per annum in the long term.  

To achieve this, the government must emphasise moving the Thai economy up the value chain, as well as enhancing productivity in order to create new competitive advantage. This requires greater efficiency and productive capacity. To achieve medium-term growth and competitiveness, government policies must provide a supportive environment with necessary infrastructure.  

I agree with the policy-makers that Thailand desperately needs to invest in major infrastructures projects. Over the past ten years, our public investment has only hovered at around 5 per cent of GDP, which is only half the investment level of the pre-1997 years.  

The government’s major medium-term investment plans include investment in both water-resource management (a five-year plan) and transportation and logistics (a seven-year plan). According to the government, a Bt350 billion investment in water-management resources is promised not only protect to Thailand’s industrial and economic zones, but also to support a better irrigation system, increasing productivity for the agricultural sector.  

However, people are now focusing more on the recently-announced transportation and logistics investment plan. Thailand has long under-invested in this sector, so that we now rely on roads for around 86 percent of our transport requirements – a relatively inefficient mode of transport compared to water or rail systems. As a result, logistics costs in Thailand are very high, at 15.2 per cent of GDP when compared to other more developed countries (in the range of 5-10 per cent of GDP), and this has led to inefficient energy use that has hurt Thailand’s competitiveness.

Some of the proposed projects under the Bt2 trillion transportation and logistics programme include four lines high-speed railway lines (Bangkok to Chaing Mai; Bangkok to Nong Khai, connecting to Laos and China; Bangkok to Rayong; and Bangkok to Had Yai) dual train track development across the country; motorway expansion and better road networks connecting Asean economic corridors; sea ports; and border facilities to enhance border trade.  Overall, about 80 per cent of the funding will be directed to rail transport.

The government has stated that the investment projects are expected to deliver the following benefits: 

Cost and time reduction: A shift from road to rail will significantly reduce the time and cost of transportation of products to our Asean neighbours and other countries in Asia.

Generation of new revenue: Better linkagess will lead to the development of new towns, cities and regional hubs in other parts of Thailand and, ultimately, neighbouring countries in the Asean Economic Community and beyond. This will generate more income and consolidate Thailand’s role as the region’s connectivity and logistics hub. 

Creation of more demand: Better infrastructure can boost demand and support long-term growth by linking various revenue-generating zones, from industrial areas to agricultural zones, as well as new destinations for tourists. 

Enhancement of living standards: The quality of life of all citizens should increase through the reduction of traffic jams and pollution in cities. Faster and more convenient transportation links will also lead to better productivity.

On the economic impact and public debt implication, the government views that Thailand’s strong fiscal position will allow the country to finance these projects through various sources, including government borrowing, while some projects may involve private-sector participation.  

In terms of the impact on GDP and jobs, throughout the investment period over the next seven years, the government expects that investment will not only increase the level of GDP on average by around 1 per cent each year, but will also create around 500,000 jobs.  

Logistics costs are expected to be reduced by 2 per cent from the current level of 15.2 per cent. Thailand will save Bt100 billion per year on energy costs. More importantly, the public debt to GDP ratio is expected to rise, but once the returns from investments are realised, greater economic expansion will bring down public debt to GDP. According to the government projection, it is forecasted that throughout the investment period, public debt will not increase to more than 50 per cent of GDP compared to the current level of 44 per cent.  

Based on this information, I hope that in the coming decade Thailand will be able to overcome its logistics bottleneck – the key impediment to sustainable growth in this country. Bangkok residents all know how bad the traffic jams in the metropolis can be, and they are likely to get worse in the coming years as people have more income to buy cars and urbanisation continues at rapid pace.  

At present, Bangkok has only 80 kilometres of electric railways; the investment plan promises to expand the total length of electric railways in the greater Bangkok area to 464 kilometres by 2019. Investment in a high-speed inter-provincial train network will shorten travel times between Bangkok and other parts of the country. High-speed train trips within 300 kilometres of Bangkok will take no more than 90 minutes.  

Let’s hope the future of Thailand will be as bright as the government promises.

 

Dr Chodechai Suwanaporn is executive vice president, economics & energy policy, PTT Public Company Limited. [email protected].