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NAREERAT WIRIYAPONG
A huge infrastructure programme, comprising the so-called megaprojects, has become a major tool of the post-coup government to spur growth, especially through public investment that has stagnated due to political uncertainties.
The megaprojects, initiated by deposed premier Thaksin Shinawatra, have been pushed ahead by the coalition government led by the People Power Party that groups key members of Mr Thaksin's now-defunct Thai Rak Thai party.
The programme has received a big boost in terms of an investment budget of a total 1.5 trillion baht for mass-transit, logistics, education, water-management and health-care projects.
Out of the total outlay, 770 billion baht have been set aside to develop a stretch of 424 kilometres of elevated rail lines and subways in greater Bangkok, targeting to complete the whole loop within three and a half years.
The government recently approved two water-management projects worth a combined 60 billion baht to increase water supply in agricultural areas nationwide, especially during the dry season. The projects include a 43.8-billion-baht scheme to divert water from Mae Hong Son to the Bhumibol Dam in Tak and a 15-billion-baht investment to dredge more than 6,600 natural water resources across the kingdom.
On mass transit, despite the serious push, the new train lines have yet to see significant progress, with few receiving partial funding from the Japan Bank for International Co-operation (JBIC).
Four rail lines have been endorsed by the government: one is scheduled to have construction contracts signed this year while the others are in the process of bidding. Another three routes have been under study for environmental impact assessment before they can be proposed for cabinet approval. Construction of the seven routes, plus another two feeder lines, is expected to being in the last quarter of 2008 at the earliest and to play a bigger role in stimulating the domestic economy next year.
Optimistic business leaders have said the government's firm decision to drive the megaprojects forward had helped improve business confidence, as evidenced by the development of numerous massive condominiums along the planned rail lines.
When compared to other governments' stimulus packages, especially those targeted at the poor, the megaprojects could generate more economic benefits in terms of multiplier effects that originate from the construction industry. The mass-transit scheme, in particular, is seen as critical to cut Thailand's imported oil bills at a time when global prices of fuel have shot up to historic highs.
The megaprojects aim to reduce car use by 60% and save up to 100 billion baht in the first phase and 200 billion in the second phase.
The government forecasts the number of Bangkok commuters using the mass transit to reach three million a day by 2013, up sharply from the current 600,000, and to rise to six to seven million no later than 2016.
Kasikorn Research Center said that public investment accounted for 7% of Thailand's gross domestic product (GDP), down from 8.2% seen before the 1997 financial crisis when the government's spending increased by 21% annually.
The latest of the government's megaprojects was Suvarnabhumi Airport, which began operation in late 2006.
The deadline for its supporting infrastructure, the 26-billion-baht Airport Link, was pushed forward by another year from the previous February 2008 schedule due to rising cost constraints. Its construction began in mid-2005.
''Massive investments in megaprojects, which include the expansion of irrigated areas and efficiency improvements of the existing irrigation system, are aimed by the government to help the Thai economy maintain the high growth over the next three to four years,'' the Kasikornbank affiliate said in a recently released paper.
KResearch estimates as much as three trillion baht would be needed to fulfil the government's megaproject schemes to be implemented from 2008 to 2011, or 750-780 billion baht per year on average, compared to 500 billion baht spent annually over the past five years.
The highest investment would be required in 2010 if the planned projects could be proceeded by schedule, it added.
''The most important factor to substantially push the megaprojects ahead is to finalise the details of project funding and set clear action plans and exact timeframes for the projects' implementation,'' the paper said.
The government has set three options to raise funds for these projects: soft loans from the JBIC and the Asian Development Bank (ADB), state budget, and government bonds.
According to the Public Debt Management Office under the Finance Ministry, the government would float 290 billion baht worth of domestic bonds to help finance Bangkok's new 760-billion-baht mass-transit megaprojects.
The investment would be spilt into two phases. The first phase, from 2008 to 2012, calls for a tranche of 260 billion baht, including 90 billion baht mobilised from domestic borrowing.
The second phase, which involves the building of the train routes through outer Bangkok from 2010 to 2014, requires an investment of 500 billion baht. Of the total amount, 200 billion baht would be raised from domestic borrowing and the rest from the central budget, offshore borrowing and equities.
But recently, a new problem has emerged, challenging the government's efforts to fulfil its investment plans of the ambitious infrastructure programmes.
Rising oil prices have drastically pushed up the prices of building materials, especially steel, while the increases in minimum wages that began in early June are threatening to push the costs of contractors further.
But the trends are a global phenomenon. International experts say the rising costs have affected infrastructure projects all over the world, mainly those in China where a number of projects are under development.
In Thailand, the Mass Rapid Transit Authority (MRTA) has agreed to raise the prices of two rail lines in progress. One of them is the 23-kilometre elevated Purple Line, for which a 17% increase in the reference price from the original 30 billion baht was proposed to reflect the actual soaring costs.
Despite the slow progress on megaprojects, KResearch forecasts public investment would expand in a range of 5.2% to 8.4% this year, up from 4% last year. It would help drive overall investment in Thailand by 4% to 7.2%, against a meagre 1.4% in 2007, a six-year low.
''Only the Red Line running from Taling Chan to Bang Sue, with a planned investment of 165 billion baht, has gone through the bidding process but so far the real investment in the project has yet to start,'' the centre said.
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