The government will rely on lending by domestic and overseas financial institutions to fund the first stage of the 179-billion-baht Sino-Thai high-speed rail project linking Bangkok and Nakhon Ratchasima.
According to Deputy Prime Minister Somkid Jatusripitak, the borrowing will be based on principles of low interest rates, decent term loans and cooperation from international financial institutions like the World Bank, Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB).
"I've already given the policies to the Finance Ministry and the Transport Ministry, stating that the government is open to borrowing both from overseas and domestic institutions, and demanding that conditions should be based not only on low interest rates offered, but also factors such as long-term loans and other cooperation from lenders to the project's development," Mr Somkid said.
The issuance of government bonds to finance the project is one alternative, he said, adding that the Finance Ministry will consider and study all options to determine the best funding solution.
The cabinet on Tuesday authorised the Finance Ministry and the Budget Bureau to consider a borrowing plan for the rail project. The cabinet also ordered the Finance Ministry to help guarantee the borrowing.
Mr Somkid said Thailand needs massive funding for infrastructure development over the next five years, with funds stemming from various sources such as the government budget, loans, public-private partnerships and the Thailand Future Fund.
Nevertheless, the government is committed to maintaining fiscal and monetary discipline and holding down the proportion of public debt to GDP, he said.
"I would like to inform the public that they should not be worried about the government's financial burden on public debt, because the government is still able to rein in public debt at below 60% of GDP," he said.
According to Mr Somkid, who met AIIB president Jin Liqun, the Beijing-based bank is ready to provide soft loans for the Sino-Thai high-speed rail project and the Eastern Economic Corridor project.
The AIIB now has 80 members and just approved US$329 million (11.2 billion baht) worth of lending to build roads in India and $114 million for a rail project in Georgia.
In a related development, Theeraj Athanavanich, a bond market adviser to the Public Debt Management Office, said the PDMO has set a 1.7-billion-baht borrowing to fund a study of the Sino-Thai high-speed train linking Bangkok to the Northeast, Bangkok to Phitsanulok and Bangkok to Rayong in this fiscal year.
Mr Theeraj played down concerns over the adequacy of local sources of funding, saying the country's financial liquidity surplus is ample for the high-speed train's investment of 179 billion baht.
Concerns persist about the project's procurement process, so checks will be needed to ensure that the process is done transparently and without collusion, he said.
Borrowing to fund the project's investment will span the course of three or four years, depending on the Transport Ministry's investment plan, Mr Theeraj said.
Of the total 179 billion baht, 70% is expected to be borrowed from local financial sources, 20% is to be secured from China and the rest from the annual budget.
The government is in talks to seek loans from China and will secure them only if the conditions are justified, Mr Theeraj said, noting that the PDMO will shift to using local funding sources in the event that the conditions are unacceptable.
He said 70% will be secured to finance civil engineering and infrastructure work, while the rest will be used to fund the rail network and trains, including signalling and operation systems.
The Sino-Thai high-speed rail development will be divided into three sections: Bangkok and Nong Khai, Nong Khai and Nakhon Ratchasima, and Kaeng Khoi and Map Ta Phut -- spanning roughly 250 kilometres.
Some 2,815 rai of land in Bangkok's Bang Sue and Don Muang districts, as well as in Ayutthaya, Saraburi and Nakhon Ratchasima's Pak Chong, will be expropriated.
Six trips a day, with 600 passengers per trip, will be offered in the initial stage after the rail service begins in 2021, with the full length taking one hour and 17 minutes per trip.
The government estimates that 5,300 passengers a day -- about one-fourth of the 20,000 commuters on the route -- will use the service in 2021, rising to 26,800 in the next 30 years when the number of high-speed train trips will increase to 26 a day.
Train fares will start from 80 baht and rise by 1.8 baht per km. For example, the fare for Bangkok to Ayutthaya will be 278 baht, Bangkok to Pak Chong will be 393 baht and Bangkok to Nakhon Ratchasima will be 535 baht.