Infrastructure freeze threatens logistics

Infrastructure freeze threatens logistics

Ministries agree to set priorities for projects

Thailand’s lofty plan to cut logistics costs as a share of GDP by two percentage points by the end of 2016 is unlikely to bear fruit now that the 2-trillion-baht infrastructure bill has been frozen.

Payungsak Chartsutthipol, a member of the committee overseeing the national social and economic development plan, said despite the plan being already halfway complete this month, the much-needed plans for the infrastructure projects have yet to emerge.

The plan for 2012-16 calls for Thailand to cut logistics costs to 13% of GDP from 15% now.

“Without massive investment in infrastructure projects, it will be hard for Thailand to reach the target,” said Mr Payungsak, who is also chairman of the Federation of Thai Industries.

The Constitutional Court recently ruled the government-proposed bill to empower the Finance Ministry to seek 2 trillion baht in loans was unconstitutional. That ruling followed a Democrat Party request for the court to decide whether the bill violated Sections 160 and 170 of the constitution.

Currently, 82.6% of goods in the country are carried by road, followed by water (9.5%), coastal marine (5.7%), rail (2.2%) and air (0.02%).

Thailand previously achieved a cut in logistics costs from 17.1% of GDP in 2007 to 14.5% in 2011.

The World Bank’s 2012 Logistics Performance Index ranked Thailand 38th in the world, far behind leaders Singapore and Hong Kong.

The poor showing has been blamed on Thailand’s sluggish development of its road, rail and water transport systems.

The national economic and social development plan is aimed at elevating rail transport to 10-15% overall.

Mr Payungsak said Thailand’s fiscal budget is limited and inadequate to finance the country’s infrastructure development.

Worse still, with no functioning government in place, the fiscal-2015 budget — which begins disbursement this October — could run into trouble.

But Chanvit Amatamatucharti, deputy secretary-general of the National Economic and Social Development Board, insists the goal to cut logistics costs by two percentage points remains on course.

Several state agencies and private companies have commenced their own plans to cut logistics costs, and certain government infrastructure projects are moving ahead despite possible cuts in capital spending, he said.

All ministries have agreed to set priorities for their infrastructure projects. The Finance Ministry is studying alternatives for financing them.

By law, state agencies can borrow using baht-denominated loans or bonds at up to 20% of annual budget expenditure or in a foreign currency at up to 10% of budget expenditure.

Public debt as of Jan 31 stood at 45.75% of GDP, edging up from 45.71% at the end of December and 45.34% at the end of November.

The huge investment required for infrastructure development and the hefty financial burden of populist policies such as the rice pledging scheme have stoked fears that the country’s public debt will outstrip the Finance Ministry’s threshold in the coming years and pose a threat to Thailand’s credit rating.

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