Friday marks one year since Thailand’s 12th coup d’etat led by Gen Prayut Chan-o-cha, who promised reforms. <i>Business Post</i> reporters look at the regime’s achievements and failures and sound out on issues that should be followed.
Infrastructure policy hailed
Some critics may argue that implementation of the government's new infrastructure development projects is yet to materialise after months of anticipation while the country is in dire need of an immediate impetus to spur the fragile economy at a time of wilting exports and tepid domestic consumption.
But business leaders see infrastructure development by this government as being much faster than expected or by its predecessors.
- Special report: One year at the top
Niyom Wairatpanij, a vice-chairman of the Thai Chamber of Commerce, says this government deserves praise rather than blame in managing the country's infrastructure development.
Prime Minister Prayut Chan-o-cha's cabinet approved an eight-year infrastructure development plan (2015-22) worth 1.91 trillion baht on March 27.
The new proposals cover a nationwide metre-gauge, double-track rail network, motorway capacity, Bangkok's mass-transit system and high-speed rail links between the capital and the East and the North as well as better connections between Bangkok and major tourist destinations upcountry.
The plan includes developing an intercity train network (494 billion baht), public transport in Greater Bangkok (745 billion), highway capacity to connect main production bases with those of neighbouring countries (522 billion), the marine transport network (101 billion) and airport and air transport capacity (50.1 billion).
Deputy Transport Minister Arkhom Termpittayapaisith says infrastructure development is progressing well, with many projects expected to start construction this year.
The cabinet has already approved three of six double-track metre-gauge lines, with the other three now undergoing environmental impact assessment, he says, adding that all six are expected to start construction this year.
The government is also accelerating development of mass-transit projects such as the Purple Line (Bang Yai-Bang Sue), which is due to start test runs in October and become commercially operational by year-end.
The government is also seeking operators for the Blue Line extension (Bang Sue-Tha Phra/Hua Lamphong-Bang Khae) and purchasing trains for the Light Red Line (Bang Sue-Hua Mark via Hua Lamphong).
He says three planned motorways (Bang Pa-in to Saraburi and Nakhon Ratchasima (196 kilometres), Bang Yai-Kanchanaburi and Pattaya-Map Ta Phut (32 km) are expected to start construction this year.
Mr Arkhom, who is also secretary-general of the National Economic and Social Development Board, also says the 1.435-metre standard-gauge, double-track development from Nong Khai to Bangkok is now undergoing a feasibility and design study by Thailand and China.
The government expects construction will start this year.
In addition, Mr Arkhom says Thailand and Japan are conducting a feasibility study on the high-speed train development for Chiang Mai-Bangkok and Kanchanaburi-Bangkok-Aranyaprathet.
Supant Mongkolsuthee, chairman of the Federation of Thai Industries, says the government is proceeding well in its infrastructure development, with construction on many projects already started.
However, he has proposed the government enforce special laws to expedite development and enact new ones governing public-private partnerships to allow greater private sector participation.
Thumbs-up for SEZs
One of the Prayut government's initiatives in its first year is setting up special economic zones (SEZs) to deepen economic integration for the imminent Asean Economic Community (AEC) and ease the labour shortage.
The main focus is in six border areas: Mae Sot in Tak province, Aranyaprathet in Sa Kaeo, Sadao in Songkhla, Trat, Mukdahan and Nong Khai. The special zones will cover 10 districts and 36 tambons with a combined area of 2,932 square kilometres.
The SEZ has two phases in its development plan. The first phase targets 13 strategic industries in which mostly the labour intensive industries.
Kasikorn Research Center estimates the AEC and SEZ investment should help stimulate trade and the economy, as Thailand can benefit from its geographical advantage. K-Research predicted border trade would grow by 12% to surpass 1.1 trillion baht in 2016.
However, no matter how good a policy is, the most important factor is how to implement it.
The Thai Board of Investment has changed the investment privileges provided to companies that invest in the SEZs, which should help the project get off the ground.
For other governments, acquiring the land needed for these SEZs might be a problem, but Section 44 gives the government broad powers to act to solve such issues.
The business sector is satisfied with the government's SEZ project, says Vallop Vitanakorn, vice-chairman of the Federation of Thailand Industries.
"The government has done well in terms of implementing its policies. The decision to impose Section 44 is a good choice to remove several obstacles," he says.
The government plans to improve the cross-border taxation system to be on par with the international standard and to facilitate trading activities. The next step will be essential facilities to accommodate SEZ investment once it is ready to service.
More spectra call for 4G auctions
The government's plan to allocate more telecommunications spectra to build the country's fourth-generation (4G) networks marks a crucial foundation for the development of an innovation-driven digital economy.
ICT-related companies - ranging from telecom and mobile operators to handset makers, network equipment vendors and content service providers - hail the plan to allow them to access more spectrum resources in what they believe will be a strategic drive to serve the explosive growth in mobile data traffic.
Modernising the nation's mobile network to 4G technology can facilitate super-fast broadband connections, which can contribute to greater competitiveness of the country's telecommunications network infrastructure.
The imminent auctions of 4G broadband licences can also expect to generate at least 50 billion baht in bids to the government as well as create direct investment opportunities of 320 billion in telecommunications-related industries.
The spectrum auctions for four licences this year is also expected to create jobs and raise GDP next year, according to a study by the National Broadcasting and Telecommunications Commission (NBTC).
The regulator plans to allocate four licences for the 4G spectrum auctions including two of 12.5 megahertz of bandwidth each on the 1800-MHz spectrum and another two of 10 MHz each on the 900-MHz spectrum.
The auction of the 1800-MHz spectrum will take place in November, while the 900-MHz auction is scheduled for December.
Somkiat Tangkitvanich, chairman of the Thailand Development and Research Institute, supports the NBTC's effort to push the 4G spectrum auctions to take place this year in order to accommodate skyrocketing demand for wireless data communications.
Thailand's internet-ready population is seeing the highest rates of use for social media, mobile games, music and video files, email and online shopping compared with neighbouring countries, say mobile operators and industry research firms.
Operators say 4G technology will help Thailand to catch up with digitally advanced countries and is in line with the government's push to create a digital economy.
However, Mr Somkiat disagrees with the government's initiative to recall other frequencies such as the 2300- and 2600-MHz spectra for 4G auctions apart from the existing 1800- and 900-MHz spectra, saying that doing so may cause a further delay in the auctions.
Mobile operators are calling for Prime Minister Prayut Chan-o-cha to allocate other telecommunications spectra for 4G auctions apart from the existing 1800-MHz and 900-MHz spectra, saying the amount of bandwidth on offer is insufficient and impractical, as it is too small to deliver high-quality mobile broadband connections.
Some industry veterans have urged the prime minister to issue an order under Section 44 of the interim charter to recall the unused 25 MHz of bandwidth of the 1800-MHz spectrum from mobile operator Total Access Communication Plc for the auctions.
Big welcome for digital economy
The government's digital economy policy has been given the thumbs-up by academics and industry veterans as it holds tremendous potential to create new business opportunities and bridge the digital divide.
The initiative is expected to make a deep and lasting impact on the way people live, work and play.
"It [the digital economy policy] is a good indication of the Prayut Chan-o-cha government's intention of supporting the country's ICT infrastructure development," says Vichai Bencharongkul, former chairman of the Thai Federation of the ICT Technology Association, which covers 15 ICT-related organisations.
The digital economy is aimed at providing affordable broadband service to each district by 2016 and all villages by 2017, up from the current 70% and 50%, respectively.
An increase in broadband access can boost the adoption of e-commerce and other e-marketing activities.
The national data centre project has also been identified as a major area of development for the digital economy. The planned construction of national data centres is aimed at bringing down the cost of data centre operations as well as increasing their efficiency.
Almost half a dozen global technology companies have expressed an interest in investing in Thailand's first data centre project, with the government welcoming and encouraging private sector participation.
"The policy could attract foreign direct investment as they seek to capitalise on emerging digital economy opportunities," Mr Vichai says.
In addition, he says a plan to add four to six international submarine cables to raise both capacity and performance is essential to reduce international internet connection costs.
The high cost of internet connectivity and bandwidth in Thailand is mainly due to fewer peering and exchange points as well as a genuine lack of competition.
Mr Vichai says the international gateway be used to carry data to other countries remains in the hands of CAT Telecom. Consequently, prices remain artificially high.
The good news is that this is beginning to change as the government is in the early stage of implementing initiatives to revise competition frameworks as part of the development of the digital economy.
Mr Vichai, however, says to get the digital economy project off the ground, a revision of all digital economy-related laws is needed in order to support and serve national security.
But the laws should not violate the freedom and liberties of the people.
Jarit Sidhu, senior market analyst of IDC Thailand, says the development of the digital economy requires medium and long-term strategies.
To accelerate the advent of the digital economy, he says the government must allow the private sector to play a leading role in driving the transition.
Energy reform
Energy reform has been one of the most active policy areas since the coup d'etat led by Prayut Chan-o-cha a year ago.
The energy industry has been the main target of attacks by activists strongly opposed to the government's energy development policies, fearing the country's resources would be unfairly distributed, community life would be changed and the environment adversely affected.
Shortly after the coup last year, the military regime vowed to reform the energy price framework. It aimed to correct distorted petrol prices through adjustment of the state Oil Fund levy collection and excise taxes collected from motorists.
The first move was made within a month as new members to the National Energy Policy Committee were appointed.
Activists have pointed their fingers at the national energy conglomerate PTT Plc, saying the giant company cares too much about profit instead of sharing its wealth with the people by subsidising lower fuel prices. They also feel it is the government's duty to keep petrol prices at a low level.
The government has said that for the sake of long-term energy security the distorted fuel price structure has to be gradually removed because the subsidies have been a major cause of unfairness for fuel users.
Past governments all subsidised energy prices by using Oil Fund levies from gasohol to reduce prices of compressed natural gas (CNG), liquefied petroleum gas (LPG) and diesel, gaining political favour in the process. This policy encouraged motorists and commercial transport operators to modify their vehicles to use the cheaper fuels at the expense of petrol and fuel efficiency.
The government picked a good time to reform energy prices as oil prices plunged for nine months in a row from US$109 to a low of $40 a barrel last year. This allowed the government to raise the excise tax rate for diesel from 0.001% to 4.25% and raise the levy collection without a higher retail price.
The most challenging fuel price to reform was LPG as over 60% of its cost had been subsidised since 2008. The government was successfully able to float the retail price, though CNG remains capped at 13 baht per kilogramme, 3.5 baht lower than the actual production cost.
While business operators and motorists have not complained about removing subsidies, activists prefer to see the subsidies continue so fuel prices remain as cheap as possible.
Energy analysts and business operators generally agree the government's policy of returning to market prices is correct, but note the power sector needs to be overhauled as it affects all industry segments.
Community activists have protested hard against the use of coal, atomic energy and the building of dams for hydropower. But analysts say renewable energy is still not viable commercially without huge subsidies from the government and its technology cannot be produced on an economical scale.
In its second year the government has to focus on how to cut its heavy reliance on natural gas to generate power, ensuring energy security despite strong opposition from activists for its choice of coal and dams.
Shifting a sackful of farming woes
Farmers are upset that the paddy they've grown fetches only 7,000-8,000 baht a tonne now, far below the above-market price of 15,000 baht a tonne they got from the populist rice-pledging programme.
They might not care much that the Yingluck administration's scheme cost the country more than 500 billion baht in losses and the world's top rice exporter title. But rice experts believe that what the military-installed government is doing to tackle the issue of the price of rice and other crops is a move in the right direction.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, says Gen Prayut Chan-o-cha's administration has done the right thing in letting the market mechanism play its role and scrapping the populist scheme that distorted the market.
He also hails the government for its efforts to rev up the disposal of hefty rice stocks although it only managed to sell 2 million tonnes in its 12 months in office.
The veteran rice trader has urged the government to clearly separate quality and substandard rice from inedible grain and continue selling quality rice stocks to lower the government's rice stock.
The government is being urged to step up zoning and rice farmland consolidation to cut farmers' production costs and supply high-quality varieties, as well as set up an independent body that is free from political interference to continue strategic rice plans.
Vichai Sriprasert, another honorary president of the Thai Rice Exporters Association, says the government should pay more heed to cutting production costs for farmers, investing in expanding irrigation and raising rice productivity and milling capability.
According to Commerce Minister Gen Chatchai Sarikulya, the government over the last 12 months has done its best in rice management, mainly through subsidies for fertiliser, farmland rent and insecticides to cut farmers' production costs.
It is also committed to continuing disposing of rice stocks, but the minister insists the disposal will proceed cautiously to prevent any impact on domestic rice prices.
Despite the industry expecting the government to take more than four years to sell off 18 million tonnes in state stocks accumulated from previous governments, Gen Chatchai said the government would try its best to sell them off within two years.
Tax reform - but not now
Implementing tax reform may not be appropriate given the fragility of the current economic rebound.
Imposing new taxes, which is part of the tax reform, could deal a further blow to the economy, says Chalongphob Sussangkarn, distinguished fellow of Thailand Development Research Institute.
The best way to narrow economic disparity is to help those at the low end of the income scale to earn higher wages, not to reduce the wealth of the affluent, he says. Collecting a higher rate of taxes on the rich with an aim of bridging the income gap has already been proven foolhardy in several countries because it disincentivises the motivation to work hard.
The government has prioritised passing an inheritance tax and housing and land tax in the hope they would improve income equality and boost the government's coffers.
But the country's primary goal is turning around the economy, so income disparity will be difficult to be address if the economy remains weak, says Mr Chalongphob, who was former finance minister under Surayud Chulanont's military government.
Thai economic growth was the lowest among Asean countries in 2014.
It is undeniable that tax reform should be undertaken, but economic conditions will determine when such reforms will take place, he says. Both fiscal and monetary policy should be used to shore up the economy.
Mr Chalongphob says government investment in infrastructure projects seems to be the right approach, but making such investments in a weak economy takes some time.
Lower growth potential is a risk factor for the Thai economy as some sectors could malfunction, he says.
Thailand's growth potential fell to 3-4% over the past few years from 5-6%.
"It is possible for the government to undertake tax reform in parallel with economic stimulus, but it must be done cautiously to prevent aggravating the economy," he says.