Loans and budget deficits: Funding Thailand’s high-speed rail
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Loans and budget deficits: Funding Thailand’s high-speed rail

This is what happens when the problem is that the critics like the investment, but don’t like the cost and so other aspects of the policy. The criticism then is really narrow on the overall substance of the details.

The Bangkok Post in an editorial on March 21:

The 2 trillion baht in debt, he said, will be repaid in a period not exceeding 50 years. That means that every Thai citizen today and those who are yet to be born will have to foot the bill for the next half century.

Most critics, including this newspaper, have no objection to the infrastructure projects if they are meant for the benefit of the country and its people. What they are opposed to is the abnormal way the government approaches the projects. That is, to seek outside loans in one lump sum rather than getting funding from annual budgets, and the lack of transparency regarding the projects.

Public participation is non-existent and there is a widespread concern that it will be bypassed for the sake of speedy implementation of the projects. Environmental impact assessment studies which are a must for any projects which may affect the livelihoods of the people and the environment are rarely mentioned.

Suthichai Yoon in an op-ed in The Nation:

Korn Chatikavanija, the former finance minister and the Democrat Party’s deputy leader, posted on Facebook after the Bt2.2-trillion infrastructure loan bill passed its first reading in the House on Friday:

“Minister Kittiratt [na Ranong]: You have betrayed the role as finance minister, who is supposed to maintain fiscal discipline, by proposing the loan bill despite the fact that you could have used the normal budget procedure.”

That was probably the strongest statement from the opposition throughout the debate on the issue. Kittiratt has insisted that the normal budgetary process was circumvented because the government wants to borrow rather than run budget deficits to finance the long-term projects.

The debate isn’t about whether we need to build new rail, road, water- and air-transport systems so that Thailand can become Asean’s communications hub. …

Not even the opposition Democrat Party is trying to derail the projects. Instead, it has zeroed in on how the schemes will be financed and how the introduction of the bill might even violate the Constitution and undermine economic stability.

BP: First, it is not a lump sum. The Bangkok Post on March 19:

Mr Kittiratt said the two trillion baht in loans would be secured gradually until the end of 2020. The government would maintain fiscal discipline to ensure that debt repayments each year would not exceed 15% of annual national expenditure.

BP: They haven’t actually borrowed the money yet.

The Nation:

Democrat MP Rachada Dhnadirek said the lists included many projects that the government was not ready to implement at the moment. “Many projects still lack a feasibility study and environmental impact assessments,” she said.

She said that to finance the projects, the government could instead run additional budget deficits of Bt300 billion per year. She suspected the government had a hidden agenda, and pinned her hopes on the bill being unconstitutional.

BP: There is no magic money from the budget. It is not as though if the money comes from a budget deficit that it is cheaper to borrow. Budget deficits have to be financed as well. Have heard multiple mentions by both the opposition and some parts of the media, but can someone somehow explain the budget deficit approach suddenly makes this cheaper or fiscally better? Yes, budget deficits are an alternative, but is it really that different?

On transparency, so because the money does not come from the budget, it will not be possible to scrutinise the government? What is happening now with the media commentary and the opposition in parliament? The project hasn’t even started yet. The complaint about transparency seems premature.

On the Democrats and that they are not trying to derail the projects, as The Nation made clear the other day with an article entitled “Train project ‘will only benefit the rich'”, this is not accurate. Key excerpt from that article:

The opposition Democrat Party mounted an attack on the government in relation to the proposed Bt2-trillion infrastructure projects in the second and final day of the House debate, saying the high-speed-rail system would mostly benefit the rich and there was no proper planning to accommodate changes in the areas involved.

Meanwhile, the Council of State has ruled that the proposed mass-infrastructure projects are legal and can proceed, Finance Ministry permanent secretary Areepong Poo-cha-um said.

Kanok Wongtra-ngan, a Democrat party-list MP, said that as per the calculations of the plan submitted by the administration of Prime Minister Yingluck Shinawatra, commuters would end up having to pay about Bt1.30-Bt3.50 per kilometre for the high-speed train. In other words, a 700km journey could cost between Bt1,800 and Bt2,000, higher than some low-cost airlines.

BP: Yet, on the other hand, the Deputy Spokesperson of the Democrats is complaining that Puea Thai copied the policy from the Democrats per Thai Rath (สิ่งที่เป็นโยบายพรรคเพื่อไทย ในขณะนี้น่าจะเป็นนโนยายที่ลอกจากพรรคประชาธิปัต). So they copied a policy to benefit the rich? Look, BP understands the opposition want to raise questions and doubts, but there is an awful lot of mixed messaging here.

On the cost, if you look at the entire infrastructure project, it is both aimed at business (for reducing the cost of freight) and individuals. If you want the faster trip, it will cost more. Just like the skytrain and buses co-exist in Bangkok, so will slower rail transport, planes, and high-speed rail coexist.   

Suthichai Yoon in an op-ed in The Nation continues:

The government can now proceed to borrow Bt2 trillion over the next seven years, with repayment to be made over the next 50 years. Interest could top Bt3 trillion, bringing the total debt to Bt5 trillion, prompting opposition leader Abhisit Vejjajiva to suggest that the total repayment burden might be spill over into “the next life”.

The weak link in the whole presentation is that the government has yet to produce an environmental-impact assessment (EIA) for some of the expensive projects in the package. It has produced no concrete plans to make the whole process transparent enough to soothe public fears of massive corruption, which has always been considered part and parcel of spending on major projects, past, present and future.

The Bangkok Post again:

Each project in the government’s 2-trillion-baht infrastructure plan must get cabinet approval and undergo an environmental impact assessment, says the government’s planning agency.

Megaprojects are required to be sent first to the NESDB for consideration before going to the cabinet for approval, according to a report by the National Economic and Social Development Board submitted to the government yesterday

BP: BP finds this whole criticism premature again. We are in the very, very early stages of the project. We have Cabinet and parliamentary go-ahead for the overall project so now each project they will conduct an EIA, go to the NESDB, the Cabinet and probably other committees.

Actually, what BP would look to see is questioning the whole investment scheme in the first place. Is it worth it? What are the pros and cons of the various projects. Then, if they are problems, what are the problems and how can it be made better?

One issue that has been repeatedly raised in recent years is how dangerous roads are in Thailand – see this article as one example –  but BP is surprised how little mention of a faster, safer means of transport of high-speed rail has not been mentioned in connection with this.