Over the next seven years, Thailand will undergo a transport transformation as the government pursues its ambitious 2-trillion-baht loan projects to improve national infrastructure and logistics systems on the largest scale in recent history.
The Thailand Development Research Institute supports the long-term direction of a bill before parliament which would enable the Finance Ministry to borrow 2 trillion baht to fund the projects.
We believe Thailand is long overdue for public infrastructure investment. Businesses and investors have been kept waiting for too long and such investment will build confidence and boost competitiveness.
However, there are some observations that must be addressed to ensure real benefits and smooth operation are achieved.
First, about half of the money will be allocated to projects that have have not yet completed feasibility studies.
From our review, these megaprojects can be categorised as follows:
– Projects that do not need feasibility studies, which are worth about 56 billion baht;
– Projects that have completed their feasibility studies, which are worth about 473 billion baht;
– Projects that have not completed their environmental impact assessment, which are worth about 529 billion baht; and
– Projects that have yet to conclude or to start feasibility studies, which are worth about 932 billion baht.
Projects that fall under the third and fourth categories are what we are concerned about.
These projects are skeleton projects: they sounded convincing on election billboards, but may not be feasible when it comes to the benefits gained.
This is where the red flag should be raised. How does the government know for certain that the return on investment will be worthwhile if none of these projects have finalised a feasibility study?
All projects should be subjected to a feasibility study within two years. The government should not pursue projects that do not meet the criteria in their investment plan.
Second, whether public debt is to be a concern depends much on the projects’ benefits. Good projects that passed rigorous feasibility studies will provide the country with long-term public transport that will last for generations to come and so eventually lighten the public debt burden.
On the contrary, if the projects are not well studied or are poorly managed, they can also be a great burden for years to come.
The bottom line here is the public needs to know what will work and what will not, and the government’s job is to provide such information with integrity and accountability.
Take for instance the case of railway systems.
The proposed double-track railway systems will provide basic transport services for the public, as well as lowering logistics costs for the transportation of goods between regions.
It will speed up the transport of goods, lowering costs previously endured by producers and which have been passed on to consumers.
On the other hand, the proposed high-speed train projects produce little evidence of such possibilities.
High-speed trains are likely to be used by middle-income travellers and will provide logistics only for lightweight goods.
To be economically feasible, the high-speed trains will need at least 9 million passengers travelling in the first year. The current number of people who fly to Chiang Mai is 4-5 million each year _ even if we add in the passengers who may stop along the way, at places like Phitsanulok, the number will not go above 6 million.
The government has not addressed how they will fill this gap.
Third, these feasibility studies will need to be transparent and independent.
We propose that an independent third party should conduct the studies. The studies should then be subject to an independent peer review and audit oversight.
The government has been praised for daring to make these projects a reality for Thailand. It must now go further and be brave enough for these projects to be reviewed and rigorously audited by independent parties and the public, and make the reviews readily available to everyone.
In addition, Thailand is not a place where evaluation of projects is often conducted after they are complete.
Projects start and finish and then we forget whether the benefits have been reaped or not.
The lack of this practice is detrimental to our development achievements. We keep pouring money into something which has not worked.
These 2-trillion-baht projects will provide an opportunity for the government to reverse such habits.
We propose so-called ex-post evaluation of all projects (evaluation after a project is complete) to see whether the government’s objectives have been met.
This will not only help in terms of transparency but it will greatly help future planning of similar projects.
The borrowing bill has been approved at its first reading in the House and is likely to have its second reading next month.
This kind of speedy bill approval should not have happened if one is to ensure effective and democratic legislative process.
The executive branch must be subject to thorough checks and balances and the practice of approving this bill has done nothing to strengthen such accountability.
Finally, it should not be forgotten that our ability to move forward as a country cannot rely solely on “hardware” such as roads, rails and ports.
We will also need the right “software” for them to function effectively.
We need to be sure this hardware will be operated properly and accountably, otherwise Thailand might move fast but in the wrong direction.
Somchai Jitsuchon, PhD, is Research Director (Inclusive Development) and Sumet Ongkittikul, PhD, is Research Fellow at the Thailand Development Research Institute.
First published in Bangkok Post, 24 April 2013