Lack of clarity and feasibility studies cause for worry.
The Thailand Development Research Institute (TDRI) has raised serious concerns over the infrastructure projects planned under the Bt2-trillion budget as there was no clarity on the value of the investments, especially the high-speed trains for which no feasibility study has been conducted.
Though the TDRI agreed with the projects, especially the logistics mega-projects, the plan should be executed transparently and effectively, the TDRI research director, Somchai Jitsuchon, said.
The TDRI found that more than half of the total budget had been allocated for high-speed trains rather than logistical transport, which is what the country needs to cut costs and increase competitiveness.
The logistics cost will not be reduced as expected if the government focuses more on high-speed trains for which the number of passengers cannot be guaranteed and it is hard to determine whether it would be worth the investment.
The TDRI found that 11 projects worth more than Bt900 billion needed feasibility studies but for nine projects, even before the study, the government had already set the budget.
High-speed rail should focus on commercial transport, not public services, because the target passengers would be middle-to-high-income earners. The government should determine clearly what are commercial projects and what are public service projects to prevent long-term loss from services. The academic warned that the government should not subsidise the high-speed train service otherwise the public debt levels will increase.
He said Thailand’s population growth was slowing down as the society ages. Therefore, it is unclear how many passengers would use the high-speed trains and whether the project would break even.
The issue of value for money is a serious concern because this involves fiscal risk, he said. He suggested that the government allow all projects to pass feasibility studies and be certified by an independent peer review in terms of the investment and the services, including the fares. All projects should have the ex-post evaluation as well, said the economist.
The government must not add new projects to the annex of the Bt2-trillion borrowing budget if some projects are found unsuitable after a feasibility study, Somchai said. And if the budget for any project shows a surplus, the government must return the funds to the lenders and not show them as part of the government’s fiscal statement. The public debt is rather high, and the government should help reduce the debt through quick repayment, he said.
The TDRI also recommended that the administration declare the medium-term/multi-year budgeting to Parliament and the public every year to realise revenue estimation in the medium term and the additional revenue plan from the investment in order to evaluate the fiscal risk.
“The financial health of the government is most important, therefore Parliament should know about the process of each project to ensure the Bt2-trillion expenditure will not aggravate public debt,” he said.
Parliament should have role in screening details of projects, which can be added in the annex of the bill, he said.
In terms of the administration, the TDRI has proposed that the government must declare the accumulated debts and the new debt from the rail investment.
First published in The Nation, 19 April 2013