Thailand 2020: The future after the infrastructure loan

Recently the Thai Cabinet approved a 2 trillion baht (US$68 billion) special borrowing programme that will secure funding for government investment in the logistics and transport sector over the next seven years (2014-2020). As a next step, the draft law will be submitted to Parliament, which is expected to give its approval, thus leaving the plan ready for implementation by August. Based on this timetable, I think we can anticipate the investment disbursement to commence by the end of this year.

In my view, the 2 trillion baht programme is an integral part of the government's overall national strategy, with the main objective of achieving "growth and competitiveness". Prime Minister Yingluck Shinawatra has stated that the government aims to ensure that Thailand can achieve consistent growth rates of around 4-5 per cent per annum in the long term.

To achieve this, the government must emphasise moving the Thai economy up the value chain, as well as enhancing productivity in order to create new competitive advantage. This requires greater efficiency and productive capacity. To achieve medium-term growth and competitiveness, government policies must provide a supportive environment with necessary infrastructure.

I agree with the policy-makers that Thailand desperately needs to invest in major infrastructures projects. Over the past ten years, our public investment has only hovered at around 5 per cent of GDP, which is only half the investment level of the pre-1997 years.

The government's major medium-term investment plans include investment in both water-resource management (a five-year plan) and transportation and logistics (a seven-year plan). According to the government, a 350 billion baht investment in water-management resources is promised not only protect to Thailand's industrial and economic zones, but also to support a better irrigation system, increasing productivity for the agricultural sector.

However, people are now focusing more on the recently-announced transportation and logistics investment plan. Thailand has long under-invested in this sector, so that we now rely on roads for around 86 percent of our transport requirements - a relatively inefficient mode of transport compared to water or rail systems. As a result, logistics costs in Thailand are very high, at 15.2 per cent of GDP when compared to other more developed countries (in the range of 5-10 per cent of GDP), and this has led to inefficient energy use that has hurt Thailand's competitiveness.

Some of the proposed projects under the 2 trillion baht transportation and logistics programme include four lines high-speed railway lines (Bangkok to Chaing Mai; Bangkok to Nong Khai, connecting to Laos and China; Bangkok to Rayong; and Bangkok to Had Yai) dual train track development across the country; motorway expansion and better road networks connecting Asean economic corridors; sea ports; and border facilities to enhance border trade. Overall, about 80 per cent of the funding will be directed to rail transport.

The government has stated that the investment projects are expected to deliver the following benefits:

Cost and time reduction: A shift from road to rail will significantly reduce the time and cost of transportation of products to our Asean neighbours and other countries in Asia.

Generation of new revenue: Better linkagess will lead to the development of new towns, cities and regional hubs in other parts of Thailand and, ultimately, neighbouring countries in the Asean Economic Community and beyond. This will generate more income and consolidate Thailand's role as the region's connectivity and logistics hub.

Creation of more demand: Better infrastructure can boost demand and support long-term growth by linking various revenue-generating zones, from industrial areas to agricultural zones, as well as new destinations for tourists.

Enhancement of living standards: The quality ofadidas