The caretaker government yesterday issued assurances that Thailand would proceed with its Bt550-billion mass-transit investment, despite the current political turmoil. It said the guarantees were aimed at restoring public confidence that there would be no delays that could derail the economy.

Both caretaker Transport Minister Pongsak Ruktapongpisal and Foreign Ministry spokesman Kitti Wasinondh said mega-project investment would remain intact despite the House dissolution and the April 2 election.

Ambassadors to Thailand were invited to the Foreign Ministry yesterday, where they were reassured there would be an election on April 2 and no change in mass-transit development plans.

Meanwhile, Pongsak said at the Transport Ministry the deadline for mega-project submissions remained May 29.

He said the mega-projects would proceed regardless of the outcome of the political conflict.

"This is the government's policy and an ongoing government project," he said.

According to the original deadline, interested investors were to submit proposals for the mega projects by May 29. Pongsak said that by that time, a new government should be formed following the April 2 election.

Construction of the projects should start by the end of this year as planned.

Observers of the economy have expressed concern that the political conflict could lead to a long delay in mega-project investment, which could hurt economic growth this year.

The University of the Thai Chamber of Commerce said that in the worst-case scenario, Thai GDP could expand only 3.2 per cent this year. This is based on the assumption the political conflict will continue for more than another six months and only a small portion of mega-project investment, in which mass transit is an integral part, is made.

DBS Bank of Singapore said in a research report that with the political uncertainty, the economic priorities of a new government would be sidelined as it focused most of its energy on garnering political support and quelling internal party politics.

"We are now only expecting about a fifth of the planned Bt221 billion scheduled for 2006 to materialise, largely on low-cost housing," said DBS. "The infrastructure-related spending, such as on mass transit, may only occur in late 2007 and will depend on political developments."

Fiscal Policy Office director-general Naris Chaiyasutra said yesterday the Finance Ministry was maintaining its growth forecast of 4.5-5.5 per cent for this year.

"Whether we revise it depends on the period of [political] conflict. But at this time, we consider the tension a short-term phenomenon that has not yet caused a stoppage in industrial production. Overall, exports are still fine, while global economic growth should also benefit the Thai economy," said Naris.

Pongsak said yesterday foreign investors had inquired about whether the mega-projects would proceed as planned.

"Investors need clarity, because they have to spend lots of money to study the projects," he said. "We have informed them the current political conflict is occurring because people have different ways of thinking. This is normal in a democracy."

Projects that have received strong attention from investors include mass transit, a port in Songkhla and a proposed double-track railway.

Projects that have received only scant attention from investors are the highway connecting Ayutthaya's Bang Pa-in, Saraburi and Nakhon Ratchasima; and the Outer Ring Road Phase III project.

Pongsak suggested that Thai contractors team up to bid for these projects.

"If they have problems with funding, they can contact financial institutions in the UK," he said.

Pongsak said the Transport Ministry had delayed investment in some projects, pending adjustments to the e-auction regulations. Since January, the Highways Department has delayed Bt20 billion worth of project investment. The ministry has now instructed the department to accelerate expenditure of the money, to stimulate growth.

He said that in January and February, the government's budget had barely been touched, making the economy stagnant. The ministry has asked government officials to speed up construction of various projects, to boost economic growth.

Pongsak believes that in the next five years, the budget for public construction work will continue to rise, amounting to Bt100 billion by next year, and what the government needs to do to start new projects is find funding.

"This requires investor confidence," said Pongsak, "and the government must follow its obligations [it accepts when it enters into agreements] with investors."

In this fiscal year, the Highways Department has a total of 28 projects totalling Bt12 billion. Eighteen of them, worth Bt8 billion, are ready to be implemented. Contractors for the a further seven projects, valued at Bt2.9 billion, will be selected next month, while contractors will be selected for the remaining three projects, with a total value of Bt1.3 billion, by May.

Poomson Rojlertjanya, former president of the Thai Contractors' Association, said the private sector believed the government's mega-projects would go ahead, as they were necessary. However, there will be some delay.

He said what investors were most concerned about was stability. The current political situation has not risen to the point of creating an economic crisis, but if it continues: "We will have to re-estimate the situation."

Business Desk

The Nation