A financial adviser of the previous government and former member of the mass-transit committee, Pichit said that right now, there were four practical options for financing the mega-projects, but setting up a Vayupak Fund 2 would prevent the government from carrying a huge public debt.

He explained that any Vayupak Fund 2 should be structured with more flexible features. Vayupak 1, founded during the Thaksin administration, invested in 25 stocks that the Finance Ministry had in its investment portfolio.

Pichit said Vayupak 2 could be adjusted to be more flexible by allowing the fund manager to trade some overvalued or non-liquid stocks for more suitable stocks over time.

"The Finance Ministry has about Bt50 billion to 60 billion worth of assets to back this fund," said Pichit. "The investors can be classed like investors in the Vayupak Fund 1. The maturity of the fund should be 20-30 years, which would suit institutional investors. Retail investors could also join if they would like to invest for such a very long term."

A second alternative is to borrow loans from the Japan Bank for International Cooperation (JBIC), which now seems to be the choice most favoured by the government, while the remaining two options are securitisation and collecting a specific tax.

Deputy Finance Minister Sommai Phasee will soon fly to Japan to discuss the loans with the JBIC.

However, Pichit is concerned about the JBIC loan, because it will increase the amount of public debt.

It remains unclear whether the JBIC will raise interest rates for the mass-transit loans to the Thai government. This will depend on the category under which the JBIC will classify the mass-transit project. If the project is deemed a "non-environmentally concerned business", the rate would be 1.5 per cent, compared with 0.5 per cent for an "environmentally concerned business".

Piyarat Setthasiriphaiboon

The Nation