The Finance Ministry and the Japan Bank for International Co-operation (JBIC) are expected to conclude a loan agreement to finance mass-transit projects in Bangkok next month.

Despite reports that JBIC was reluctant to extend loans to the Thai government due to the political situation and other issues, officials at the Finance Ministry are confident that a contract is in the offing.

"We have repaid previous JBIC loans, and the bank has ample liquidity, so we think that JBIC will give us the loan," said an official.

The official said that a loan from JIBC would be cheaper since JBIC charged the lowest interest in the domestic or US market.

JIBC also offers loans of up to 30 years. The interest rate if converted into a baht loan currently would be about 2.7 per cent.

The Finance Ministry plans to borrow US$300 million (Bt10.5 billion) in the first batch.

JBIC's representatives are expected to come to Bangkok next month to discuss the terms.

The Cabinet has approved the construction of three mass-transit lines, red, purple and blue, for a total investment estimated at Bt1.65 billion. The Finance Ministry plans to borrow up to 60 per cent of the total from JBIC; the rest will be financed by government budget and domestic loans.

The first bidding, under the State Railway of Thailand, is scheduled in June for the Bang Sue-Talingchan route, part of the red line.

Finance Minister Chalongphob Sussangkarn will go to Kyoto early next month to attend a meeting of Asean finance ministers and their counterparts from China, Japan and South Korea, known as Asean+3.

He is expected to discuss the loan there with JBIC executives. Early this month Prime Minister Surayud Chulanont went to Japan and signed a free-trade agreement, further cementing the economic relationship.

The government is trying to push government agencies and state enterprises to accelerate investment in order to boost the economy. However, the projects have been delayed partly because of political uncertainty. Some critics have noted that JBIC seems unwilling to approve loans to the interim government.

Meanwhile, Deputy Finance Minister Sommai Phasee said the Finance Ministry could not approve tax incentives for fuel-efficient eco-cars during this month as earlier planned.

He said car-manufacturers and officials could not reach agreement on the purpose of the project. While the government wants carmakers to concentrate on the export market in order to enjoy tax incentives, the manufacturers want to focus on the domestic market. He said more study was needed, with research expected to conclude next month.

Wichit Chaitrong

The Nation