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Published on October 6, 2007

 After signs of hesitation, the Japan Bank of International Cooperation (JBIC) has unofficially informed the Finance Ministry it will provide Thailand with long-term soft loans to finance the extension of mass-transit projects.

Public Debt Management Office director-general Pongpanu Svetarundra yesterday said negotiations between the government and the JBIC for the loans were close to conclusion after a long delay.

There have been reports over the past few months saying the JBIC was reluctant to extend loans to support the project and that the government was looking to other sources, such as China.

Pongpanu said although there had been twists and turns in the negotiations, the Finance Ministry was apparently now confident the JBIC would extend the long-term loans.

"The JBIC is ready to lend to Thailand to finance the Purple Line electric train's Bang Sue-Bang Yai route," he said.

JBIC executives have unofficially informed the Finance Ministry that Thailand will get the long-term loans, he said.

"We want the JBIC to send us an official letter of confirmation this month. Otherwise, we may not be able to wait any longer for loans from them."

Pongpanu said the government would initiate the bidding process this month, while the JBIC would also send a mission to assess the Blue and Red Line projects.

Previously, the JBIC was reportedly reluctant to lend to Thailand and demanded a higher interest rate. This sparked speculation the bank was unhappy with political uncertainties in both Japan and Thailand.

However, Pongpanu said part of problem was that the government had been unable to come up with a clear investment model related to public-private partnership.

Meanwhile, Deputy Finance Minister Sommai Phasee said he met Naoyuki Shinohara, vice minister for international affairs in Japan's Finance Ministry, last week and asked for consideration of an interest rate lower than the suggested 1.5 per cent over 25 years. It will take about a month before the JBIC can decide whether to offer such a loan, he said.

Negotiations have also been held with the Chinese government, but Thailand will not accept loans from China if that country wants the project to be exclusively handled by Chinese firms. The government wants Thai firms to take part in the construction of the route, he said.

As for construction of the Bang Yai-Bang Sue line, he said the ministry would ensure that all parties had an opportunity to participate in the loan extension.

If the JBIC cannot extend the loans, then the Thai government may seek funding from China, which has offered to extend a loan at 3-per-cent interest over 15 years. The Finance Ministry would have to discuss the rate.

The mass-transit project will be open to private investment at the 50-per-cent level.

In another development, Sommai said the Finance Ministry would submit a draft of the Currency Act to the National Legislative Assembly next Wednesday. Controversial clauses will be removed after taking into account objections from critics, he said.

Sommai said he also met with followers of Luangta Mahabua who were worried that the draft would allow the central bank to deplete official reserves.

Wichit Chaitrong

 The Nation