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Published on December 24, 2007

The new government to be formed after yesterday's election will have to make crucial decisions on a number of key issues involving infrastructure and the future of the economy.

Especially important is whether Thailand will go ahead with nuclear power - the cleanest and cheapest choice of fuel - because the high oil price boosts the import price of liquefied natural gas used for power generation and local reserves are limited.

While current Energy Minister Piyasvasti Amranand insists that nuclear power is necessary because gas prices tend to rise in line with oil prices and acceptance of other cheap fuels like coal is low, Democrat Party leader Abhisit Vejjajiva has said Thailand still has other choices and there is no need to resort to nuclear power as yet.

The 15-year plan to add between 27,000 and 36,790 megawatts to the power grid by 2021 calls for the use of coal and nuclear energy. Nuclear power is slated to provide 10 per cent of the national power supply in 2021, while the ratio of power from natural gas will drop from 72.7 per cent in 2008 to 38.9 per cent in 2021. But if the plan is to be achieved, the next government has to decide whether to proceed with the current preparatory process, as it could take years for Thailand to gain enough nuclear scientists and know-how in the area. Experts said the new policy-makers must decide on diversification of fuels, because Thailand relies too much on gas from Burma and Iran. If tough decisions are postponed, the costs could be extremely high, they said.

One major decision not made by the current government is the location of the Southern Seaboard, a cluster of industrial land to accommodate new investment because the Eastern Seaboard in Rayong has become congested.

This will require policy-makers to flex their political muscle. When news spread that the seaboard was to be located in Nakhon Si Thammarat, residents threatened to launch a protest over fears about toxic emissions that are believed to have caused serious illnesses in Rayong.

People in the telecom industry are waiting to see what the new government will do with the amendments to two telecom laws - the Frequency Allocation Act and the Telecom Business Act.

The first law, now being screened by the Council of State, mandates the creation of the nine-member National Broadcasting and Telecommunications Commission (NBTC) to regulate the broadcasting and telecom industries, including the allocation of new spectrum licences. Because of the pending amendments, the existing telecom regulator - the National Telecommunications Commission - has refrained from making crucial decisions, such as the granting of 3G mobile licences that would generate tens of billions of baht in new investment.

The amended telecom business law is awaiting Cabinet approval. One highlight of the revised law is that it will state clearly that the existing interconnection regulations will be applied to both telecom operators holding concessions and licensees of the NTC. The draft amendments are also meant to prevent pricing collusion between licensees and concession holders and to promote the allocation of vacant frequency bands.

Foreign investors will want to know what the next government does with the amendments to the Foreign Business Act (FBA). Many have refrained from coming to Thailand in the absence of clear rules.

The FBA amendment is intended to prevent the practice of using nominees, to clarify the definition of foreign company and also to revise the list of restricted activities in Annexes I, II and III, which are meant to reserve certain businesses for Thai investors.

Though the Commerce Ministry introduced changes to the FBA's annexes to change the specifications of businesses open to investors, foreign investors still want to know if they should wait for the enactment of the amended law.

Small retailers are awaiting the passing of the country's first Retail and Wholesale Business Act, which promises protection against retail giants, who have expanded aggressively and threatened the survival of small players. The law, if promulgated, will place limits on the expansion of big retailers and give small retailers some breathing space.

Despite signing the Japan-Thai Economic Partnership Agreement, the interim government suspended all other pending free-trade agreements (FTAs) and trade negotiators are now waiting for a renewed mandate from the next government to resume talks to open more markets to Thai goods.

"We only join free trade talks at the committee level, but cannot commit to anything as we don't have a mandate from the government," said Chutima Bunyapra-phasara, director-general of the Trade Negotiation Department.

However, a clause in the new Constitution bars negotiators or ministers from making final commitments. Under the new charter, if the government wants to pursue an FTA it must make sure it abides by Article 190, which requires it to inform the public about its intention first. Also, the negotiation framework has to be approved by Parliament, the government must keep the public informed during the talks, and hear public comments on any FTA before it is ratified. In addition, Article 350 (5) says that any trade negotiation where a pact has not yet been signed must get a mandate from parliament or else it will be in breach of the Constitution.

"Thailand is the only country in the world setting up such restrictions. The mandate should be approved at the beginning, when starting negotiations," Chutima said.

The new government will also have to decide whether to proceed with the amendments to the Currency Act. The amendments will give the Bank of Thailand (BOT) greater flexibility in managing the country's international reserves, which currently stand at about US$85 billion (Bt2.86 trillion).

The BOT wants the Currency Act amended so it can improve the management of its resources and change the way it accounts for its activities.

The Finance Ministry believes the amendment could also allow the government to use the country's international reserves to repay the debts of the Financial Institutions Development Fund (FIDF), incurred when it bailed out the banking system after the 1997 crisis. The fund's remaining debt is about Bt1 trillion. Without the amendments to the Currency Act, the FIDF's huge debts will remain unsettled.

However, critics and followers of revered monk Luangtha Maha Bua strongly oppose the move. They argue the central bank would take excessive risks that could deplete Thailand's international reserves, similar to its actions prior to the 1997 crisis. Since Finance Minister Chalongphob Sussangkarn gave up trying to push the bill through, his successor will have to decide what to do with the issue.

The new transport minister will also be in the spotlight on several issues. One is the huge investments in urban rail transport. Commuters are worried about more changes to the Bangkok mass-transit policy, given that it has been amended repeatedly by both the Thaksin and Surayud governments. Moreover, some project conditions may need to be eased to draw investors. Notably, the Bang Sue-Taling Chan part of the Red Line drew only two bidders, as the State Railway of Thailand requires the winner to handle the complicated land expropriation.

The minister will also need to decide whether Don Mueang should be reopened for international flights, something airlines oppose because of the lack of a transport link between the old airport and Suvarnabhumi Airport.

If Don Mueang is to serve only domestic flights, then the Cabinet will need to approve the second phase of expansion at Suvarnabhumi, which could cost Bt48 billion-Bt50 billion.

Either way, a decision is necessary because Suvarnabhumi is now running at close to its full capacity of 45 million passengers per year. Congestion could disrupt Thailand's dream to become a regional hub given that Singapore's Changi Airport will soon open a new terminal that will increase its capacity to 60 million passengers.

Last but not least, individual and corporate taxpayers are worried what the new finance minister will do with the current tax structure. If the new government is to implement the kind of social projects promised during the election campaign, it will need to raise revenue to finance them and might do so by raising taxes or abolishing some tax deductions.

Tomorrow: Telecom industry outlook