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Published on February 6, 2008

Pongpanu Svetarundra, director-general of the Public Debt Management Office, said yesterday that it was still unclear how the Samak government would revise the mega-projects planned by the Surayud government.

According to the earlier plan of the Surayud administration, Thailand would invest Bt250 billion in five-route mega-projects. How-ever, Samak said over the weekend that his government wanted to pursue nine-route mega-projects costing around Bt500 billion.

Pongpanu said the Public Debt Management Office would meet the National Economic and Social Develop-ment Board, Budget Bureau and the Office of Transport and Traffic Policy and Planning in order to draft a funding plan to support the new government's mega-project plan.

According to the earlier plan for the five-route mega-projects, funding sources included borrowing Bt75 billion, or 30 per cent of the cost, from the Japan Bank for International Cooperation, raising Bt125 billion, or 50

per cent, from the domestic market, with the balance of Bt50 billion coming from the Energy Conservation Fund and profits of some state enterprises.

Pongpanu had on Monday suggested Thailand could issue 30-year bonds to finance the mega-projects as the country's public debt was still low at 38 per cent of GDP, far below the ceiling of 50 per cent.

This gives room for the government to borrow about Bt800 billion to Bt900 billion. He believes the 30-year bonds would get a good response from the market as an alternative investment tool for institutional investors.

Pongpanu yesterday said a 30-year bond issue would be possible amid high demand in the domestic market, while life insurance firms get more than Bt200 billion of long-term funds every year but invested only for five to seven years.

"This is a good opportunity to issue bonds to raise long-term funds to help build up a long-term bond benchmark in Thailand. Our public debt is currently low at 37-38 per cent. The success of the 30-year bond issue will depend on the price as the market has never had such a product," Pongpanu said.

However, the Thai Bond Market Association said yesterday that the 30-year bonds may not be fully subscribed because the capital-control measure prevents foreign investors from buying the bonds.

Association president Nattapol Chavalitcheevin said the Bt500-billion 30-year bonds would not be fully subscribed at once. So far, the government has raised only Bt40 billion to Bt50 billion for mega-projects. The longest maturity period of bonds currently available is only 20 years.

"This is the constraint caused by the capital control as foreign investors would not be able to invest in the bonds," Nattapol said.

"Funds from local institutional investors will raise only about Bt100 billion to Bt200 billion. The remaining bonds might need to reduce the maturity period."

He said the 20-year bond yield was currently around 4.82 per cent. Compared to previous data, the 30-year bond yield might be around 5.12-5.32 per cent.

The Nation