Logistic budget being swallowed up by infrastructure

Meanwhile, it is time the Thai logistics industry comes to terms with fully integrated development.

Most budgets proposed by departments, especially those of the Transport Ministry, are for developing infrastructure projects such as railways, roads and ports, say industry watchers.

According to the national logistics committee's first meeting chaired by Deputy Prime Minister Korbsak Sabhavasu on February 25, about Bt672.38 billion - almost the entire budget - will be used for increasing the efficiency of transport, and just Bt4 billion for the logistics system.

The committee's full name is the National Management Committee on Development Logistics System and Service.

The logistics element will be distributed into four areas: improving the logistics system in the real sector; developing the logistics business; improving facilities for trade; and developing the workforce in the logistics industry.

However, the logistics budget is planned for five years, from 2009 to 2013.

The current five-year logistics development plan covers nationwide double-track railways, inland water ports, and a land-bridge project linking the Gulf of Thailand to the Andaman Sea, said a source at the national logistics committee.

Ruth Banomyong, associate professor of Thammasat Business School, said that truly developing the logistics industry would have to comprise four dimensions: infrastructure; rules and regulations; logistics service providers; and logistics service users such as importers and exporters.

"The government shouldn't exploit the national logistics development strategy as a hidden agenda to inject money into the mega-investment projects," he said.

An industry source said "logistics" had always been a pretext for proposing a budget to develop infrastructure projects that were made by several departments of the Transport Ministry.

Given the present economic slump, the government wants to spur the economy via its spending, in particular on such infrastructure projects, as it has no other choice because the country's exports and private consumption have fallen.

However, some academics are optimistic that the initial budget for logistics development, though being just a pretext, might be good for the country in the short and medium terms.

"I didn't think the government would exploit the logistics agenda to propose a budget for infrastructure projects," said Pongchai Athikomrattanakul, director of the Centre for Logistics Excellence.

He said the country has experienced twin negative impacts simultaneously - the global economic slowdown and political conflict. Meanwhile, he said, the government needed to stimulate domestic consumption by investing in many projects, most of which will be related to infrastructure, because exports and foreign direct investment have shrunk since last year's fourth quarter.

Pongchai said in the past the government was concerned about energy saving for logistics services when the oil price rose to the peak of US$140 (Bt5,030) a barrel in July last year.

But, at present, with crude having declined to $35-$40 a barrel, the topic of energy savings has turned to infrastructure improvement.

"If the government keeps vacillating like this, it will get lost," said Pongchai, adding that first of all, the government should admit that there were some routes, especially rails, that have full utilisation.

He suggested that the government should integrate "infrastructure" with a "logistics" development plan, so that it would know which tasks should be implemented as priorities.

"The government should determine which routes or which zones are optimised for "passenger" transits or for "cargo" logistics as a whole picture, so that every route will be utilised efficiently," Pongchai said.

In addition, the government should not miss the target when it comes to putting money into projects. Now, the government should target short- and mid-term projects for three to five years. Then, the money distribution will be workable, he said.

Sunyawit Sethapokin, managing director of Blue & White Logistics Group, said on behalf of Thai Logistics and Production Society's committee that the logistics industry would like to see an action plan implemented by the government on integrated logistics development - not just infrastructure alone.

Logistics services cover areas like freight forwarding, shipping and warehousing in addition to transporting, he said.

He added that most Thai-owned logistics services were small and not stable, having been affected by free-trade agreements.

"About 80 of total transport services by road are now used by large foreign firms with strong financial status," he said.

He added that any roads would be more beneficial to foreigners than Thai firms unless the government integrated all dimensions of logistics development.

Chula Sukmanop, deputy director-general of the Office of Transport and Traffic Policy and Planning, said some departments under the Transport Ministry could not receive the budget they desired if they proposed using it for infrastructure development. Therefore, they raised the notion of developing a logistics system as a pretext to seeking the money.

However, he said, the office - being engaged in budget considerations for proposals by Transport Ministry departments - had not passed a number of budgets for infrastructure work that had been proposed under the guise of developing logistics.