Political risk still obstacle to private role in govt projects

Inconsistent infrastructure policies putting off investors, conference told

Political risk remains one of the main obstacles in attracting private participation in infrastructure projects, according to experts.

Past governments often implemented inconsistent policies, resulting in the country getting a bad reputation among foreign investors, they said. With each administration wanting to score political points, governments sometimes seek to change contracts, a practice that can be detrimental to the interests of investors, Supavud Saicheua, managing director of Phatra Securities, said yesterday at an international conference on Asian regional cooperation.

He cited a dispute between a previous Thai government and a highway operator, when the administration did not allow the business to increase toll fees in accordance with the terms of its concession.

The problem is that policy-makers often seek popularity among the electorate by keeping utility fees low, whereas investors want a return on their investment, he said.

Kiyoshi Nishimura, chief executive officer of the Credit Guarantee and Investment Facility of the Asian Development Bank (ADB), shared the view that political risk was one of the major obstacles to private participation in infrastructure projects.

Kanit Sangsubhan, director of the Fiscal Policy Research Institute, told the conference that political commitment was needed if Asian governments wanted private firms to invest more in infrastructure projects.

"Demand for investment is there and funding is available, but it is hard to get projects off the ground, so we need someone to make a serious effort," he said.

For example, many people talk about how to develop an industrial park in Dawei, Burma, and a road from Thailand to Dawei, but the projects will not happen if the government does not take action, he added.

A survey by the ADB suggests that Asia needs to invest about US$8 trillion (Bt248 trillion) over the next 10 years in infrastructure projects.

Thailand needs to invest about $72.1 billion in the next five years, according to the National Economic and Social Development Board.

Narongchai Akrasanee, adviser to the Fiscal Policy Research Institute, said one problem was that it was very hard to identify good projects.

Vorapol Socatiyanurak, secretary-general of the Securities and Exchange Commission, suggested that to solve the problem of public budgetary constraints, the government should let the capital market drive infrastructure investment.

He said he expected the Electricity Generating Authority of Thailand would in the next few months create an infrastructure fund, as it plans to raise funds from the local capital

market.

Experts agreed that while there are high savings in Asia, long-term investment from Asia tended to go into US and European government bonds, because of those instruments still being considered a safe haven.

However, such investment provides a low return due to the weak US and European economic recoveries.

Meanwhile, US and European interests recycle those savings and put them in short-term investments in Asian banks or stock markets, where they get higher returns. Experts suggested, therefore, that Asia should utilise its high savings by investing more at home.

Kanit said he expected many projects would be implemented after Asean this year puts in place credit-guarantee facilities, which should convince investors over the safety of investment in infrastructure projects in the region.