Infrastructure plan to change logistics landscape, boost property developers 

Economy January 06, 2017 01:00

By  SOMLUCK SRIMALEE
THE NATION

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THE GOVERNMENT’S policy to commence investment in infrastructure projects worth nearly Bt1.8 trillion this year means a major change for the country’s logistics system and a boost for property businesses, with developers expanding their investment focus from the central business districts of Bangkok to suburban areas and neighbouring provinces.



 

“Investment in public infrastructure projects will lead to the development of land around the projects into community and workplace areas,” Thongma Vijitpongpun, chief executive officer of residential developer Pruksa Real Estate, said in a recent interview with The Nation. 

“This will increase the number of people moving from their current place of residence to be located close to their new workplace. This presents a [welcome] challenge for property firms to develop residential projects in locations close to the new mass-transit routes.” 

Srettha Thavisin, president of another major listed developer, Sansiri, also believes that when the investment in infrastructure projects kicks off in earnest this year, it will start to create new activity from property firms wishing to expand their provincial investment in new locations situated near the infrastructure schemes.

Moreover, not only will property developers benefit from the government’s infrastructure-expansion programme (see graphic), which is scheduled to run through to 2036, it will also benefit the country’s logistics system by reducing transportation costs for businesses delivering products from their plants or warehouses to locations around the Kingdom, as well as to neighbouring countries.

According to research by the Transport Ministry, Thailand’s overall logistics costs equate to about 14 per cent of gross domestic product.

The figure is made up of transportation costs at 7 per cent, followed by inventory/warehousing costs (6 per cent) and management costs (1 per cent). 

This is higher than in Malaysia and Singapore, both of which have an overall logistics cost of below 10 per cent of GDP.

Some 4.6 per cent of the 14-per-cent logistics cost in Thailand is accounted for by road transportation, 1.5 per cent by marine transportation, 0.4 per cent by air cargo and 0.02 per cent by the rail-cargo system, the research found.

Developing the country’s transportation infrastructure – and the rail system, in particular – is seen as the way to reduce logistics costs, the ministry said.

Frost & Sullivan, which advises on logistics business, has estimated Thailand’s logistics value at US$85.9 billion (about Bt3 trillion) last year, up 7.5 per cent from the 2015 level. 

The company also predicts that Thailand’s logistics sector will continue to post strong growth when the country is truly at the centre of the Asean logistics system.

However, the country must develop its infrastructure projects if it is to serve strong future demand, the research stressed.

Meanwhile, the government last year approved investment in 20 infrastructure projects worth Bt1.79 trillion that would commence in 2017, while bidding will be opened this year for a further Bt895.75 billion worth of projects slated for development next year onwards.

The major change of emphasis in the investment programme is the development of the rail system nationwide from 1-metre-gauge single-rail track to 1.435-metre double-rail track, which will considerably speed up rail transportation for both passenger and cargo traffic.

The master plan to develop the country’s infrastructure also links all major aspects of the transportation system – road, rail, marine and air – which will make it easier for businesses to manage their logistics costs, while they will also benefit from links between Thailand and other Asean countries. “The master plan to develop the country’s infrastructure system is part of efforts to support sustainable growth of the economy for the long term, and not only to support the country’s logistics system,” Transport Minister Arkhom Termpittayapaisith said.

“This also entails developing the logistics system for Asean, linking the transportation system with neighbouring countries. This will help boost the country’s trade value with our neighbours. 

“We are confident about the investment that is slated to kick off in 2017, after approving 20 projects worth Bt1.79 trillion in 2016,” he said.