A proud nation does not place itself on the chopping block

opinion November 06, 2014 01:00

By Pornpimol Kanchanalak

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The consensus is that Thailand desperately needs an infrastructure upgrade, and for at least three major reasons. One, our basic transport network, especially the railways, is in a sorry state and rail is the most economical means of transport. Two, the h

On mainland Southeast Asia (the Mekong Subregion), Thailand’s geographical location has significant strategic implications. Most of the planned high-value transport and economic corridors of the GMS run through Thailand.

It is estimated that the funding needed for Thailand’s infrastructure investment plans between 2015 and 2022 is Bt2.40 trillion. These projects include mass transit and a rail network, road and water transport, motorways, customs facilities, a deep-water seaport and air transport. The finance for these projects is expected to come from a combination of the country’s annual budget (20 per cent), government borrowing and state enterprise revenue (10 per cent) and/or borrowing/on lending (45 per cent), public/private sector partnership (20 per cent), and infrastructure funds (5 per cent). 

The colossal funding requirement in conjunction with the country’s indisputable need to undertake these infrastructure projects has put Thailand in a conundrum – damned if we do and damned if we don’t. The central strategic location of Thailand ironically may compound our risk exposure if we do not plan our act carefully and prudently.

The West, led by the US, has turned a cold shoulder to Thailand after the bloodless May 22 military coup that ended months of street protests and a political and economic impasse. The official decision to spurn us is a condescending gesture and just another example of the West’s hypocrisy and double standards. One need not strain one’s neck to see countries where democratic principles are completely trampled and human rights violated egregiously and in open view, and yet they are embraced willingly and unreservedly by the US and the rest of the Western hemisphere.

Feeling slighted and anxious, Thailand has turned to another major power for support and leverage. Naturally, the question of infrastructure investments that weighs heavily on our mind comes into play.

George Bernard Shaw once said, “Life isn’t about finding oneself; life is about creating yourself.” To elaborate: Life is all about creating viable options for yourself. And those options can be meaningful risk-mitigating factors.

It is thus understandable that Thailand wants to look East when the West shuns us. But we also have to ponder the price we have to pay.

As in life, Thailand as a country should realise that there is no such thing as a free lunch.

Instead of putting all of our eggs in one ally’s basket when it comes to infrastructure project financing, we should position ourselves in such a way that we can pick and choose the very best for us, not for others. This is our country, not anybody else’s.

There are several ways and means to finance infrastructure projects of the size and magnitude that Thailand is contemplating. The ones to be preferred are those that do not bring onerous burdens of sovereign and public debts, and especially not ones that will effectively place our nation’s autonomy under the claws of foreign power.

Infrastructure funds are one option we should seriously consider.

There are several types of infrastructure funds. There are those that invest in the equity of companies carrying out infrastructure projects, and those that finance the projects directly. The latter are the type that should be a useful financing vehicle for our infrastructure endeavour.

If Thailand were to create its own national infrastructure funds for each infrastructure sector, those funds can invite other sovereign funds, private equity funds, private sector companies, etc, to participate as unit holders/investors. When it comes to borrowing, these vehicles, not the government, will become debtors. 

One of the fiduciary duties of these vehicles to the funds’ investors would be the assurance of transparency and a level playing field.  These two features will in turn bring wider participation when it comes to bid tenders. The result will be that each project has proper financial planning that identifies appropriate and optimum funding facilities for each stage of development, payback schemes and timetables.

Meanwhile the government has a critical role to play in garnering credibility and creating confidence among investors. There are two essential measures to achieve this. One, the government must learn to strictly abide by the rule governing the project revenue stream that will serve as the underlying assets or collateral for project financing. And two, fairness when it comes to arbitration. There would be no harm in adopting internationally accepted conflict resolution mechanisms or joining an international arbitration body.  If we want to be regarded as an adult, we must behave like an adult.

As for barter trade – for example, swapping rice, rubber, longan, etc, for rail and rolling stock – we should also realise that it has been attempted before countless times and has not really worked. The value of these products is minuscule compared to the cost of infrastructure investments. It may help in the short run by reducing our enormous stockpile of rice and oversupply of rubber in the market. But over time, it never works – and for several reasons. It may even work against us and become a noose that tightens fatally around our necks. It is about time we realised the imperative need to start managing this perpetual problem of unbalanced supply and demand in a systematic and sustainable manner.

American humorist Will Rogers (1879-1935) once jokingly said he would rather be the man who bought the Brooklyn Bridge than the one who sold it. For Thailand, it’s our duty to let everybody know that we are the masters of our own destiny, with warranted pride, dignity and a healthy self-respect. And that Thailand is not for sale.