Infrastructure Investment Badly Needed for Thailand

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Thailand – situated at the prime location among the CLMV (Cambodia, Laos, Myanmar, Vietnam) – stands to lose economically if political strife continues to delay infrastructure investment.

Regional competition is getting fiercer. Thailand ranks 46th on the 2012-2013 World Economic Forum’s Global Competitive Index on Infrastructure, while its ambitious neighbour in the south, Malaysia, came in at 32th. Experts and businesses agree that if no spending is approved by the government within coming years, the country could lag behind while its neighbours develops.

According to the National Economic and Social Development Board (NESDB), Logistics costs account for 19% of Thailand’s Gross National Product (Estimates generally vary from 15% to 20% of GDP). The US, on the other hand, spends only 8% of GDP on logistics in 2009. In developed countries, logistics costs are generally less than 10% of GDP. According to the Ministry of Transportation, the freight structure of Thailand comprises mainly of road transportation, accounting for 84% of freight movement. Rail, on the other hand, is generally overlooked as an important mode of transportation, as such only 2% or less of freight traffic is on rail.

This is a stark contrast from Singapore, which has the lowest share of percentage of logistics cost to GDP in ASEAN, at 8%

With the political deadlock in Thailand guaranteeing further investment in infrastructure a postponement, it will be harder for the country to achieve and realise the objective of “Reduce logistics costs to less than 15 percent of GDP, and increase the share of rail transport to 5 percent.” as envisioned by the makers of the 11th National Economic and Social Development Plan.

The Pheu Thai Party, being a pragmatist at heart, gathered together transportation infrastructure development projects together under a single umbrella, the 2 Trillion Baht infrastructure development Scheme. The party gave the project a name – The Build Thai Future 2020 project. At this project’s heart is the “2 Trillion Baht” Bill, which would have authorised the Ministry of Finance to lend money specifically for this project. The constitutional court ruled the bill unconstitutional, forcing the planners to turn to other, less reliable, sources of funding.

The other source of funding now comes from the government annual budget. But as of now, there is no functioning parliament to pass the budget for the 2015 fiscal year, which begins on October 2014. The projects that were under the 2 Trillion Baht infrastructure development Scheme, especially the dual-track railway project, will have to be delayed. Here is where politics is pulling the country behind the development plan laid out by the NESDB.

It is not hard to see how the political struggle is felt by the ordinary men. Metro and Skytrain construction in Bangkok will be interrupted, as has happened from time to time during the period after the dissolution of the parliament, if no parliament exists to approve next year’s budget. As more cars are being churned out in the millions from factories, and with the Board of Investment’s approval of the phase 2 eco-car scheme, there will be more cars on the street if there is no alternative mode of transportation available. 

The planner’s ultimate goal for the shift of freight from road to rail is to decrease the percentage of logistics cost to GDP by 3%. At night, roads leading to and out of major cities are crammed by freight trucks, these heavy trucks damages the road surface and decrease the efficiencies of roads, straining the repair funding. Road traffic in Thailand, essentially, is among the deadliest in the world. Hence, it is of great importance for the shares of freight movement be transferred to rail and for urban population to shift from driving cars to work to taking more efficient public transport systems. In 2011, logistics costs for Indonesia constituted 25.03% of GDP. But as the Government of Indonesia has announced, an ambitious infrastructure development plant worth 14 trillion baht will reshape the way Indonesians, and their freight, gets around the country. Competition in the region can only be fiercer, if Thailand cannot unlock the political deadlock, its private sector stands to lose from the lack of development while its neighbours move ahead.

What is needed for Thailand to move forward is a parliament. Then, the annual budget can be debated and agreed upon. If this does not happen soon, it will be harder for the Thai nation to compete with others.

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