Thailand boosts infrastructure spending-

The Thai Government’s concrete action of accelerating infrastructure spending through a more effective public-private partnership (PPP) scheme framework on projects, ranging from expressways and motorways to mass transit and high speed trains, with a combined investment of 2.4 trillion baht, has boosted investor confidence in the sector. The government recently launched the Transport Infrastructure Investment Action Plan 2017, detailing a list of 36 projects to be taken up on priority during the year. Of the various segments, motorways and expressways are likely to be the key beneficiaries of the government’s ambitious plans. Besides, these mega projects will open up vast opportunities for the contracting and construction materials industries, which are likely to be the first to reap benefits from this huge infrastructure spending.

Planning ahead

As part of the Transport Infrastructure Investment Action Plan 2017, five expressway/motorway projects have been identified – Nakorn Phatom-Cha Am; Hat Yat-TH-Malaysia border; Rama III-Dao Kanong-Outer Ring Expressway (West); Northern Route N2 and E-W Corridor; and Expressway Kratu-Patong – to be taken up on a priority basis during 2017.

To further bolster its push for infrastructure development, the government has also established the Intercity Motorway Development Master Plan 2017-36, which has a pipeline of 21 routes with a combined length of 6,612 km, requiring a total investment of close to $60 billion. Funds for these projects will be mobilised via private participation in the bidding process and an infrastructure fund called Thailand Future Fund (TFF), which is likely to come out with its initial public offering (IPO) in September 2017. The fund plans to raise around 50 billion baht in 2017. While the Ministry of Finance will invest around 1 billion baht, the Vayupak Fund will invest another 9 billion baht, and the remaining will come from the public through the IPO. The estimated yield of the fund is 5-6 per cent.

The cabinet has also given the green signal for the Expressway Authority of Thailand (EXAT) to raise funds through 45 per cent of the estimated toll-based income from two existing expressways – Chalong Rat Expressway and the Buraphavithi Expressway – for the next 30 years. The planned proceeds from these two assets will be used to finance the BHT 30.44 billion Rama III-Dao Kanong-Western Bangkok Outer Ring Expressway project and the BHT 14.38 billion expressway project for the northern (N2) route and East-West Corridor in the eastern region.

Further, with the Eastern Economic Corridor (EEC) likely to be completed by 2021, Thailand plans to develop its eastern provinces into a leading ASEAN economic zone, a hub for technological manufacturing and services with strong connectivity to its ASEAN neighbours by land, sea and air.

Going forward, the government expects around $43 billion for the realisation of the EEC over the next five years, which is likely to open up vast opportunities in the road sector. This funding is planned to come from a mix of state funds, PPPs, and foreign direct investment. The government has further identified four core areas – increased and improved infrastructure; business, industrial clusters, and innovation hubs; tourism; and the creation of new cities through smart urban planning for the development of the EEC. Such development initiatives are likely to boost road construction in the country in the coming few years.

Portfolio pipeline

The government has identified a pipeline of flagship projects to be presented before the cabinet for approval and implementation by early 2018.

The Rama III-Dao Khanong-Western Bangkok Outer Ring Expressway is a new project that has been proposed to reduce congestion on the Rama II Road. The expressway will be constructed on the median of Rama II Road, which will be elevated along the same road at an average elevation of 15.75 metres, while also being elevated over the first stage expressway. A new bridge parallel to the Rama IX Bridge over the Chao Phraya river will also be constructed as part of the project.

Another planned project is Phase III of the expressway’s northern section in Bangkok from the Kasetsart intersection to Nawamin Road (N2 section) that will stretch across a length of 9.2 km. The other two projects are the19.2 km route from the Bang Yai intersection in western Bangkok to the Kasetsart intersection (N1) and the 11.5 km route that will link the Nawamin, Seri Thai and Ramkhamhaeng roads (N3).

The Ministry of Transport is also likely to open bidding for the 120 km Nakhon Pathom-Cha-am motorway project worth BHT 80 billion this year. The project is part of the Department of Highways’ (DOH) 17 action plan, which includes the eastern and north-eastern sections, stretching from Bangkok to Rayong and Aranyaprathet in Sa Kaew, and from Laem Chabang port to Nakhon Ratchasima via Prachin Buri.

Other projects which are likely to attract foreign bidders are the Bangkok-Bang Pa-in Motorway (Motorway No. 9) and the Bangkok-Chon Buri Motorway (Motorway No. 7). Two other projects, the 96 km Bang Yai-Kanchanaburi (Motorway No. 8) and the 196 km Bang Pa-in-Nakhon Ratchasima (Motorway No. 6) route, are currently under construction. The operation and maintenance of these two routes are most likely to be auctioned under the PPP fast-track scheme.

Future outlook 

With the Intercity Motorway Development Master Plan 2017-36 finalised in November 2016 and included in the 12th National Economic and Social Development Plan, the government is stepping up efforts to accelerate big-ticket infrastructure investment to boost economic growth and trigger a crowding-in effect for private investment.

To achieve this, the government is currently amending the State Undertakings Act to shorten the time for the PPP process to less than nine months by applying the fast-track PPP scheme framework. The finance ministry is also planning to increase state investments to 48-49 per cent of GDP in the next four to five years, which will still be below the level of 60 per cent of the economic value set by the ministry for having a sustainable fiscal framework.

Going forward, large contractors having prior experience of handing public projects are expected to lead the way, with some of the work possibly subcontracted to smaller contractors, while businesses in the building materials industry, such as steel and cement, are also expected to benefit.