The last few years have been challenging for Thailand. It faced a tough time during the massive floods in 2011, which forced manufacturing units to shut down production. Thereafter, the political crisis of 2013-14 proved costly for the economy. The country is estimated to have lost about $15 billion due to the conflict. The real gross domestic product (GDP) growth rate was recorded at a mere 0.1 per cent in 2011 and 1 per cent in 2014.

With the military government in power, many believe that the economy is expected to regain the lost momentum. Notably, the economy did well during the 1980s when a similar government was in power.

In a short span of time, the new power centre has come out with several plans to upgrade and modernise Thailand’s infrastructure. The 3.3 trillion baht infrastructure development plan approved by the government is bound to give the much-needed push to the country’s economic growth. New development strategies have been chalked out for the power and transportation sectors, including railways, ports, roads, highways, and urban mobility. Besides, funds have also been approved for the water management sector.

Current state of infrastructure sectors

Thailand boasts of relatively better infrastructure as compared to the other Southeast Asian countries, with Singapore and Malaysia being exceptions. However, there is huge scope for improvement, especially in the railway, port and airport sectors.

The following is a snapshot of Thailand’s existing infrastructure:

  • Thailand’s energy sector is dependent on gas and coal as primary fuels.
  • The power sector is dominated by three state enterprises – the Electricity Generating Authority of Thailand (EGAT), the Metropolitan Electricity Authority, and the Provincial Electricity Authority.
  • PTT Exploration and Production Public Company Limited plans to double LNG import to 5 million tonnes (mt) during 2015 as compared to the previous year.
  • At 2,501 kWh per person, Thailand has the third highest per capita energy consumption among the 10 members of the Association of Southeast Asian Nations (ASEAN).
  • About 7 per cent of the electricity is imported from neighbouring countries of Lao PDR, Myanmar and Cambodia.
  • Over 80 per cent of the country’s road network is paved.
  • According to estimates, the number of passengers using the rail system has declined from 88 million passengers per annum (mppa) to 45 mppa in the past 20-22 years.
  • Over 85 per cent of Thailand’s freight is moved by road, while only 2 per cent is transported by rail.
  • The quality of port infrastructure, which measures the perception of a country’s port facilities and measured by the World Bank, has been declining.
  • Airport asset utilisation is poor.
  • Mobile penetration is high at over 140 per cent.

Facilitating regulatory structure

Thailand has several economic policies and regulations supporting infrastructure development. In the 1990s, the Thai government invited the private sector to undertake projects on a public-private partnership (PPP) basis. This model of development was introduced in sectors such as ports, power and electricity, telecommunications, water and sanitation, and highways. Some of the successful PPP projects that stand out are the expansion of Laem Chabang port, the development of two toll roads/expressways in Bangkok, and the operation of main mass transit lines in Bangkok.

Recently, in 2013, the government revised the old act and came out with the Private Joint Investment in State Undertaking Act B.E. 2556 (2013). It overcame several constraints and paved the way for different types of PPP models like the design-build-finance-operate format.

However, there is huge scope for improvement in government processes. “Procedures to get the rights to investment in infrastructure are not too easy as they involve huge capital and affect many stakeholders and it should be considered deliberately,” says Narit Thersdsteerasukdi, executive director, Investment Strategy and Policy Bureau, Thailand Board of Investment.

Development plans and upcoming projects

Recently, in May 2015, the National Energy Policy Council approved Thailand’s new Power Development Plan (PDP 2015). It charts out the country’s energy and investment plans for the next 21 years – 2015-36. Under this, Thailand expects to double its installed energy capacity over the next 20 years to reach 70,410 MW by 2036.

The reliance on imported electricity from Lao PDR, Cambodia and Myanmar is expected to increase in the future. It is expected that 15-20 per cent will be contributed by imported hydropower by 2036 as compared to the current level of 7 per cent. This is on the back of Thailand’s Mineral Fuels Department projection that proven natural gas reserves in the Thai Gulf stood at 8.4 trillion cubic feet – equivalent to seven years of power production at the current rate.

Thailand’s military government has come out with an extensive Transportation Development Plan. It is covered under the New Transportation Development Strategies and envisages mobilisation of about 2 trillion baht by 2022. These are in the areas of urban mobility, railway expansion, upgradation of airports and seaports, and road expansion projects.

The augmentation of the railway network is another focus area of the Thai Junta. Currently, the country has a total railway route of about 4,000 km. The plan is to complete doubling of 2,500 km of rail lines. Most of the planned dual-track railway development in the country is set to involve 1 metre wide tracks to match existing rail infrastructure. In addition, the second railway system in the country, the 1.44 metre standard gauge dual-track with trains operating at speeds of 160-180 km per hour, is to be expanded by about 3,000 km. According to the government, the priority is to develop the rail network from Nongkhai-Khon Kaen-Nakhon Ratchasima-Saraburi to Bangkok and from Saraburi to Rayong. In addition, railway connectivity on the east-west corridor, which has two main lines, will be prioritised.

Other planned railway projects include the Bangkok to Padang Besar section in Malaysia, the Kunming-Vientiane-Bangkok rail line, the Kunming-Northern Vietnam-Lower Vietnam-Cambodia-Bangkok-Malaysia-Singapore line and the China border-Myanmar-western part of Thailand-Bangkok-Malaysia-Singapore stretch. The government is expected to engage with countries like Japan, Korea, Germany and France to fund these projects.

The government has an elaborate plan to upgrade the existing airport infrastructure as well. It has already approved the plan to modify and augment the capacities of Suvarnabhumi airport, Don Mueang airport and the navy’s Utapao airport. Currently, Suvarnabhumi airport handles about 50 million passengers per year. Once complete in 2017, the airport will handle about 80 million passengers per year. Going forward, the government plans to expand handling capacities at Don Mueang and Utapao airports to 45 mppa and 15 mppa respectively. Besides, the government is studying the feasibility of upgrading the Chiangmai International Airport so as to cater to the traffic originating in the northern part of the country.

With regard to seaports, Map Ta Phut in Rayong and Laem Chabang in Chonburi are the two key ports in Thailand. The government has announced the construction of a deep sea port in south Thailand – Pak Bala in Satun province. Further, Songkhla and Chumporn ports in south Thailand will be upgraded in the future. One of the most anticipated developments in this sector is the implementation of the Dawei project in Myanmar. It will be undertaken with support from the Myanmar, Japan and Thai governments. The MoU is likely to be signed soon after the agreement on the terms and conditions is finalised.

On the road expansion front, the government aims to provide good quality connectivity to six special economic zones by 2017. In addition, key projects like the development of the highway linking Pattaya and Map Ta Phut, and the Ayutthaya-Nakhon Ratchasima, and Nonthaburi-Kanchanaburi road stretches will be undertaken in the near future. Besides, other projects planned to be undertaken include the 96 km Bang Yai-Kanchanaburi stretch costing 55.6 billion baht, and the 196 km Bang Pa-in-Nakhon Ratchasima stretch costing 84.6 billion baht.

In the urban segment, the government plans to invest in buses, subways, skytrains, public boats, taxis and other service vehicles. The objective is to augment connectivity in Bangkok and reduce traffic congestion. The primary focus is to complete  ongoing and upcoming metro projects in the city by 2022. Of the total ongoing metro projects, one or two lines are likely to be completed in 2015. In addition, a light rail transit system is planned for the city of Phuket and work on the project is likely to begin in 2017.

The Thai government has come out with a 10-year water management plan aimed at solving all water-related problems across the country. Under this, two water management projects worth 244 billion baht will be taken up on an urgent basis over the next two years. In addition to improving existing infrastructure, water resources expansion is also expected on the eastern seaboard and in the north due to firms relocating from the flood-prone central region, giving rise to new industrial estates along the Myanmar and Cambodia borders.

The way forward

The country is expected to bounce back from the political unrest in the coming years. The real GDP growth is expected to touch 3.5-4.5 per cent in 2015. Adequate investment in the country’s infrastructure will help it achieve a higher growth trajectory.

With financial constraints, the government’s prioritisation will be the key to future development. The primary focus of the current government is to augment physical infrastructure and improve connectivity. As a result, several transport projects are expected to be rolled out in the near future.

The government will need to encourage greater private sector participation in infrastructure projects, especially in the power sector. This is for two reasons – to mobilise non-government resources/funding and to introduce competition in the sector and challenge the current dominant position of EGAT.

With a long list of upcoming projects, Thailand is expected to become one of the preferred investment destinations and centres of growth in Southeast Asia. However, political stability and certainty of policy and regulatory arrangements will play a key role in attracting private/foreign investors.