Thai Prime Minister Looks to Infrastructure Spending to Drive Economic
Growth
http://enews.voanews.com/t?ctl=BC67F4:2F72C9DAnalysts concerned about corruption, government's ability to
finance projects
Prime Minister Thaksin Shinawatra (File photo)The Thai government
hopes to drive economic growth over the next four years with spending
on infrastructure projects. But analysts are worried about corruption,
and the government's ability to finance the projects.
Thailand's economy has been growing at around six percent over the
past year, and Prime Minister Thaksin Shinawatra wants to keep it that
way as he embarks on an unprecedented second four-year term.
Mr. Thaksin, buoyed by a landslide election victory on February 6, is
banking on massive infrastructure spending to propel the economy.
During his first term, he concentrated on increasing domestic
consumption, by providing subsidies to the rural sector.
The prime minister, who has discussed his vision with cabinet members
and advisers since winning re-election, plans to initiate major
transportation and energy projects worth at least $40 billion.
Aside from fueling growth, Mr. Thaksin hopes that new transportation
infrastructure, including a $10 billion railway upgrade, will speed
the movement of goods within the country. It could also improve
Bangkok's notoriously bad traffic, which in turn could save billions
of dollars a year in gasoline imports.
Supuvud Saicheua, a senior analyst with Phatra Securities, says the
government hopes private domestic and foreign investors will be a key
source of financing for the projects.
"They plan to make sure that the financing will be largely private so
that they can keep their promise that public debt would be 50 percent
of gross domestic product or less," he said.
Analysts believe financing may also come from the privatization of
state enterprises and from domestic bond issues, with an option to
borrow from international capital markets.
Thailand's financial standing has rebounded from the Asian economic
crisis of the late 1990s, when it had to borrow $17 billion from the
International Monetary Fund.
Mr. Thaksin has overseen repayment of that loan, and the country's
foreign exchange reserves currently stand at close to $49 billion.
Jun Trinidas, an economist with Citigroup who monitors Thailand's
economy, says Mr. Thaksin's hand has been strengthened by the crushing
election victory of his Thai Rak Thai party. The party won 376 of the
500 parliamentary seats.
"We're taking the view that after the elections, it [the result]
certainly will provide, politically, a strong backing for the projects
that he has envisioned, starting with the transport and energy
projects," he said.
Mr. Trinidas also says Mr. Thaksin's plans could provide a cushion for
an expected economic slow down.
Some local analysts are also concerned about the estimated expenditure
of $40 billion - or up to two trillion Thai baht - on the
infrastructure projects. They fear the huge outlay will overheat the
economy and lead to inflation and economic instability.
Bob Broadfoot, managing director of the Political and Economic Risk
Consultancy in Hong Kong, sees another risk: the potential for
corruption despite official assurances that the infrastructure program
will be marked by transparency.
"Thailand's record of implementing infrastructure projects is not
particularly good - since many of them, like the airport, the toll
roads, in the past have been involved with corruption. Is this going
to be an excuse for feathering the nest of a lot of bureaucrats?" he
asks.
The Germany-based anti-corruption watchdog, Transparency
International, last year rated Thailand 64th out of 146 countries
listed in its annual transparency table.
Mr. Thaksin and his policy advisors appear to be adopting a proactive
strategy on the economy, instead of waiting for a downturn before
making a move. While many analysts favor the effort, they the real
test, they say, will be how quickly and transparently the government
is able to put its program into effect.