Thailand is set for a massive boost in infrastructure spending, under an economic stimulus package due to be put before parliament next week.
Lawmakers are preparing to vote on a plan that provides for investment of up to Bt1.5 billion in infrastructure projects to be financed jointly by the public and private sector, according to Thai finance minister Korn Chatikavanij.
“We’re aiming to achieve two objectives: the short-term objective of stimulating the economy and creating jobs, and the second objective of really making sure that Thailand emerges from this crisis in a much stronger position in terms of enhanced competitiveness,” Korn told Emerging Markets in Bali.
The total investment – worth some 18% of Thailand’s $295 billion GDP – will be spread over the next three fiscal years and target areas of weakness in existing infrastructure, especially in transport, energy and agriculture. It also includes irrigation schemes designed to improve farmers’ livelihoods.
“There’s been no significant investment in the rail network for close to 60 years, so we will be investing in upgrading the rail network, including mass transit in Bangkok,” said Korn.
“We will be moving towards enhancing our alternative energy capability given our natural ability to produce foods that can be transformed into energy, without impacting on the nation’s food supplies.”
Korn aims to provide details of the projects to potential private sector investors as soon as possible.
“We are thinking of creating infrastructure funds, concomitant with the existing infrastructure funds that exist in the financial marketplace”, he said. This would enable officials to “see whether we could help reduce the burden on the government and enhance the efficiency of these projects through private sector participation”. The scheme comes as Thailand’s economy is suffering from falling export revenues. Output fell 4.3% in the fourth quarter of 2008 as exports plummeted and is likely to have fallen by another 6% in the first quarter of 2009, according to Korn.
It is Thailand’s second fiscal stimulus this year, following a much smaller package worth just over 1% of GDP, that was passed at the end of January. That stimulus focused on generating domestic demand, with around half of the funds going to low-income workers and older members of the population with no regular pension. “This expenditure was obviously to mitigate the challenges faced by the low-income members of the population, but also designed to stimulate domestic consumption, and to do so pretty much immediately,” said Korn. He told investors in Bali that there are already signs that the package would help output pick up in the second quarter.