Thai government allots THB2.7t for its infrastructure plans

Implementation is set in the next 5-7 years.

According to Maybank Kim Eng, the Thai Government has laid out THB2.7trn infrastructure plans for implementation in the next 5-7 years. This is part of the Mega Project List that has been discussed before.

Here’s more from Maybank Kim Eng:

Adding to the list is the THB350bn Water Management Project that is due for immediate implementation. Of the Mega Project List, projects under feasibility study amounts to THB1,520bn and we expect that this could be the segment that could see faster execution especially those that are earmarked under the Public-Private Sector Participation (PPP).

Netting out the import content on these projects and including the Water Management Project we estimate THB1,009bn value of projects that could be implemented in the medium term, a significant amount to drive the Thai construction sector. The Ministry of Finance has disclosed a target of at least 17% cumulative disbursement under the Water Management Project, and this implies spending of THB56bn in 2013.

There are three factors that could drive implementation to a faster rate
than before, in our view.

First, political stability is a key to the implementation of the construction projects. Since the Sep/06 coup d’etat the leadership has been through revolving doors, and since this was in the time of heightened conflict even non political appointees officers in the government were fearful to implement in any project for fear of repercussion, in our observation.

Second, slow economic growth due to slow weak export contribution (66% of GDP) raises the need to find another growth driver. In the last round of change in its economic forecast the NESBD has projected an 8% growth in private investment and 8.5% growth in public investment. Scrolling back to Thailand’s economic history starting 1980, these growth numbers straddle the 1980-1997 years whereby the growth in cement demand ranged from 11-17%.

Lastly, the 2011 flood was devastating in locations that have high concentration of foreign investment. Given the spike in insurance premiums, the Thai government is obligated to ensure that the risk of recurrence is low.

Thus, while the flooding did not recur this year, it remains an aspect that the Thai government must safeguard against and the sooner the better. This is why we think that the THB350bn water management program remains very much in the agenda and could see faster rate of implementation.