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Thailand’s transparency deficit: Haste makes waste on mega-projects

One of the country’s top bankers is stressing the need for faster action to transform Thailand into a hub for CLMV countries (Cambodia, Laos, Myanmar and Vietnam).

Kevin Tan, CEO of HSBC Thailand, was speaking during an interview on Vietnam’s increasing attractiveness to foreign investors. Vietnam’s gross domestic product grew a whopping 797 per cent between 1995 and 2014, from US$20.74 billion to $186.2 billion. Thailand’s GDP growth was sluggish in comparison, rising from $169.28 billion to $404.8 billion over the same period.

And with big names like Intel, Apple and Samsung now showing interest in Vietnam, it seems the times are against Thailand.

By Achara Deboonmee

Bangkok, Thailand, March 29, 2016

The Nation

One of the country’s top bankers is stressing the need for faster action to transform Thailand into a hub for CLMV countries (Cambodia, Laos, Myanmar and Vietnam).

Kevin Tan, CEO of HSBC Thailand, was speaking during an interview on Vietnam’s increasing attractiveness to foreign investors. Vietnam’s gross domestic product grew a whopping 797 per cent between 1995 and 2014, from US$20.74 billion to $186.2 billion. Thailand’s GDP growth was sluggish in comparison, rising from $169.28 billion to $404.8 billion over the same period.

And with big names like Intel, Apple and Samsung now showing interest in Vietnam, it seems the times are against Thailand.

Yet, as a banker, Tan still sees hope for us. He has identified opportunities where Thailand can focus more on CLMV and maintain economic supremacy over its regional neighbours. Just as Vietnam is pushing ahead in research and development, Thailand can do more.

“There are strong prospects. But Thailand will need to move faster – a lot faster than now.”

Catching up and staying ahead needs fast decisions. But to ensure sustainable results, the decisions must also be reached and executed with transparency. Does the Thai government’s Bt1.8-billion infrastructure mega-project pass that test? There are doubts.

Among the 20 projects listed in the plan is the 873-kilometre Bangkok-Nong Khai rail line. From the start, this project has been beset by a big question: why was China named as the single potential partner? Well, Thailand is constrained by an annual national budget deficit of about 10 per cent. Funding from China in the form of equity and loans would kill this constraint.

However, after months of negotiations with Beijing ended in failure, Thailand has decided to go it alone. On his return from the latest meeting in China, Prime Minister Prayut Chan-o-cha announced Thailand would be the sole investor, at least for the first 250km linking Bangkok and Nakhon Ratchasima. He declared that the government would borrow to finance the construction.

Yet, when he added that a Chinese company would be hired to construct the section under a government-to-government deal, it prompted another question. If we Thais are to shoulder this debt – estimated at between Bt170 billion and Bt190 billion – why isn’t this project being put to an auction so we get the lowest price among international contractors?

The prime minister said China had no problem with the Thai side’s decision. That is hardly surprising. It has been handed the contract without having to spend a dime. Are we indebted to China in some way that means we need to borrow and then hand it the proceeds?

The list of 20 mega-projects also includes another rail project, an east-west line running from Kanchanaburi to Laem Chabang. The idea is to link Laem Chabang with the deep-sea port at Dawei in Myanmar, part of the southern economic corridor. As in the first project, a single potential partner has been named – this time Japan. But unlike the first project, progress in negotiations has been slow. Hopes are high that Japan will keep its word and continue to pour in investment, especially given its ambition for a bigger role in the Dawei Special Economic Zone.

Aside from the process to choose partners, the government seems to be in the hot seat over transparency in the projects’ implementation. Civil society organisations have responded to the government’s decision to relax the environmental and health-impact assessment rules for the 20 mega-projects with a barrage of criticism. By invoking absolute power through Article 44, preparations can go ahead without projects having to first pass assessments.

One-party rule has forged similar arrangements in neighbouring countries.

In Myanmar, civil society watchdogs report that three whole villages in Kachin State were relocated to make way for the 6,000-megawatt Myitsone hydropower project. Despite a 2011 order suspending the project, more than 300 households have not been allowed to return. Meanwhile locals in Laos have cried foul over the damage to livelihoods caused by the construction of hydropower dams, which the government insists is a quick way to earn income from electricity generated and sold to other countries. Many Thais remain uncomfortable at the thought that poor villagers in neighbouring countries have had to suffer so that we won’t experience power blackouts here.

Such lack of transparency in decision-making and implementation can also lead to long-term problems that increase the burden on future governments.

Kachin state furnishes us with another important lesson here. Locals have long complained about hardships related to jade mining introduced and controlled by the junta. Residents say few locals reap much benefit from the mining companies’ activities, yet it is they who suffer most in frequent accidents such as mudslides. Now, the first elected government in decades is seeking an immediate suspension to jade mining until a proper investigation of the activities is completed.

This is a tough task for Aung San Suu Kyi‘s ruling National League for Democracy and few observers are confidently predicting success. In Thailand, however, it would be even tougher for an elected government to handle fallout and complaints stemming from junta-initiated projects. History tells us that this is not something Thai governments are good at.

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