PPP LAW AND INFRASTRUCTURE PROJECTS
Did you know Thailand was once the world’s pioneer in bringing publicprivate partnership projects into existence?
In a span of five years from 1988 to early 1992, Thailand was lifting itself into the league of middle-income countries and took pride as one of the world’s pioneers in PPP infrastructure projects, commencing 10 megaprojects at the unprecedented fast pace of six months for every project.
The Thai golden age of PPP took place before the more well-known contemporary world leader in PPPs, Britain, launched its first public-private project in 1991.
Thailand reached its pinnacle of success with the granting of concessions for an expressway, elevated toll road, electric train, wireless telecommunication networks, fixed-line telecommunications and satellite, all financed and built by the private sector, with no burden to constrained government budgets.
Those projects are household names today being used daily by the Thai masses, having contributed to economic growth and people’s well-being through generations.
Along came the first PPP law in the second quarter of 1992: the Act on the Private Sector Participating in or Operating Public Services (the “First PPP Act”). The statute was not designed to add more PPPs to the pipeline; rather, it emphasised anti-corruption and increased complications and the number of government agencies involved in the process of approving a concession, creating barriers for anyone who would want to enrich themselves by committing an offence of bribery and corruption.
Certainly, one would expect the good governance efforts to be contained in specialised laws, such as an anti-corruption law, not a major-projects generational law in the name of a PPP statute. The law was overkill; the well-intentioned endeavour backfired.
From the enactment of the First PPP Act in 1992 to the year it expired in 2013, only three substantial PPP projects occurred over 22 years in the fields of water, expressways and electric trains. The law drowned the innovative PPP spirit and “dried the swamp” of PPP projects for decades.
As for corruption, an overwhelming majority of public projects in Thailand are funded by government budgets in typical state-owner, private-contractor relationships, so the First PPP Act’s measures were not an effective way to stamp out corruption. One door was shut, but the other remained wide open.
Government agencies and state enterprises blocked by the law found ways to avoid its reach, splitting the value of contracts into halves, amending or renewing existing contracts to circumvent the legal requirements, or simply ignoring the law and risking subsequent witch hunts. The scene was chaotic.
Electricity generation, often slated for PPP projects in other parts of the world, narrowly escaped the grip of the First PPP Act because the government’s legal arm in those days went to great lengths to assure the state that electricity generation was not a public service, and therefore private power projects stayed outside the reach of the Act. The generous legal interpretation was a boon to the industry; private power has continued to prosper and benefit shareholders and the public to this day.
New private projects for public services in other sectors disappeared. The Thai PPP industry went into a deep sleep until 2009, when there was a call by the private sector and some in the international community to scrap the law.
Up to that point, infrastructure projects weighed heavily on the national budget, with the public debt moving quickly past 40% of GDP, a worrying trend given that the recommended limit for developing countries hovers around 60%. Raising taxes to fund the infrastructure push would not be well-received by the public, but government leaders realised the importance of infrastructure in jumpstarting the economy.
In lieu of emptying the state coffers, why not allow interested parties in the private sector to pay for the megaprojects? Government and private seminars, as well as brainstorming, were commonplace, and hopes were high about the potential of PPPs to build these projects and save state budgets from ruin.
Both sectors were apparently oblivious to the legal hurdle. But the First PPP Act was still in place, and it was deemed a roadblock. Talks stalled, parties became discouraged, and another open call to scrap the law ensued.
In the eyes of local authorities, no matter how wise it would be to revoke an existing law, doing so is taboo. In Thailand, you don’t talk about repealing a law the way Americans go public about dismantling Obamacare. When a law becomes obsolete, you revise it, rather than repeal it. If there is a need to change an existing law, there must be a new law in its place.
The First PPP Act could not be scrapped; it was to be amended. From 2009 to 2013, spearheaded by the government and assisted financially by the Asian Development Bank, a new PPP law was drafted: the Act on the Private Sector Participating in Joint Investments in Public Services 2013.