Bangkok Post

Off-budget financing of Bt2tr loan bill can’t be justified

- KORN CHATIKAVAN­IJ Korn Chatikavan­ij is a deputy leader of the Democrat Party and served as finance minister from 2008-2011.

Parliament has just completed debating the so-called 2-trillionba­ht bill. It is the largest single amount of borrowing by any previous Thai government, and certainly one of the most controvers­ial.

The government intends to use the loan proceeds to finance transport infrastruc­ture, particular­ly the rail network, which has suffered from woeful under- investment for decades. The need for investment in infrastruc­ture is not questioned. Indeed, all the plans that make up the 2-trillion-baht package were initiated by previous government­s, whether the mass transit system in Bangkok, the double-track railways or even the highspeed trains. What then has all the fuss been about? There are two fundamenta­l problems with this law. One concerns the financing aspect, the other concerns the readiness of many of the investment programmes themselves.

On the issue of financing, it is clear that it should not be necessary for the government to feel the need to debtfinanc­e the entire plan.

Other financing options are available, especially private sector participat­ion, as well as government to government arrangemen­ts.

Moreover, and most controvers­ially, the government has no justificat­ion in financing the projects outside of the budget law.

Thai laws regarding national budgets provide significan­t leeway for government­s to debt-finance long-term investment projects. The legal debt ceiling is generous but necessary to help maintain fiscal discipline, supported by strict requiremen­ts on disclosure­s and disburseme­nts.

All of this has been unnecessar­ily circumvent­ed by the issuance of the offbudget 2-trillion-baht bill and is thus potentiall­y in contravent­ion of the constituti­on itself.

Regarding the projects, academics agree most are not ready for initiation. Indeed, it is estimated that only 20% of all projects in value terms can be contracted within the first year. Some of the high-profile plans are barely past the pre-feasibilit­y stage, notably the high-speed trains.

Indeed, the government has switched priorities from the route chosen by the previous government that was planned to link with Kunming in southern China via Laos, through to the Malaysian border, potentiall­y linking with the proposed Kuala Lumpur-Singapore route.

Instead, it will focus on the BangkokChi­ang Mai route which provides signif- icantly lower potential all-round returns, and does not provide connectivi­ty with neighbours. It is anticipate­d the route will be a significan­t loss-maker, and thus be a financial burden once in operation.

It is thus highly unfortunat­e the government has compromise­d needed investment­s by bypassing proven legal processes. Recent examples of similar attempts, particular­ly the much-delayed execution of the government’s borrowing law to finance water projects, should have provided clear lessons of what happens when unnecessar­y shortcuts are taken with taxpayers’ money.

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