Borrowing to fund state projects

Borrowing will be the largest funding source for the government’s big-ticket infrastructure projects, providing 60% of the total value of 1.7 trillion baht, says Finance Minister Apisak Tantivorawong.

Mr Apisak said for the rest of the funding, 20% will come from the public-private partnership (PPP) scheme, 10% from the government’s budget expenditure, 2% from the Thailand Future Fund (TFF) initial public offering (IPO) and the remainder from state enterprise income.

The government intends to invest in 20 big-ticket infrastructure projects worth a combined 1.7 trillion baht.

The state has ample space for borrowing, given that the country’s public debt at 43% of GDP is still far below the Finance Ministry’s 60% threshold, Mr Apisak told that audience at CLSA Forum 2017.

He said the Finance Ministry has already submitted an IPO filing for the TFF to the Securities and Exchange Commission (SEC) and the 100-billion-baht-fund is expected to go public in the next few months.

Three expressway projects will be used as underlying assets for the TFF, Mr Apisak said.

The three projects comprise two brownfields — the N7 motorway (Pattaya-Map Ta Phut) and the N9 motorway stretching from Bang Na to Ayutthaya’s Bang Pa-in district — and a greenfield, an expressway linking Rama III Road to Dao Khanong.

The TFF bundle will include a portion of the brownfield projects that generates 40-50% of each project’s income. The funds generated from TFF unit sales will be used to finance the construction of the greenfield project, Mr Apisak said, adding that an additional 10 projects will be brought forward to seek approval for inclusion under the PPP programme.

The cabinet in December approved the launch of the TFF, an infrastructure fund to raise cash from the public for the construction of state projects. The fund will also afford the government more room to invest in necessary infrastructure projects with lower investment returns.

Mr Apisak said recently that the TFF would generate a return rate of 7-8%.

The government will continue to focus on state spending through large-scale infrastructure development and attracting private investment in the Eastern Economic Corridor (EEC) to underpin economic growth, he said.

The cabinet earlier this month approved a Finance Ministry proposal to offer a personal income tax option for foreigner workers at companies that invest in 10 targeted industries in the EEC.

The measure aims to develop the 10 targeted industries to drive economic growth.