Government claims 2-trillion baht investment essential
Despite claims from opposition politicians and others that its planned 2-trillion baht infrastructure investment package is ripe for corruption, the government suggests it will in fact be the main driver of the Thai economy until 2020.
The Finance Minister Kittiratt Na-Ranong suggested the seven-year plan will in fact add at least 1.5 trillion baht to gross domestic product (GDP). He also stressed the loan investment accounts for just one percent of the expected 200 trillion baht of accumulated GDP for the seven-year period.
Nonetheless, the opposition has made much of the fact that the draft bill which authorises the government to borrow the money has left the debt to be paid by future generations, with claims it will take up to half a century to pay off.
As the statisticians trade percentage points and numbers with far too many zeroes back and forth like financial tennis players, other number crunchers not directly associated with the ‘warring’ parties note that Thailand is currently ranked 49th in the world in terms of its infrastructure. By comparison, Malaysia sits at number 29.
Casting the net a little wider, Thailand also lags well behind Malaysia in terms of roads (Thailand 36th, Malaysia 27th) and railways (Thailand 57th, Malaysia 19th).
Those numbers would suggest the government is certainly right to try and address the imbalance, but whether such a massive loan is the way to go is, as we see, very debatable.
According to the Public Debt Management Office of the Finance Ministry, Thailand’s public debt stood at 44.2 percent of GDP at the end of March 2013. The government insists that even when the entire 2 trillion baht is drawn down Thailand’s public debt will not exceed 50 percent of GDP because the investment will in fact boost GDP.
The Finance Minister said the infrastructure plan would be the main driver of economic growth now that weak demand in Europe and the United States had dampened the general export outlook. Given that the overall world economic slowdown shows little sign of being over any time soon, the infrastructure spending plan is meant to keep Thailand competitive.
Approximately 80 percent of the loan, if it is indeed drawn down, will be spent on high-speed trains and other train-related public transport improvements.
Naturally, government ministers have stressed that the longer there are delays in pushing through the loan bill will probably lead to increased costs down the track and may mean the overall loan amount will blow out beyond the current 2 trillion baht planned.