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April 7, 2015

Positively Private: Thailand’s Infrastructure Strategic Plan for 2015–2019

Southeast Asia Infrastructure

When the Thai government enacted the Private Investments in State Undertakings Act B.E. 2556 (2013) (PISUA)—a new law regulating public-private partnerships (PPPs) that was designed to streamline and clarify the PPP process and thereby boost private investment, especially in the infrastructure sector—measures were introduced to increase the effectiveness and transparency of the PPP process, something previously unseen in PISUA’s predecessor, the Private Participation in State Undertakings Act B.E. 2535 (1992) (PPSUA).

The provisions of the old PPSUA, which were in effect from 1992 until 2013, were written in a way that allowed for a variety of legal interpretations, thus providing for uncertainty as to which projects were captured within the scope of the law. Although regulations had been issued under the old law which addressed the selection process, many investors still perceived difficulties, which ultimately discouraged them from pursuing participation in PPPs in Thailand. Additionally, the old PPSUA lacked any provisions that would specifically guide the development of PPPs in Thailand, as it did not determine which sectors PPPs would benefit the public and should therefore be promoted.

While the new PISUA—which applies to all projects (except petroleum and mining concessions) with a value of THB one billion (approximately USD 30.5 million) or more—made only incremental changes relative to the older PPSUA in terms of approval procedures, it did set out a much stronger framework for comprehensive planning and quality of public-private ventures. This was evident in the stipulation of regulations on the use of qualified experts and consultants for preparing an independent project appraisal report, as well as sections calling for a PPP Policy Committee, a PPP Fund, and, as a main driver and guideline of PPP policy, a PPP Strategic Plan.

The new law has also established a PPP Development Fund, which is to be used for developing the PPP Strategic Plan, hiring consultants, and helping agencies develop PPPs that are consistent with the plan. Among other matters, the Strategic Plan identifies sectors and specific projects in which PPPs would be of benefit to Thailand, the priority of each, a target for private investment, and a timeframe for implementation. Five-year Strategic Plans are, from now on, to be prepared on a roll-on basis to provide for continual guidance.

The PPP Committee, which is chaired by the Prime Minister and vice-chaired by the Minister of Finance, is now required to work with the State Enterprise Policy Office (SEPO) to prepare a five-year Strategic Plan for PPPs for the Cabinet’s consideration. The SEPO, acting as the secretariat, has the duty to prepare a framework setting out the draft Strategic Plan, goals, target audience, and other details for approval of the PPP Committee. To ensure the plan reflects public needs, the PPP Policy Committee must also hold hearings to obtain input from state agencies and members of the public.

Once the hearings have been held and the Committee has then approved the draft Strategic Plan under consideration of the input from these hearings, it will submit the plan to the Cabinet for approval and promulgation.

In addition, once the Strategic Plan has been published in the Government Gazette, it is binding on state agencies regarding the preparation and approval of projects that fall under the Strategic Plan. Even the Cabinet and the PPP Committee are required to principally adhere to the Strategic Plan when they are making their decision regarding the approval of a project. However, if the Cabinet finds it expedient to revise a Strategic Plan that is already in effect, it does have the right to approve revisions suggested by the PPP Committee, and in such a case, the newly revised Strategic Plan would again have to be published in the Government Gazette to replace the previous one.

The current draft of the Strategic Plan for 2015-2019, which marks the first time such a Strategic Plan for PPPs in Thailand has ever been submitted, completed the public hearing stage in March 2015 and is currently awaiting approval by the Committee to be submitted to the Cabinet. In this draft, it has been stipulated that projects have to be conducted as PPPs in the following six fields: urban mass rail systems, urban toll roads, commercial ports, high-speed rail systems, telecommunication networks, and high-speed Internet systems.

For 15 other fields, the current draft Strategic Plan recommends that the government encourage the participation of private investors, but in these fields, private participation is not mandatory and the relevant state agencies have the right to decide whether they want to use a PPP or whether they would prefer to fund the project entirely by the use of the state budget or the state agency’s budget. In this group are fields such as inter-urban toll roads, solid waste disposal systems, airport management, terminals for transportation, packing, sorting, and distribution of goods, as well as administration, management, and maintenance of common ticketing systems. (For the full list of these 15 fields under group 2, please see “Table 1: PPP Implementation Timeframe” in the attached PDF.)

The current draft Strategic Plan also sets out the timeframes of implementation for most of the PPP fields (for details, please see “Table 1: PPP Implementation Timeframe” in the attached PDF), as well as the estimated investment amount for each field (for details, please see “Table 2: Estimated investment amounts under the Strategic Plan for 2015-2019” in the attached PDF). It now remains to be seen whether this Strategic Plan, once enacted, will indeed become a driving force for increased private investment in Thailand’s state undertakings.

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