Development of public infrastructure has been increasing in line with Thailand’s economic growth, and the private sector has played an important role in this regard. However, the existing law governing Public-Private Partnerships (PPP) is somewhat unclear and unsuitable for the current economic climate.
PPP refers to a government or state enterprise’s project in which the private sector participates or jointly invests. Generally, PPP involves infrastructure development in sectors such as power and electricity, telecommunications, water, sanitation, and transport. PPP in Thailand is governed by the Private Participation in State Undertaking Act B.E. 2535, which has been effective since April 1992. The purpose of this legislation is to prevent corruption, because in the past, granting approvals or concessions for private sector entities to participate in government projects was subject to the consideration of only one government agency. In relation to private participation, the government may grant the concession, approval, or rights to a private sector entity via different forms, depending on the appropriateness of each project. Examples of high-profile PPP projects in Thailand include the Electricity Generating Authority of Thailand, the BTS SkyTrain, and the Don Muang Tollway.
The Private Participation in State Undertaking Act
The Private Participation in State Undertaking Act applies to private participation in state projects which involve funds or assets valued at THB 1 billion or more. However, state undertakings with funds or assets worth less than THB 1 billion may have to comply with this law if the Council of Ministers (i.e., the Cabinet) deems appropriate.
The procedures for PPP projects under this statute are divided into three steps: (1) project initiation; (2) selection of a private sector entity; and (3) project monitoring. The approval process of a PPP project is summarized below:
As the law stipulates a long consideration process and the involvement of many government agencies, it may take up to two years to initiate a PPP project. In addition to these approval delays, there are also some practical problems with the application of the current law to PPP projects. The Private Participation in State Undertaking Act contains only 25 sections, while the number of PPP projects is dramatically increasing. The definitions of many terms in the Act are not provided or clearly specified, for example, “project,” “the project’s value or asset,” or “new and existing project.” The calculation of a project’s value is not defined, the consideration process is lengthy, the governing framework is unclear, and there is no provision for the amendment or renewal of an agreement between the public and private sector. In addition, there is no central agency to provide support to PPP projects.
Newly Proposed PPP Law
In order to repeal the existing legislation and help address the problems in connection with PPP projects, a new PPP law has been proposed, called the “Private Joint Investment in State Undertaking Act.” The bill was approved by the Cabinet on April 10, 2012, and sent to the House of Representatives for their approval on a fast-track consideration basis. If the draft is approved by the House of Representatives, it will be further sent to the Senate for final approval, and once granted, announced in the Government Gazette by the Prime Minister and will subsequently become effective. The draft new PPP law, as it currently stands, contains the following key provisions:
With more streamlined procedures and clearer guidelines, if and when the bill is passed by the relevant authorities, it will be a significant development for Thailand’s PPP projects, and will hopefully strengthen the country’s infrastructure sector.