Thailand: Investing Boldly in Infrastructure

Source: Thailand Board of Investment's Investment Review Publication

The BOI Investment Review is a monthly publication of the Thailand Board of Investment. and Runckel & Associates believe that much of this information needs wider dissemination.  We are therefore working with the BOI to help promote these useful articles and index them into categories that are easy to find.

By Renee Santo

Mr. Nikorn Chamnong, Deputy Prime Minister of Transport of Thailand, signs the Asian Highway Agreement in Shanghai, China, as part of UNESCAP’s 60th Commission Session. With him are Mr. Kim Hak-Su (left), UNESCAP Executive Secretary and Mr. Palitha Kohona, Chief of the UN Treaty Section. (April 26, 2004) Linkages among ASEAN, the Far East and Europe to have broad economic impact he signing of the Asian Highway Agreement on April 26, 2004 marked an important milestone in the development of land-based trade and transportation linking T32 countries in Europe and Asia. Gathering in Shanghai, twenty-four signatories officially pledged to continue their efforts to finish the last 17% of upgrades to complete the 140,000-kilometer highway. The agreement outlined final routes, highway standards, signage and border crossing facilities.

From Japan in the East, Turkey and Finland in the West and Indonesia in the South, the Asian Highway and its sister project, the 80,000-kilometer Trans-Asian Railway, are capturing the imaginations of governments, the public and the business community. Investors can look forward to a day when shipments from Bangkok to Ireland will be taxed once and delivered faster and cheaper than by marine transport.

Under the agreement signed this month, Asian Highway 1 (AH1), for example, will start in Tokyo and pass through North and South Korea, China, Vietnam, Cambodia, Thailand, Myanmar, India, Pakistan, Afghanistan, Iran and Armenia, ending in Istanbul. Over the next 10 years UNESCAP expects the distance of linked roads, bridges and highways in the Asian Highway to further increase 50%. With the Asian Highway Agreement completed, substantial negotiations for the Trans-Asian Railway are expected to take place over the next 2 years with a draft agreement expected in November and a possible signing date in 2006.

All these measures taken together give added meaning to a comment by Barry Cable, Director of Transport & Tourism at UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific): “One of the exciting things now is that many overseas investors can see the strength of Thailand’s economy... [which] ... gives an important reason to invest in Thailand.” Thailand is definitely on the move economically.

Recently named the fourth most desirable country for Foreign Direct Investment, and priming up for future economic expansion, in December 2003 Thailand’s government moved forward on a 5-year, US$38.5 billion budget for new infrastructure projects, including new roads and a satellite city located in Nakorn Nayok to be serviced by a Japanese-style bullet train. The huge infrastructure spending package will go hand-in-hand to support other on-going infrastructure projects, such as the Suvarnabhumi International Airport expected to open in December 2005, expansion and upgrading of domestic highways, improved mass transit, and integration measures to connect with the Asian Highway and Trans-Asian Railway.

Much funding for the Asian Highway will be provided by the more economically advantaged nations participating as well as the World Bank, the Asian Development Bank and the Japan Bank for International Cooperation. It is expected that the Asian Highway and Trans-Asian Railway will bring about a boom in economic activity and trade as experienced in Europe when a similar project was completed in those nations after World War II.

Greater Regional Cooperation This greater regional cooperation is seen as a major step forward for developing countries to keep apace with the expansion of developed countries’ trade integration measures, as seen in the North American Free Trade Agreement (NAFTA) and the inclusion of 10 new member countries into the European Union on May 1. “Trade is increasing quite rapidly, about 40% last year, and Asian countries realize they need this infrastructure to service that growth,” said UNESCAP Poverty and Development Division chief Raj Kumar. Admittedly, the largest potential bottleneck is the efficiency and transparency of border crossings. UNESCAP is working directly with governments and the Asian Development Bank to improve border crossing procedures such as customs, visas, health checks, and other regulatory obligations. UNESCAP expects important negotiations on intergovernmental agreements on the transport of goods across borders to be completed by 2005.

Thailand taking a lead in promoting regional transport linkages “[It is] particularly exciting working with Bangkok to identify highway linkages to Laos, Myanmar, Malaysia, Cambodia and to the wider sphere connecting India, China and Vietnam. This holds great promise for Thailand,” stated Barry Cable, Chief of UNESCAP’s Transport and Tourism Division in an interview with the Investment Review. “Overseas investors can recognize the strength of Thailand’s economy and the expansion of the domestic market as important reasons to invest in Thailand, both in terms of servicing the Thai market and in using transportation linkages to wider markets, as well as using Thai production to supply GMS and ASEAN countries,” Cable noted.

“Thailand has been a center of ASEAN and GMS development, playing a central role in efficient transportation among all continental linkages especially landlocked Laos. In the near future there will be increased access to China through Yunnan Province, and much of it channeled through Thailand. “Thailand’s policies to collaborate more closely with neighboring countries have been reflected in practical investments in infrastructure. For Thailand,” Mr. Cable noted, “this type of investment will expand economic development and include other areas of the country so they can share in globalization.”

5-Year Infrastructure Budget

Railway system - 900 billion baht (US$22.5 billion)
Bullet train - 140 billion baht (US$3.5 billion)
New roads & highways - 400 billion baht (US$10 billion)
Infrastructure for Bangkok’s new satellite city 100 billion baht (US$2.5 billion)
Investors in Thailand to Benefit from UNESCAP
Asian Highway Agreement and Trans-Asian Railway


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