Thailand Focus 2014

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“What’s new in Thailand’s Economic Development Strategy”

Thailand focus 2014 – Competencies & Growth potentials

Arkhom Termpittayapaisith

Secretary-General

Office of the National Economic and Social Development Board (NESDB)

Wednesday 27th August 2014, 11.00-11.50 am.

Grand Hyatt Erawan , Bangkok, Thailand

The 11th National Economic and Social Development Plan

(2012-2016): key development strategies to move Thailand

forward on a more sustainable path and pave way to achieve

high income country in a longer term.

- From the 11th Plan to Infrastructure Development Plan:

where Thailand is heading to?

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1.

11th National Economic and Social Development Plan (2012 – 2016)

Vision: “A happy society with equity,

fairness and resilience.” 6 Development Strategies

Targets Thai society will become a better place, characterized by

harmony and the well-being of its people.

All citizens will acquire lifelong learning and better health.

The Thai economy will achieve inclusive growth at a

moderate pace based on its potential:

• Focus on upgrading total factor productivity (TFP) to

be higher than 3 percent per annum

• Improve Thailand’s competitiveness rank

• Increase the contribution of SME’s to at least 40

percent of GDP

Environmental quality will be improved to meet

international standards.

Create Human and Social Quality

Restructuring the Economy

1. Create a just society 2. Develop knowledge-based society

3. Strengthening the agricultural sector as

well as food and security

4. Restructure the economy toward more

balanced and sustainability

5. Create regional connectivity for social

and economic stability

6. Manage natural resources and the

environment towards sustainability

Natural Resources Management

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Strategy 4: Restructuring the economy aiming at

quality growth and sustainability Target 1. To reduce logistics cost per GDP to less than

15% and to increase rail transport to 5% of total transportation

2. To increase share of renewable and alternative energy use to Total Final Energy Consumption to more than 19%

3. To reduce energy import by more than 3% and to increase energy intensity by 2%

Improve infrastructure and logistics system • Promote development of multimodal transportation

• Increase the efficiency of logistics management by

developing professional human resources

• Improve railway transport

• Modernize the public transportation network

Strategy 5: Creating regional connectivity

for social and economic stability

Develop connectivity in transport and logistics systems under regional cooperation frameworks

• Develop efficient transport and logistics services • Improve rules and regulations • Enhance human resource capabilities in transport and

logistics businesses • Link economic development along border economic

zones to the domestic economy

Target

1. Enhance Thailand’s key regional role in trade

and investment based on equitably shared

benefits and security

2. To increase value of border trade and direct

investment by Thai companies in neighboring

countries by 15% and by 10% per year

Infrastructure Development Strategies under the framework of the 11th Plan

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Development Targets: better quality of

life and sustainable development

Development Strategy

1 Inter-city rail network development

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Infrastructure Development Plan (2015-2022) : Development targets & Strategy

1. To enhance social security by improving people’s quality of life

2. To enhance economic productivity by reducing transportation cost and time

3. To enhance travel and transportation security and safety

4. To enhance competitiveness and to facilitate Thailand to optimally benefit from AEC

Public transportation network development for Bangkok Metropolitan Region

Capacity enhancement for highway network to link with key areas in the country and with neighboring countries

Maritime transport development

Enhancement of air transport capacity

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New transportation development strategies 2015-2022

1. Inter-city rail network

2. Capacity enhancement for

highway network to link with key areas in the country and with

neighboring countries

3. Public transportation network development

plan for Bangkok Metropolitan Region

4. Air transport capacity

enhancement

5. Maritime transport development

Water and

Air transport

Mass Transit in

BKK & vicinity

• Upgrade rail

infrastructure and

overall system

• Build double-track

in 6 main rails with

their extension to

respective

borders

• Extend mass transit railway system in Bangkok and vicinity

• Improve quality of service and safety of mass transit bus as well as to enhance its environment standard

• Develop 4 lane-road networks linking Thailand’s key economic regions and borders areas

• Construct new motor ways

• Develop facilities along the main roads such as container yards

• Improve seaport on both Thai

gulf and Andaman sea

• Enhance capacity of airports

to be the regional center of

air transportation

• Establish the aviation industrial

estates

Infrastructure Development Strategies: 5 Key Programs

Road network Railway

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Key Transportation Projects expected in 2014-2015

Old New

Double track

Rail network

High speed train Review (F/S)

Mass transit railway

Highway

Seaport

Airport

Custom

Key investment projects started in 2014 Mass transit railway extension

- Purple Line (Bangyai – Bangsue)

- Blue Line (Hua Lumpong – Bangkae and Bangsue-Tapra)

- Green Line (Baring – Samutprakan)

- Red Line (Bangsue – Rangsit and Bangsue – Talinchan)

Key investment projects to be started in 2015 Mass transit railway 4 Lines above plus 5 more Lines

- Green Line (Morchit – Sapanmai – Kukot)

- Orange Line (Talingchan - Cultural center)

- Yellow Line (Ladpao - Samrong)

- Pink line (Kaerai – Minburi)

- ARL extension line (Suvanbhumi airport - Donmueng airport)

Build double-track in 6 main rails

Develop 4 lane-road networks and new motorways

Improve seaports and build container center

Improve Suvanbhumi airport and regional airports

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From Infrastructure Plan to its implementation/action plan—

ways forward and key challenging

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2.

Causes of Delay in Project Implementation of

the Previous 2 Trillion Baht Infrastructure Development Plan

2 Trillion baht Infrastructure Development (The Old Plan)

Budget

Other Borrowing

SOE Revenue

PPP

Infrastructure Act

• The main cause of delay was the different views about the

modalities/types of project financing despite more or less

consensus views on projects’ ideas and concepts. In fact

agencies concerned had stood ready for implementation.

• The debate was concentrated very much over the main

sources of financing either off-budgetary or annual

government budget. The previous government considered

that off-budgetary ways of financing was more suitable

taken into account budget constraint and continuity of

the project implementation, thus led to the 2 trillion baht

Infrastructure Development Act in March 2013.

• However, in March 2014, the Constitutional Court ruled

against the Act as it was considered to violate the

constitution. The plan was suspended thereafter.

Financing Plan

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Infrastructure Project Financing

Setting priorities and sequencing projects implementation

• By prioritizing the projects for budget allocation, the infrastructure investment projects have been allocated a budget worth 123 billion baht from the FY2015 budget.

• The key projects awarded with budget in 2015 include dual rail track, urban rail transport in Bangkok metropolitan area, road and maritime transport project, highway rehabilitation.

• In line with projects prioritizing and sequencing, the government will increase government budget efficiency and effectiveness both on the revenue and expenditure sides

Timeframe for project implementation and the way to secure sources of fund for the remaining projects should be drawn up

• To some extents the timeframes have been stipulated in the plan. However, ministries concerned will soon propose detailed schedules to the coming government, provided some projects will have to be identified for the FY2016 budget.

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Budget Allocation for FY2015 Mil Baht

1. Restoring Confidence &

Creating Firm Foundation 186,240.70

2. State Security 222,762.70

3. Sustainable & Equitable

Economic Growth 169,112.60

4. Education, Health, Quality

of Life 955,921.00

5. Management of Natural

Resources & Environment 135,121.80

6. Science, Technology, R&D

Development 24,741.40

7. Foreign Affairs &

International Trade 9,594.90

8. Good Governance 354,484.60

9. Government

Administration 517,020.30

Total 2,575,000

Infrastructure Budget Allocation for FY2015

Note: data from Bureau of the Budget as of 21st July 2014

• Rail: with budget of 910.7 million baht to prepare for investments in 11 rail routes (2,161 km), including land procurement, detail designs, bidding process.

• Urban rail: with budget of 1.92 billion baht for projects covering 8 routes.

• Connecting North – South, East – West, and Southern Economic Corridors, with budget of 15.2 billion baht to improve and rehabilitate roads and bridges along the Economic Corridors.

• Resolving bottle-necks and missing links, with budget of 10.2 billion baht

• Maritime Transport, covering feasibility studies for second Songkla deep seaport, Chumphon seaport, Suratthani seaport, etc.

Budget for Restoring Confidence & Creating Firm Foundation includes key infrastructure developments.

Budget for Sustainable & Equitable Economic Growth includes development of infrastructure and logistic

• Rehabilitation of highways and roads.

• Improving seaports

• Issuing licenses for logistics operators and rail services

• Subsidizing bus services

• Improving road safety

Financing of infrastructure development Plan:

one of the key challenging, finding most efficient method/modality of financing

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3.

Infrastructure Fund

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Infrastructure Fund will be will be registered with Stock Exchange of Thailand and overseen and managed primarily by Ministry of Finance. There are 2 types of Infra Fund.

• Availability Payment Infra Funds, based on availability of service with no regard to actual usage or demand, e.g. power plants, power grid, water processing plants.

• Demand Payment Infra Funds, based on actual demand for service, e.g. express way. New projects with hard-to-predict returns/high risk may require Government’s support (e.g. in form of minimum guarantee) to attract investors.

SOEs that can set up Infra Fund: according to MOF assessment, 5 SOEs are ready to set up Infra Fund.

• There are 3 SOEs with adequate cash flow to set up Infra Fund using internal budget, namely Electricity Generating Authority of Thailand (EGAT), Metropolitan Electricity Authority (MEA), and Port Authority of Thailand (PAT).

• These which likely to require Government assistance to set up Infra Fund include Expressway Authority of Thailand (EXAT) and Provincial Waterworks Authority (PWA).

Infrastructure Fund

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Criteria for setting up and managing Infra Fund approved

by Securities and Exchange Commission in January 2011.

SEC allows Infra Fund to be set up

for the following infrastructures

• Rail transport

• Electricity

• Water supply

• Road, Express way, or toll way

• Airport

• Deep seaport

• Telecommunication

• Alternative Energy

• Water management/Irrigation

• Disaster prevention

Key Criteria Detail

Type of Fund Closed end fund with investing infrastructure specified

Size of Fund Min. size of 2 billion baht, with asset of each project min. size of 1 billion baht (except for electricity project – min. size of 500 million baht allowed)

Investment Infra Fund must invest in infrastructure no less than 75 percent of its capital within 6 months of being registered

Form of Investment Infra Fund can invest in 2 ways: (1) direct investment in the infrastructure, or (2) indirect investment in companies that invest in infrastructure in forms of stocks or bonds.

Borrowing Infra Fund can borrow no more than 3 times of its capital

Trading of Unit Trust Infra Fund is to be registered in SET so that investors can trade

their unit trusts.

Unit trust allocation

No person or persons shall hold more than one third of unit trust

of an Infra Fund. If there is more than one type of unit trusts, no persons shall hold more than half of unit trusts of all type available.

With all those said development strategies and their associated plan and programs in various sectors and

enabling factors—what achievement Thailand is aiming to

reach?

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4.

6 Development Strategies

of the 11th Plan

Economic

Restructuring

Creation of Quality Human

Capital and Society

Management of Natural Resources

• Strengthening of agriculture sector and food & energy security

• Restructuring of the economy towards quality growth and sustainability

• Regional connectivity

• Creation of Justice in Society

• Creation of Learning Society

New Growth Model

• Preparation for effects of climate change and transfer to low-carbon & environmentally friendly society

Human Capital

/ Quality of Life

/ Knowledge /

Fairness

Infrastructure /

Productivity/

Research &

Development

Growth and Competitiveness

Towards

High

Income Country

Towards Economic

Equity

Towards

Sustainable Economy

Towards

Good

Governance

in Public Sector

Legal Framework Inclusive Growth Green Growth

The 11th Plan and Long-term and Medium-term Development Guideline

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The 11th National Economic and Social Development Plan is a part of Thailand’s Long-term Vision (2027) which aims to develop the country in economic, social and environmental aspects. For the economic aspect, as Thailand is now a middle income country, the long term goal is to lift the country up to high-income country.

Long-term and Medium-term Development Guideline

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2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

2022

2026

2030

USD

Lower Middle Income Country

High Income Country (HIC)

Upper Middle Income Country (UMIC) 2013 (per cap) GNI = $5370 GDP = $5779

Source: NESDB, World Bank 17

Avg. Growth 4%

Avg. Growth 5%

Half transition from

UMIC to HIC

Thai GNI per Capita Target : 1. Maintain GDP growth at 5 %

2. Achieve GNI per capita of 12,000 USD (Atlas method) by 2026

Thailand will be a high-income country by 2027 (average growth of 5% per year)

• Move up the value chain towards high-tech

industries

• Create value add in agricultural and services

sectors

• Maintain supportive environment by (i) ensure

macroeconomic stability, (ii) encourage R&D

and innovation, (iii) sound legal framework,

(iv) skilled and readily available workforce and (v) infrastructure and logistics network

• Leverage on ASEAN Economic Community

Growth & Competitiveness Inclusive Growth

• Enhance opportunities to access natural

resources and supporting infrastructure to

promote jobs and stable incomes

• Access to judicial system with fair and

equitable legal protection for Thais and

foreign workers in preparation for AEC

• Development of labor standard in

preparation for movement of skilled labors among ASEAN countries

• Access to quality public health and social

safety net

Green Growth

• Reduce energy usages in industrial

sector logistics and households

• More usages of clean energy

• Upgrade to low-carbon production

technology

• Expansion of forestry area to absorb

green house gas

• ASEAN collaboration in the

encouragement of green growth

Thailand’s New Growth Model: To pursue a stronger, sustainable and more balanced growth

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