Questions remain on public investment projects

Doubts remain over whether the government can ensure productive investment under the Bt1.43 trillion Thai Khemkhaeng stimulus scheme.

The challenge next year (2010) is to implement Thai Khemkhaeng," Finance Minister Korn Chatikavanij conceded recently. He has said the government would draw about Bt300 billion from the second stimulus package, dubbed Thai Khemkhaeng, which spreads some Bt1.43 trillion in spending over three years to 2012.

It would be the first sizeable public injection since the 1997 Asian financial crisis, and equal to 3.5 per cent of gross domestic product.

Prime Minister Abhisit Vejjajiva has assured the public that investment under Thai Khemkhaeng would help immunise the domestic economy this year from uncertainties in the world economy. The global recovery is still fragile, as the US and Europe remain burdened with high unemployment. Less purchasing power in such major export markets would result in lower demand for Thai goods. The economy relies mainly on exports, which contribute about 70 per cent of GDP.

The announcement by Dubai World that it would suspend debt repayment made markets fear there may be risks in countries with high public debt and large current-account deficits.

So public investment will play a crucial role this year, just like the short-term measures to shore up consumption did over the past several months.

Transparency looks set to be the key issue in determining the effectiveness of the investment plan, especially after 12 politicians and state officials were accused of plotting to abuse the Public Health Ministry's Bt86 billion procurement project.

Contractors vying for construction jobs under the Transport Ministry also complained about calls from politicians for "kickbacks" of 20 per cent of project value.

Critics were also afraid about the quality of projects, while Finance officials have admitted that had just recycled old project proposals that missed Budget Bureau approval under annual budget requests.

Pongpanu Svetarundra, head of the Comptroller General's Department, conceded that in a rush against time, officials had no choice but revive old projects previously rejected. This suggests the first batch of projects worth Bt200 billion lack quality.

Academics and the public have also raised questions about road construction projects, which may end up lining the pockets of influential politicians rather than promoting public good. This is partly because politicians have vested interests in construction.

For example, the government approved road projects in Koh Samui, while the island needs a wastewater treatment plant the most. In the first batch of outlays only Bt689 million will be spent on environmental issues, such as planting more trees. But the Map Ta Phut scandal shows how little heed officials have paid to the need to clean up or prevent pollution.

There are signs the government is starting to take green issues seriously, as the second batch of Thai Khem-khaeng investments would take into account large outlays to clean up the environment.

But it's still unclear whether the government would have a chance to implement the next Bt400 billion that is pending in Parliament, due to the unsettled political conflict.

Signs of poor management have also cropped up, as disputes between management and the labour union at the State Railway of Thailand have raised doubts about productive investment to upgrade the rail system, which is expected to get a large appropriation in a future phase of Thai Khemkhaeng.

"Delaying the service of the airport express train caused largely by internal conflicts within SRT was a bad sign," Sompop Manarungsan, an economist at Chulalongkorn, said.

Korn admitted that funds were available but state agencies were not ready to carry out all such projects.

An internal conflict at a state enterprise and ministries not collaborating well has pushed back investment in broadband telephone and mobile phone infrastructure.

Abhisit claimed the government had brought the moribund economy back to life after it endured political turmoil and the global financial crisis.

The Bt100 billion first-aid package implemented in March helped whip up consumption to make up for losses from the fall in exports. Yet it cost then deputy PM Korbsak Sabhavasu his post, due to allegations of irregularities in community-based projects under his oversight. Korbsak is expected to be transferred to a less important position this year.

"We have started to investigate some projects suspected of corruption," said Pisit Leelavachiropas, a deputy auditor general.

But low productivity projects with problems, poor management or corruption will not translate into rises in income or tax revenue. With public debt near 60 per cent of GDP in three years due to the jump in spending, the government hopes dearly its outlays will generate sufficient income to bring public debt down to manageable levels. But that remains to be seen.