Thai Prime Minister General Prayut Chan-o-cha (center) observing a construction project in Bangkok in a 2015 file photo. Photo: Reuters/Athit Perawongmetha
Thai Prime Minister General Prayut Chan-ocha (center) observing a construction project in 2015. Photo: Reuters/Athit Perawongmetha

Thailand’s National Economic Social Development Board (NESDB) started its search several years ago for a new Eastern Seaboard, the industrial corridor along the country’s eastern coastline that is arguably the public sector’s sole large infrastructure success story.

But NESDB, the chief government planning agency, couldn’t find a suitable site, at least not in Thailand, given the empowerment of civil society and the environment movement over the past three decades and their likely opposition to any government-led attempt to create a massive new polluting industrial complex elsewhere.

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Instead they decided that the best bet for Thailand’s future industrial growth was to start transferring polluting, labor-intensive factories across the border to Dawei, Myanmar. But that cross-border scheme has run into its own problems due to unresolved ethnic conflicts in the country.

When Thai Prime Minister General Prayuth Chan-ocha rose to power in a May 2014 coup, his first industrial push was to create ten special economic zones along Thailand’s borders, to benefit from its neighbors’ cheaper labor and pursue cross-border trade and business opportunities. But that plan likewise ran into local opposition to polluting industries and a lack of suitable infrastructure.

Thailand's Deputy Prime Minister Somkid Jatusripitak looks on at the Ministry of Foreign Affairs in Colombo on March 9, 2016.Jatusripitak is in Sri Lanka for a three-day state visit. / AFP PHOTO / ISHARA S.KODIKARA
Thailand’s Deputy Prime Minister Somkid Jatusripitak Photo: AFP/ Ishara S Kodikara

In August 2015, Prayuth sacked his former chief economics minister Pridiyathorn Devakula and replaced him with Somkid Jatusripitak, an economic visionary in the administrations of controversial former premier Thaksin Shinawatra (2001-2006) and a co-author of the book, “The Marketing of Nations: A strategic Approach to Building National Wealth.”

Somkid, a known marketing guru, helped devise the “Thailand 4.0” scheme, setting a broad goal to shift Thailand into higher-tech, value-added sectors and away from the resource-based, labor-intensive, export sectors that have driven growth for the past three decades.

Thailand’s exports declined between 2013-2015 and grew only 0.4% year-on-year in 2016, leading to massive industrial over capacity and hence slow new industrial investment. Most of Thailand’s existing industries are based on the Eastern Seaboard, which comprises the three provinces of Chachoengsao, Chonburi and Rayong.

“The idea of the government was, since we already have a good foundation in the Eastern Seaboard – our petrochemical and automotive industries there are huge – so why not start from there?” said Nathporn Chatusripitak, a spokesman at the deputy prime minister’s office.

An employee works at an assembly line at the new Ford Thailand manufacturing plant located in Rayong province, East of Bangkok May 3, 2012. Ford Motor Corp is eyeing Indonesia as a production centre to help meet strong demand for cars in Southeast Asia but supply problems mean Thailand will remain its regional hub for the foreseeable future, company executives said. REUTERS/Chaiwat Subprasom (THAILAND - Tags: TRANSPORT BUSINESS) - RTR31JKS
An employee works at an assembly line at a Ford Thailand manufacturing plant located in Rayong province, East of Bangkok. Photo: Reuters/Chaiwat Subprasom

The re-branded, revised Eastern Seaboard has thus recently been rechristened the “Eastern Economic Corridor (EEC). “It doesn’t mean that we will only have the EEC, but if this model works you can replicate it in other parts of the country,” Nathporn said.

Replicating the EEC anywhere else in Thailand may prove a challenge, though. The area comprises a heavy concentration of Thailand’s infrastructure, including deep-sea ports at Map Tha Put, Rayong, and Laem Chabang, Chonburi, an international-class airport at U-Tapao and another deep sea port at Sattahip, both in coastal Rayong province.

There is a massive petrochemical complex at Map Ta Phut industrial estate, where the 400-kilometer-plus long underwater pipeline to natural gas reserves in the Gulf of Thailand comes ashore. The area boasts a score of private sector-run industrial estates and some of the best highways in Thailand.

It also hosts the somewhat notorious Pattaya and Jomtien beach resorts, which offer a seamy nightlife but also more than 200,000 hotel and condominium rooms nearby.

A view of the Map Ta Phut industrial estate is seen in Rayong province, eastern Thailand, August 31,2010. Thailand's cabinet on Tuesday approved a list of industrial activities deemed harmful to the environment, a step towards ending a dispute that has frozen the activities of scores of plants at the world's eighth-largest petrochemical hub. The plants at the Map Ta Phut estate, home to the world's eighth-largest petrochemicals hub, have been idle for a year, with even construction halted at some, because companies failed to carry out environmental and health assessments. REUTERS/Sukree Sukplang (THAILAND - Tags: POLITICS BUSINESS ENVIRONMENT) - RTR2HQUS
The Map Ta Phut industrial estate in Rayong province, eastern Thailand. Photo: Reuters/Sukree Sukplang

One economic argument against the EEC is that it will mainly benefit Thailand’s most affluent region – Bangkok and her eastern neighbors. Rayong province is already the country’s second wealthiest province after Bangkok, according to the National Statistics Office. Chachoengsao and Chonburi are not far behind.

But the scheme probably wouldn’t work elsewhere, analysts say. “To upgrade Thailand to 4.0 nationwide is going to be difficult, an uphill task, so starting with the Economic Corridor is much more feasible,” said Kirida Bhaopichitr, research director at the Thailand Development Research Institute (TDRI) a local think tank.

Other economists agree that Thailand needs to move up the value chain if its industries are to remain competitive with its Association of Southeast Asian Nations (Asean) neighbors, including the fast-growing, low-cost economies of Cambodia, Laos, Myanmar and Vietnam. The EEC hopes to piggyback on the lesser developed nations’ industrial expansions.

“Our main selling point is that the EEC is the main gateway to Asia, or at least to Asean, because we have Cambodia, Laos, Myanmar and Vietnam around Thailand, with some of the highest growth rates in the world, and we are right in the middle of them,” Nathporn said.

“However, their infrastructure is not well developed while we have all the infrastructure in place, so there will be symbiosis between us and [them].”

A view of the port of Bangkok, Thailand May 26, 2016. REUTERS/Jorge Silva - RTX2EF3K
A view of the port of Bangkok, Thailand May 26, 2016. Photo: Reuters/Jorge Silva

The Thai government estimates that total investment in the EEC, both public and private, will amount to 1.9 trillion baht (US$55.8 billion) over the years. It hopes to kick off major infrastructure projects, including the upgrading of U-Tapao Airport, double-track rails and a high-speed train linking Bangkok to Rayong and expansion of Laem Chabang deep sea port, before year-end.

It has also designated ten priority “S-curve” sectors for FDI, including next-generation automotive, smart electronics, affluent medical and wellness tourism, agriculture and biotechnology, food for the future, robotics, aviation and logistics, biofuel and bio-chemicals, and development of digital and medical hubs.

The Board of Investment (BOI), Thailand’s chief FDI promotion office, is offering exclusive privileges to investors in the ten categories, including eight-year tax holidays and an income tax ceiling of 17% of their salaries for executives and experts.

Aware that Thailand lacks the human resources to staff many of these high-tech sectors, the government is making it easier for investors to bring in foreign expertise, normally a politically sensitive issue in Thailand where many professions such as architects and doctors exclude foreign nationals.

Robot arms perform during a synchronisation show to pay tribute to Thailand's late King Bhumibol Adulyadej at an exhibition hall in Bangkok, Thailand, November 23, 2016. REUTERS/Athit Perawongmetha - RTSSWDA
Robot arms perform during a synchronized tribute to late King Bhumibol Adulyadej at an exhibition hall in Bangkok, Thailand, November 23, 2016. Photo: Reuters/Athit Perawongmetha

Last month, the government passed a law that would allow 100% foreign-owned universities to be established in the EEC, in a bid to enhance Thailand’s woefully uncompetitive tertiary education and create a more competitive future work force.

Despite these inducements, actual investments in the EEC have so far been subdued. Although the Cabinet on June 30, 2016, approved the framework of the EEC development plan, it has yet to pass a specific law for the scheme. The legislation might provide the legal security foreign companies need to proceed with actual investments.

The BOI had received 1,597 applications worth 594 billion baht (US$17.4 billion) in the EEC’s ten priority sectors as of March, according to the agency’s statistics, but this has not yet translated into real investment. Thailand’s overall private sector investment declined 1.1% year on year in the first quarter, according to NESDB statistics.

Private investor hesitation to commit substantial funds to the EEC is also likely a reflection of political uncertainties, as the country heads tentatively back to democracy after over three years of military rule.

An anti-government protester waves a Thai flag as he gathers with others outside the Parliament House in Bangkok May 9, 2014. Ousted Prime Minister Yingluck Shinawatra's Puea Thai Party still runs the interim government and is hoping to organise a July 20 election that it would probably win, but the protesters want the government out, the election postponed and reforms to end the influence of Yingluck's brother, former premier Thaksin Shinawatra. Protest leader Suthep Thaugsuban, speaking to supporters in a city park, urged them to rally outside parliament, the prime minister's offices and five television stations to prevent them being used by the government. REUTERS/Athit Perawongmetha (THAILAND - Tags: CIVIL UNREST POLITICS TPX IMAGES OF THE DAY) - RTR3OEXQ
An anti-government protester waves a Thai flag as he gathers with others outside the Parliament House in Bangkok May 9, 2014. Photo: Reuters/Athit Perawongmetha

Many analysts predict the coup-toppled Peua Thai party, still de facto led by self-exiled former premier Thaksin Shinawatra, will prevail at polls scheduled for next year.

“The EEC is a good idea and in the right direction but it may have come late and risks political volatility that could upend it,” said Thitinan Pongsudhirak, a well-known political scientist at Chulalongkorn University.

“As the post-election government is likely to be a coalition heavily influenced by the military, there is likely to be some continuity for the EEC, but a Peua Thai-led government doing Thaksin’s bidding could launch a new project altogether because it will be anti-military.”

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