Thailand’s military government says that its economic policies, namely its US$44 billion flagship Eastern Economic Corridor (EEC) project, will survive the kingdom’s transition back to democracy regardless of the March 24 election’s result.
“The election will not disrupt this project,” Deputy Prime Minister Prawit Wongsuwan guaranteed while presiding over the opening of the
EEC’s new labor administration center in eastern Chonburi province on January 17. “This project will go on.”
Deputy Prime Minister Somkid Jatusripitak chimed a similar note on January 31, when he assured a group of 500 Japanese businessmen in Osaka that the EEC was on track, whatever the March 24 election outcome. “No political party is likely to be a fool to interrupt their development,” he said of the junta’s economic policies.
Despite those assurances, many investors wonder whether the EEC has advanced enough to survive a change in government, given Thailand’s political tradition of new elected administrations moving quickly to undo the handiwork of their predecessors.
The EEC aims to catapult Thai manufacturing into 12 so-called “S-Curve” high-end industries, ranging from aviation to robotics to digital services to new generation vehicles, through big new investments in infrastructure and logistics at its established Eastern Seaboard manufacturing region.
Prawit made his comments while presiding over an EEC labor center aimed at assisting investors to find or train the human resources Thailand will need to make the jump into such higher value-added production.
But like many EEC-related projects, the labor center is a work in progress, filled with newly acquired computers and plenty of empty space. It has been pushed through quickly to be in place before the general election and the installation of a new government.
Prime Minister Prayut Chan-ocha and his economic czar Somkid only started to push the EEC scheme seriously in March 2017, after broaching but not following through on other schemes, including plans to build new special economic zones in border areas.
Prayut’s cabinet did not provide a legal framework for the mega-project, the EEC ACT, until May 15, 2018, four full years after the military seized power in a coup. Whether Thailand’s next elected government will be legally obliged to implement all of the junta’s economic schemes as part of a mandatory 20-year economic development plan is in question.
“If this was conceived and launched in the first year of the coup regime, it would have had more legs and more traction,” said Thitinan Pongsudhirak, a political scientist at Bangkok’s Chulalongkorn University. “But it comes like a year before they were going out and as their departure became more eminent they became more desperate in making progress.”
The EEC aims to build on the Eastern Seaboard, the signature export-oriented development scheme of another military prime minister, Prem Tinsulanonda, who governed from 1980-88.
His chief economic minister, Snoh Unakul, hatched and promoted the concept of developing three east coastal provinces – Chachoengsao, Chonburi and Rayong – into an industrial zone for petrochemicals using natural gas piped in from the Gulf of Thailand and light industries that leveraged into the kingdom’s then abundant cheap labor.
The Eastern Seaboard, with its deep sea ports at Map Ta Phut and Laem Chambang, connecting motorways and proliferation of industrial estates, paved the way for Thailand’s export-led boom in the 1980s through the mid-1990s.
That boom was led by Japanese investment in industrial clusters in the automobile, electronics and electrical appliance sectors.
Prayut’s EEC scheme, part of his government’s “Thailand 4.0” vision to push Thai industry up the technological ladder, hopes to attract a new generation of foreign investment in offshoots of old sectors, including the production of electronic vehicles (EVs).
Investments in these targeted sectors, if based in the EEC, are promised special tax incentives under the Board of Investment (BOI), including greater leeway in hiring foreign experts, deemed as necessary given Thailand’s dearth of human resources in high tech industries.
The Labor Ministry envisions eventually attracting more than 6,000 “skilled migrants” to the scheme, while creating altogether 100,000 new well-paid jobs for Thais. Once underway, the government expects the EEC to boost Thailand’s economy to 5% growth per year.
New and improved infrastructure is part of the EEC’s sales pitch to investors. Prayut’s government has targeted five mega-projects to be built over the next five years, requiring a total investment of 694.5 billion baht ($21.1 billion).
Those include outlays for a high-speed rail linking U-Tapao Airport in Rayong province to Bangkok’s Suvarnabhumi and Don Mueang airports (224.5 billion baht), an aircraft maintenance, repair and overhaul (MRO) facility at U-Tapao Airport (10.6 billion baht), an U-Tapao aviation city (290 billion baht), and third phase expansions of Map Ta Phut and Laem Chabang ports (55.4 billion baht and B114 billion baht, respectively).
Clearly concerned that a new elected government would look to derail these big ticket projects, Prayut’s regime has recently pushed to issue terms of reference (TOR) for bids and sign contracts before the polls.
The government has been particularly quick to push through the 220-kilometer long airports-rail link, issuing the TOR and attracting about 30 bidders on the project in June.
That particular infrastructure project will be implemented as a Public Private Partnership (PPP), a traditionally slow process but fast-tracked under the EEC Act, with the government’s contribution amounting to 119 billion baht including land rights, primarily along an existing train track belonging to the State Railway of Thailand (SRT), a highly indebted state enterprise.
The lowest bidder and likeliest winner of the deal was a consortium of Chinese and Thai conglomerates led by the Charoen Pokphand Group, Thailand’s agro-industry giant that has branched out into telecoms, real estate and other activities but has no track record in building railways.
The consortium, however, includes two companies with transport expertise – the Bangkok Expressway and Metro Plc (BEM) that operates the capital’s first subway system, and the China Railway Construction Corp Ltd (CRCC). Other local partners include Ch Karnchang Plc (CK) and Italian-Thai Development (ITD), two of Thailand’s largest construction firms with long records of winning government contracts.
Even if the contract is signed before the March 24 election, there is already growing opposition to the EEC among political parties vying for votes on an anti-junta ticket.
“We don’t think the high-speed train linking the new airports together is a good idea,” said one senior politician with ties to the coup-ousted Peua Thai Party, nominally backed by self-exiled ex-prime minister Thaksin Shinawatra, whose various parties have won every general election held since 2001.
“The winner will enjoy the benefit of utilizing the land, and no one will use the train, so it is a waste,” said the politician, requesting anonymity. According to recent opinion polls, the Peua Thai Party and its affiliates are likely to win the most seats on March 24. “We need to see if the contract and bidding was completely legal. If it is not, and if we can cancel it, we will cancel it.”
That said, even a Peua Thai-led government would be likely to support the expansion of U-Tapao Airport, a facility built by the US military during the Vietnam War. Although under the Royal Thai Navy’s management now, it has expanded its commercial operations since Prime Minister Yingluck Shinawatra’s government, which was ousted in the May 2014 coup.
Nor would any elected government, pro or anti-junta, likely overturn the BOI’s success so far in drumming up investment interest in the EEC’s S-Curve industries. Last year, Thai and foreign applications for BOI tax incentives reached 902 billion baht ($28.7 billion), up 43% year-on-year, of which 683.9 billion baht were in EEC targeted industries.
Investment applications in new generation automobiles, including battery electric vehicles (BEV), hybrid electric vehicles (HEV), EV buses, EV battery production and EV charging stations, amounted to 151 billion baht, a good plug for Thailand’s already well-established automotive industry.
Analysts and investors hope that the next government will judiciously pick and choose to continue and promote the EEC’s most viable and efficient projects. But there is a strong potential for politically motivated cancellations as the country moves back towards democratic politics.
“I hope the main players will think of Thailand’s interests, not just of political revenge,” said academic Thitinan. “I think the EEC as a concept is sound, because Thailand needs a second generation of industries and a new hub for growth.”