BMA Charts Ambitious New Course For Bangkok

[webfact]

BMA charts ambitious new course

By ACHARA DEBOONME,

CHULARAT SAENGPASSA

THE NATION

For years, limited budgets have deprived the Bangkok Metropolitan Administration of the means for major infrastructure investment. Starting this year, a new investment mechanism will be deployed, with the BMA's business enterprise Krungthep Thanakom as the spearhead, in hopes of meeting the growing demand among residents of the capital for a better quality of life.

While Krungthep Thanakom will be a vehicle to finance long-term investment projects, the BMA also seeks to widen its revenue base to back the new spending, Deputy Governor Theerachon Manomai-phibul said in an interview.

"This will be the first year that the fiscal model will be implemented. I believe that if we earn Bt50 billion in revenue, we don't need to spend Bt50 billion in the year. A deferred payment scheme would make it easier for us to invest in mega-projects," said the former businessman, who is introducing the practice to the public service.

Under the BMA's budgeting law, employment costs must not exceed 40 per cent, leaving 30 per cent for services-related expenses, 20 per cent for investment and 10 per cent for debt repayment. Under this rationing, the administration can invest Bt9.8 billion this year, about 21 per cent of the Bt46-billion budget.

Since Bangkok is the centre of economic activity and has the highest population density, there is high demand for quality public services that would also attract more business and private investment. With shrinking budgets for its own investments, the BMA relies on government subsidies that can be sidetracked by political conflicts, and this leads to project delays or postponement.

Theerachon outlined several investment plans that the BMA would like to embark on in the next two years. Chief among them is completion of the BMA 2 Complex in Din Daeng. The administration also envisages light-rail projects from Suvarnabhumi Airport to the eastern part of Bangkok in Nong Chok where the Futsal World Cup will take place next year. It is also looking into making commercial gains from vacant land plots, which total nearly 1,000 rai (160 hectares), probably through the construction of a university town.

The BMA 2 Complex was conceived 18 years ago, but to date it is not fully exploited. More investment is needed for the finishing touches.

Meanwhile, the light-rail system linking the airport with the sport complex is necessary to serve the thousands of athletes participating in the World Cup, but it requires an investment of about Bt300 million to Bt400 million per kilometre.

Theerachon believes that the university-town concept would liven up Bangkok, as he experienced while in the private sector. His former employer, Property Perfect, set aside a land plot on Rama IX Road for Stamford University. The university's presence in turn boosted sales in the company's surrounding housing estate. He foresees a new town, probably for the elderly, as their number has risen from 8 per cent to 20 per cent of the population in seven years.

He acknowledged that all these projects need investment, and the BMA needs a new funding mechanism that offers greater flexibility. Krungthep Thanakom, a 99.96-per-cent-owned subsidiary, will play a vital role in this regard. Long-term contracts for major projects will be given to Krungthep Thanakom, which can be used as collateral to raise funds. The loan terms and conditions will be matched with the BMA's fee payments.

Tris Rating, which in November issued the rating of "AA+" for the BMA's planned bonds, favoured the clear investment framework. But it also expects that the BMA will not make investment commitments exceeding its ability to repay.

"We're encouraged by Krungthep Thanakom's success in several projects," Theerachon said. "It is now ready to stand on its own feet and take care of bigger projects. While the company will not seek profits from BMA projects, we envisage it venturing out to provide a similar service to other cities and earning more revenue from there."

Krungthep Thanakom was in charge of investing in two extensions of the BTS Skytrain, the On Nuj-to-Baring route that is to open on August 12 and the Tak Sin-Bang Wa route, which is scheduled to open on December 5, 2012. The two extensions require an investment of about Bt10 billion.

The BMA also looks forward to amending the contract with BTS Holdings Group, the operator of the Skytrain.

A committee is reviewing the amendment, under the Public-Private Joint Venture Act, as the old 30-year contract will be scrapped. Replacing it will be a new 30-year contract, under which BTS must assume ownership of the two extended routes. BTS will also enjoy a 30-year contract-renewal term to manage the service while the railway is transferred to the BMA under the concession.

The contract will oblige BTS to pay Bt10 billion for the route extensions, allowing the BMA to finance new projects.

Aside from the new investment model, the city looks to raise revenue to match its spending plans. For the first time, it plans to charge fees for wastewater treatment. This year alone, the BMA expects to spend Bt3.87 billion for irrigation and wastewater treatment.

The city will also raise excise taxes on cigarettes and fuel. On banners and signs, a legal amendment has been sought, as many advertisers put small Thai words on the signs to make them bilingual and pay only half of the fees imposed on English banners and signs.

Once the tourism industry fully recovers, it also looks to charge hotels accommodation taxes. Now that many street vendors are benefiting from the central government's financial help, they could be charged Bt30 per month, at least to cover cleaning costs. The tax scheme could be extended to foreign workers in Bangkok, who are using BMA services at no cost, as well as private state enterprises such as PTT that use public space for free.

"We're adhering to the fiscal-balance policy, [under the guidance of former finance permanent secretary Somchai Richupan], if we want to spend more, we need to earn more," Theerachon concluded.

-- The Nation 2011-01-17

[OzMick]

"...........Krungthep Thanakom, a 99.96-per-cent-owned subsidiary,..........."

I wonder who owns the other .04%? Insignificant at 1st glance, it works out at B400,000 per billion in a multi-billion enterprise, in return for........?

[eljeque]

Where ever you have public-private investment

you have

public investment first and private profit later

public guarantees of debts, so lower interest loans to companies building government projects

private companies becoming legally involved in where the government makes investments and what investments, rather than simply under the table payments.

And note this is for... mega-projects

[Orac]

"Meanwhile, the light-rail system linking the airport with the sport complex is necessary to serve the thousands of athletes participating in the World Cup, but it requires an investment of about Bt300 million to Bt400 million per kilometre"

Last years tournament in Brasil had 20 teams with each squad limited to 14 players - 280 athletes in all. Maybe he has got it confused with the 'football' world cup???

[tigermonkey]

Amazing Thailand --- actually Amazing Bangkok (BMA) -- or perhaps it is merely the Nation that is showing a complete lack of any sense of image or public relations.

Whoever chose the picture, which is heading the article and the announcement, should use both his eyes and his brain. Imagine talking about the " high demand for quality public services that would also attract more business and private investment", while showing a picture of Bangkok with air pollution that would rival any in the world.

Someone just was not thinking !

[AleG]

Once the tourism industry fully recovers, it also looks to charge hotels accommodation taxes. Now that many street vendors are benefiting from the central government's financial help, they could be charged Bt30 per month, at least to cover cleaning costs. The tax scheme could be extended to foreign workers in Bangkok, who are using BMA services at no cost, as well as private state enterprises such as PTT that use public space for free.

Excuse me?

Are they proposing a double pricing scheme for foreigners using Bangkok´s transportation system? I pay a lot on taxes already so this would really piss me of.

What else? farang should sit at the back of the bus?

[Arkady]

"The tax scheme could be extended to foreign workers in Bangkok, who are using BMA services at no cost"

I wonder what is the meaning of this nasty little xenophobic jibe. I am sure that the average expat worker pays significantly more in income tax and VAT than the average Thai worker.

Or are they trying to get at the unskilled workers from neighbouring countries who are forced to pay high fees relative to their meagre wages to be legal and also have pay into the Social Security Fund to subsidize Thai workers as most of the benefits are only available to those who pay in for over two years.

[bangon04]

Once the tourism industry fully recovers, it also looks to charge hotels accommodation taxes. Now that many street vendors are benefiting from the central government's financial help, they could be charged Bt30 per month, at least to cover cleaning costs. The tax scheme could be extended to foreign workers in Bangkok, who are using BMA services at no cost, as well as private state enterprises such as PTT that use public space for free.

Excuse me?

Are they proposing a double pricing scheme for foreigners using Bangkok´s transportation system? I pay a lot on taxes already so this would really piss me of.

What else? farang should sit at the back of the bus?

Farang should run along behind the bus...

[bangon04]

""We're encouraged by Krungthep Thanakom's success in several projects," Theerachon said. "It is now ready to stand on its own feet and take care of bigger projects. While the company will not seek profits from BMA projects, we envisage it venturing out to provide a similar service to other cities and earning more revenue from there."

Krungthep Thanakom was in charge of investing in two extensions of the BTS Skytrain, the On Nuj-to-Baring route that is to open on August 12 and the Tak Sin-Bang Wa route, which is scheduled to open on December 5, 2012. The two extensions require an investment of about Bt10 billion.

The BMA also looks forward to amending the contract with BTS Holdings Group, the operator of the Skytrain."

Yes they certainly did such a fantastic job of organising the Onnut extension line that it is still not open. Something about missing paperwork.

And renegotiating the contract with BTS will give plenty of opportunity for redistributing profits again, so it could be another 3 years before the Onnut extension gets opened, if at all.