More Delays For New Subway?

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In todays Nation:

Govt may look abroad for project funds

Published on November 23, 2005

The government may have to seek soft loans from the Japan Bank for International Cooperation (JBIC) to finance the first phase of its mass-transit expansion plans because it may take longer to fund the projects by other means, a source in the Transport Ministry said yesterday. He said the projects could be delayed if the government waits for a holding company to be set up to raise funds on the stock market to finance the project. Moreover, the cost may increase if the government seeks loans from other financial institutions, which tend to charge higher interest than the JBIC.

The source said the Finance Ministry would discuss the possibility of soft loans with JBIC, including conditional details such as the portion of Japanese imports required in order to secure such credit.

Earlier, the Finance Ministry announced plans to raise funds for the projects by establishing a holding company to raise money on the stock market.

It also plans to arrange bidding for contracts in a way that generates money for the projects and hopes to raise funds from property development along mass-transit lines, as well as from licence-plate taxes and oil funds.

But it will take a long time for these sources to make money and the projects will not be completed on time. Construction has already been delayed beyond the original completion date in 2009, the source said.

The source added that differences of opinion between the Transport and Finance ministries over the sources of funding had led to Pornchai Nuchsuwan, vice minister of the Prime Minister’s Office, withdrawing from the fund-raising team.

However, Bangkok Bank executive vice president Banlue Chantadisal said Thai banks had funded several major infrastructure projects and possessed the capital to participate in the government’s Bt1.7-trillion mass-transit projects. However, banks may consider the projects high-risk because construction requires many imported components while their income is in baht, he said.

This “mismatching of funds” is part of the problem affecting Bangkok Mass Transit System Plc (BTS), another part is low passenger numbers, said Banlue.

He added that in the case of the Mass Rapid Transit Authority of Thailand, its private operator Bangkok Metro Plc was responsible for passenger traffic through the concession scheme, which it inked with the authority. However, for the new projects the government has not made it clear who will be the operator and how risk is to be allocated.

Banks’ other concerns are cost overruns and project delays, operating and maintenance expenses, he said, and who will determine ticket prices.

Banlue was speaking at a EuroMoney conference entitled “Funding the Futures & Accessing Opportunities”, held in Bangkok yesterday.

The planned lines are from Makkasan to Ayutthaya, Bang Sue to Nakhon Pathom, Bang Yai to Bang Sue and Hua Lamphong to Bang Khae.

At one point the government approved the construction of seven extended railway lines. However, Transport Minister Pongsak Ruktapongpisal later reduced the number to four.

Watcharapong Thongrung,

Pichaya Changsorn

The Nation