Collapsed Platform Brings Abandoned Hopewell Back In Public Eye

[webfact]

ANALYSIS

Collapsed platform brings abandoned Hopewell back in public eye

Watcharapong Thongrung

The Nation

BANGKOK: -- The recent collapse of a giant concrete slab and steel scaffolding at the Hopewell project will attract more public attention to the pending appeal ruling at the Administrative Court over Bt12 billion in compensation demanded from the Thai authorities by the Hong Kong-based company.

Getting on for 20 years, the public had been largely trying to ignore the controversial abandoned project between Hopewell (Thailand), which is a subsidiary of Hong Kongbased Hopewell Holdings, and the State Railway of Thailand (SRT) - that is, until the collapse of part of the construction last Thursday.

The incident involving a collapsed platform section has brought to the surface four key issues.

First, Hopewell (Thailand)'s demand for compensation of Bt12 billion for unfair trade practice after the SRT cancelled the contract, leaving the project partconstructed. The amount claimed is not only to compensate for the partial construction, but also because the government now plans to use the construction to proceed with the Red Line commuter train project.

Second, the SRT in turn is seeking Bt200 billion in compensation from Hopewell in return for business opportunity losses from land development along the 26-kilometre Bang Sue-Rangsit route, as well as benefit-sharing from the project.

Third, there are the SRT's costs in having to pay a surcharge to the Japan International Cooperation Agency (Jica) after missing loan repayment as scheduled under the contract. So far, the agency has had to pay a surcharge of Bt33 million.

Finally, the pending ruling will delay Red Line route construction, as Hopewell and the SRT have not been able to reach a compromise.

In particular, the prolonged wait for the appeal court ruling has undermined foreign investor confidence as regards the operation of government megaprojects. Investors could now be reluctant to join hands with the government, or they would have to add the risk cost into such projects.

From the Hopewell side, however, now is a good time to attract more attention to the drawnout case, as the group needs to achieve compensation for its business loss in Thailand.

On the other hand, the SRT wants to end the case without having to make any payment, arguing that it was Hopewell that had breached the agreement. This would allow the agency to proceed with the Red Line commuter rail route, which is now behind schedule as construction was due to begin last year.

Red Line construction is scheduled for completion by 2016 at an investment of Bt75.54 billion.

The SRT inked the Bt63.87billion loan agreement with Jica in March, 2009. It had to repay the first instalment of the loan last year, but this was delayed due to the problems surrounding the project.

The first-phase construction contract of the Red Line, to establish the central station and maintenance centre, is being negotiated by the SRT and a joint venture between SinoThai Engineering and Construction and Unique Engineering and Construction, which had offered the lowest bid at Bt31 billion. However, the Cabinet approved a lower budget of Bt27.17 billion for the first phase.

In 2008, an arbitrator ruled in favour of Hopewell, ordering the SRT to pay Bt12 billion in compensation. Of the total, Bt9 billion is to compensate for the construction cost, Bt2.85 billion for land utilisation, Bt38.7 million for the cost of the bank guarantee issued at a 7.5-percent interest rate, and Bt500 million for the guarantee itself.

However, the SRT petitioned the Office of the Attorney General to forward the case to the Administrative Court, seeking that the court nullify the arbitrator's ruling.

The case is still pending a final ruling by the Administrative Court, besides which the SRT also wants a decision on compensation of Bt200 billion from Hopewell for business opportunity losses.

-- The Nation 2012-03-08

[pipo1000]

First, Hopewell (Thailand)'s demand for compensation of Bt12 billion for unfair trade practice after the SRT cancelled the contract, leaving the project partconstructed. The amount claimed is not only to compensate for the partial construction, but also because the government now plans to use the construction to proceed with the Red Line commuter train project.

Second, the SRT in turn is seeking Bt200 billion in compensation from Hopewell in return for business opportunity losses from land development along the 26-kilometre Bang Sue-Rangsit route, as well as benefit-sharing from the project.

So the government cancels the contract ,then claims compensation from the constructor for opportunity losses?Only in Thailand.

In 2008, an arbitrator ruled in favour of Hopewell, ordering the SRT to pay Bt12 billion in compensation. Of the total, Bt9 billion is to compensate for the construction cost, Bt2.85 billion for land utilisation, Bt38.7 million for the cost of the bank guarantee issued at a 7.5-percent interest rate, and Bt500 million for the guarantee itself.

However, the SRT petitioned the Office of the Attorney General to forward the case to the Administrative Court, seeking that the court nullify the arbitrator's ruling.

I guess another airplane will be confiscated before they will pay up.

Edited March 8, 2012 by pipo1000

[noitom]

The purpose of international arbitration is to avoid costly court processes. The arbitration ruling is to be upheld and presumes that there is an arbitration agreement in place as well as a mechanism to enforce the arbitration in the losing country, Thailand. It can be assumed that Hopewell understood that Thailand had a procedure in place to enforce the ruling of the international arbitrator and also that Hopewell and Thailand signed a mutual agreement. The Nation doesn't clarify these points, but rather makes a statement of "four issues now brought to the surface." One would assume that these four issues were carefully considered by the international arbitrator in reaching their decision to award Hopewell. Why is the newspaper missing these fundamentals about international arbitration?

[Unkomoncents]

Hong Kong's Hopewell was certainly foolish not to do feasibility studies for a country like Thailand. BOT infrastructure megaprojects are extremely difficult to get off the ground in developing economies because of the complexity of funding, the potential for conflict-of-interest (local government agencies, despite their intended disconnect from the funding process, nearly always get involved), and the risk of politicization (Build-Operate-Transfer projects are tough because if the political system is prone to rifts and in-fighting, indigenous resistance to project logistics can shut down the entire plan). The Thai government is well-known for its instability, infighting, and corruption; power in Thailand is so fractured and loyalties are so divided, that the Thai government nearly always looks inept (the floods provided ample evidence of this problem). Proposed MRT-expansion projects have struggled at times because the government is incapable of invoking eminent domain powers. For observers of Thailand, one interesting feature of life in the country is that, for cultural reasons, law enforcement of any type is extremely unpredictable. On an anecdotal basis, I recently observed a woman in a Mercedes being stopped at a checkpoint. The moment she rolled the window down, the police officer received a tirade of obscenities in Thai. Acknowledging her social status and age, the police officer kindly stepped back, put his head down and listened briefly before waving her on. Certainly in a country like Thailand, investors need to be aware of these types of problems. You cannot expect to procure land in a country like Thailand for a project like the Hopewell project, without situations like the one above happening. I'm not sure how Hopewell believed they were going to get the SRT to effectively secure the land for this project. Anyone who knows anything about Thailand knows how complex, confusing and tedious land deals in the Kingdom can be.

Hopewell had a timeline for this project that was incredibly optimistic. I believe they thought significant portions of the project would be completed within ten years. Once the BTS extensions were built, it took years before all the kinks (all various parties were satisfied and legal agreements had been worked out regarding fee structures and other management concerns) were worked out and it could operate, and that was after infrastructure was already in place and ready to run. Hopewell was hopelessly idealistic in its own case.

Throughout the debacle, the SRT was simply an embarrassment; their argument is that Hopewell ran out of money. Well, that's absurd. The circumstances of the case almost certainly point to unreasonably 'expensive' land deals and various other Thai government 'transactions' (see Thailand's ranking in Transparency International's Corruption Perceptions Index) Thais are not known for discerning risks and weaknesses in their own quarters. You can be certain that the ambitions were stratospheric and that knowledge of local conditions were non-existent (among the SRT executives), as is typical in Thailand. Too bad Buddha didn't say, "Know thyself."

Edited March 8, 2012 by Unkomoncents

[MikeOboe57]

'Unbeatable Thailand, Unparalleled Opportunities'

[IMA_FARANG]

Here's the hard truth in a nutshell:

The Hopewell project is like last nights bargirl.

Thank you honey, that was nice, but what have you done for me lately?

The Hopewell project was from another time, and another government...nobody wants to have anything to do with it now.

Certainly not the present government,

The quicker that ALL involved realise that the better it will be for everyone.

Right now, they are all like vultures fighting over a decaying corpse....just picking at stinking bodyparts.

[marquess]

Sadly for those of us living in Northern Bangkok the Red line is probably ten years away if at all, rather than the overly optimistic four years that the gov harping on about. I am sure some international construction firms make good money in Thailand but I just seem to hear so many negative stories about those who seem to get screwed out of their original agreement-- is it a matter of this is business or this is Thailand? On another note, was Hopewell behind the building of the pillars on Nawamin Road?

[noitom]

Hong Kong's Hopewell was certainly foolish not to do feasibility studies for a country like Thailand. BOT infrastructure megaprojects are extremely difficult to get off the ground in developing economies because of the complexity of funding, the potential for conflict-of-interest (local government agencies, despite their intended disconnect from the funding process, nearly always get involved), and the risk of politicization (Build-Operate-Transfer projects are tough because if the political system is prone to rifts and in-fighting, indigenous resistance to project logistics can shut down the entire plan). The Thai government is well-known for its instability, infighting, and corruption; power in Thailand is so fractured and loyalties are so divided, that the Thai government nearly always looks inept (the floods provided ample evidence of this problem). Proposed MRT-expansion projects have struggled at times because the government is incapable of invoking eminent domain powers. For observers of Thailand, one interesting feature of life in the country is that, for cultural reasons, law enforcement of any type is extremely unpredictable. On an anecdotal basis, I recently observed a woman in a Mercedes being stopped at a checkpoint. The moment she rolled the window down, the police officer received a tirade of obscenities in Thai. Acknowledging her social status and age, the police officer kindly stepped back, put his head down and listened briefly before waving her on. Certainly in a country like Thailand, investors need to be aware of these types of problems. You cannot expect to procure land in a country like Thailand for a project like the Hopewell project, without situations like the one above happening. I'm not sure how Hopewell believed they were going to get the SRT to effectively secure the land for this project. Anyone who knows anything about Thailand knows how complex, confusing and tedious land deals in the Kingdom can be.

Hopewell had a timeline for this project that was incredibly optimistic. I believe they thought significant portions of the project would be completed within ten years. Once the BTS extensions were built, it took years before all the kinks (all various parties were satisfied and legal agreements had been worked out regarding fee structures and other management concerns) were worked out and it could operate, and that was after infrastructure was already in place and ready to run. Hopewell was hopelessly idealistic in its own case.

Throughout the debacle, the SRT was simply an embarrassment; their argument is that Hopewell ran out of money. Well, that's absurd. The circumstances of the case almost certainly point to unreasonably 'expensive' land deals and various other Thai government 'transactions' (see Thailand's ranking in Transparency International's Corruption Perceptions Index) Thais are not known for discerning risks and weaknesses in their own quarters. You can be certain that the ambitions were stratospheric and that knowledge of local conditions were non-existent (among the SRT executives), as is typical in Thailand. Too bad Buddha didn't say, "Know thyself."

Well said in highlighting the issues. All the problems that you outline are supposed to be ameliorated with the arbitration agreement and the agreement to abide by the arbirator's findings. The newspaper going on about "four issues now coming to the surface" overlooks the basic fact that the arbitration supposedly evaluated these four issues.

[Payboy]

What do you do when facing a compensation claim for Baht 12bn?

Slap a counter-claim for Baht 200bn.

Who gives a rats arse about arbitration awards.

[Unkomoncents]

Hong Kong's Hopewell was certainly foolish not to do feasibility studies for a country like Thailand. BOT infrastructure megaprojects are extremely difficult to get off the ground in developing economies because of the complexity of funding, the potential for conflict-of-interest (local government agencies, despite their intended disconnect from the funding process, nearly always get involved), and the risk of politicization (Build-Operate-Transfer projects are tough because if the political system is prone to rifts and in-fighting, indigenous resistance to project logistics can shut down the entire plan). The Thai government is well-known for its instability, infighting, and corruption; power in Thailand is so fractured and loyalties are so divided, that the Thai government nearly always looks inept (the floods provided ample evidence of this problem). Proposed MRT-expansion projects have struggled at times because the government is incapable of invoking eminent domain powers. For observers of Thailand, one interesting feature of life in the country is that, for cultural reasons, law enforcement of any type is extremely unpredictable. On an anecdotal basis, I recently observed a woman in a Mercedes being stopped at a checkpoint. The moment she rolled the window down, the police officer received a tirade of obscenities in Thai. Acknowledging her social status and age, the police officer kindly stepped back, put his head down and listened briefly before waving her on. Certainly in a country like Thailand, investors need to be aware of these types of problems. You cannot expect to procure land in a country like Thailand for a project like the Hopewell project, without situations like the one above happening. I'm not sure how Hopewell believed they were going to get the SRT to effectively secure the land for this project. Anyone who knows anything about Thailand knows how complex, confusing and tedious land deals in the Kingdom can be.

Hopewell had a timeline for this project that was incredibly optimistic. I believe they thought significant portions of the project would be completed within ten years. Once the BTS extensions were built, it took years before all the kinks (all various parties were satisfied and legal agreements had been worked out regarding fee structures and other management concerns) were worked out and it could operate, and that was after infrastructure was already in place and ready to run. Hopewell was hopelessly idealistic in its own case.

Throughout the debacle, the SRT was simply an embarrassment; their argument is that Hopewell ran out of money. Well, that's absurd. The circumstances of the case almost certainly point to unreasonably 'expensive' land deals and various other Thai government 'transactions' (see Thailand's ranking in Transparency International's Corruption Perceptions Index) Thais are not known for discerning risks and weaknesses in their own quarters. You can be certain that the ambitions were stratospheric and that knowledge of local conditions were non-existent (among the SRT executives), as is typical in Thailand. Too bad Buddha didn't say, "Know thyself."

Well said in highlighting the issues. All the problems that you outline are supposed to be ameliorated with the arbitration agreement and the agreement to abide by the arbirator's findings. The newspaper going on about "four issues now coming to the surface" overlooks the basic fact that the arbitration supposedly evaluated these four issues.

I know. When can this country expect a better set of English-language dailies? It would do Bangkok some serious good if the city could drum up an independent media outlet or two. The word "independent" might make that a bit dicy though, huh?

[IsaanUSA]

I guess another airplane will be confiscated before they will pay up.

I came in here to post that

[Bagwan]

I guess another airplane will be confiscated before they will pay up.

I came in here to post that

A certain criminal on the run regularly visits HK does he not? Simply hang a trumped up charge concerning his visa and keep him under lock and key while the matter is thoroughly investigated - at leisure of course. The dosh would be handed over tout suite I think..

[airconsult]

This seems a bit muddled...

The contract was initially awarded by the Transport Ministry - the winners were the partnership of SRT and Hopewell. Now the local partner, SRT, wants compensation for the use of their land in the project? Hopewell put up all the money for construction, SRT put up the land..... Sounds like a typical counter-claim to try and reduce their exposure to damages claims.