EDITORIAL

Debt burden gambles with the country's future

The Nation

BANGKOK: -- Massive infrastructure projects need to be planned strategically for the long-term before the govt pumps billions in public money into them.

The government must lay down a clear strategy for how it intends to spend the Bt2 trillion that it wants to borrow to finance infrastructure projects over the next seven years. Without a clear-cut working plan, the additional loans will end up being the burden of future generations without driving the economy forward.

The Finance Ministry is set to seek Cabinet endorsement for legislation to allow the government to borrow the Bt2 trillion. But the government should first have come up with full details, including the need for and the expected results of the spending, instead of simply setting the amount needed.

Each infrastructure project should come with its spending duration, the period to repay the debt, and the target for benefits that the project should produce. These projects will require a massive amount of money and will create long-term debt obligations, especially for future governments, which could face as-yet-unknown fiscal strain.

The government has vowed to balance the budget by 2017 with the borrowed money, but that claim is based on the assumption that current spending will produce effective and sustainable results.

Originally more than 70 per cent of the budget was earmarked for transport and logistics, especially railway projects, to help reduce the country's reliance on imported energy.

These massive projects are susceptible to corruption. And there is speculation that politicians are trying to divert a sizeable amount of the planned budget to finance local projects such as roads instead of railways, in order to gain short-term political capital.

If that proves to be the case, the Bt2 trillion will not serve its stated purpose of building infrastructure for the long-term benefit of the country as a whole.

The government is not known for implementing cautious spending plans. All of its projects so far have been aimed at fulfilling political promises without any thorough evaluation of the expected results. In addition, many projects are contradictory to the government's pronounced policy. For instance, the first-car purchase scheme, on which the government spent Bt90 billion to finance a tax break, runs counter to its own stated energy-efficiency policy. The government should have spent this huge sum to finance an urban mass-transit system or a national railway project, either of which would help improve logistics in the long-term.

The government must formulate short-, medium- and long-term plans for four areas of infrastructure: financial structure, legal structure, social structures such as education and public health, and transport and communications system.

Instead of creating more debt in the public sector, the government should promote public-private partnership projects and allow the private sector to accelerate these projects by sharing in the financial and technical risks. The model has proved suitable in many other countries, so why not here?

The government has already provided privileges to big corporations in Thailand through tax breaks and other incentives. The amount of private investment in Thailand should grow further and become commensurate with the overall expansion of the economy in the next few years. Big corporations with political connections in Thailand tend to play it safe by asking the government to use taxpayers' money to absorb the initial risk before taking over a project after it has proved fruitful.

The government should also ensure links between the three sectors of government, private industry and educational institutions, in order to promote and secure the competitiveness of the country in the long term. Many educational institutions have made progress in developing innovations, but there is insufficient infrastructure to translate their innovative work to commercial viability.

In addition, every big infrastructure project must respond to a national agenda of strengthening the three key areas of business sustainability, environmental sustainability and the sustainability of human resources. Otherwise, this money, like so much else, will simply end up being the burden of future generations to repay. If that becomes the case, what the government is doing now will be a complete waste of public money.

-- The Nation 2013-01-24

No-one can afford to have 50% debt to income. The old days of banking when applying for mortgages any other type of loan was max'd out at 25% of net income. Past the first digit this is all zero's but far larger sums. The Govt has the country geared and in no way can it afford to be, based on future 'unearned' income. Thailand it is time to express your sentiments at the polls if you want to not put your families, for generations to come, in debt to a bunch of criminals running the country. I would love to see a ceiling capped at say 30% of GDP. That would slow it a bit.

Edited January 24, 201313 yr by Locationthailand

It's gonna be a good year:)...the newbies are beginning to understand what politics is all about......time to start getting the Cayman accounts opened...

"The government should". "The government must". The government ought to".

In this case the government does what it dam_n well wants to because they have the mandate of the people."

The chickens that will eventually come home to roost are at the moment merely eggs.

With a very strong baht at the moment, it will be increasingly hard for Thai exports.

But as many have mentioned on here, Thailand's saviour bides his time in Dubai.

Jam today.

(for those sat at the table)

Jam today.

(for those sat at the table)

OR this, which may apply to this country.

http://bob.bob.bofh....terband/JT.html

....so much for 'love of Thailand'.....what a travesty.....when will this rape, pillage and plunder, end.....

(...typical sociopathic payback.....caught and punished for wrongdoings.....almost.....now Thailand will be made to pay...one way or another...)

and when you join the AEC, you can add / copy all the mistakes of the EU (which used to be the EEC).

Jam today.

(for those sat at the table)

Exactly. It's all about quick turnover at the PT trough not long term strategy.

The government has vowed to balance the budget by 2017

Do they have a mandate to govern till 2017?

Or is she counting on winning another election?

If there must be another election in that time and PT lost no doubt they would be saying the new Govt cant ballance the budget but we could have if you had returned us.

Plan??? What plan??? There has never been a plan in the first place on a society where status and face comes PRIOR to the well being of the faceless and "lost-on-translation-confused International society"

Rug it under the table and "Not-my-problem"-type of attitude will steer Thailand into the Abyss of ASEAN

Edited January 24, 201313 yr by MaxLee

No doubt there will be more FIDF-type sweepings under the carpet to make the debt percentage look good.

There is opportunity in the making, for the careful few..

The government has vowed to balance the budget by 2017

Do they have a mandate to govern till 2017?

Or is she counting on winning another election?

If there must be another election in that time and PT lost no doubt they would be saying the new Govt cant ballance the budget but we could have if you had returned us.

I think the next election is all bought and paid for on the never never, isn't it?

Never in the field of economics has so much been owed by so many to so few.