Who wants in on the EEC?

• Oct 09, 2017

The much-awaited Eastern Economic Corridor (EEC) bill has already passed its first reading by the National Legislative Assembly (NLA) and is expected to be implemented by the end of the year.

The expectation is that the project will attract immediate foreign direct investment. The reality, however, may be quite different as there are several emerging factors that could force foreign investors to take a wait-and-see attitude before committing themselves.

Most foreign investors interviewed by the Bangkok Post said they were more concerned with the content of the bill rather than its implementation.

Among them is Japan, ranked as the biggest foreign investor in 2016 with total investment value of 79.6 billion baht from 284 investment projects, according to the Board of Investment (BoI) data.

The Japan External Trade Organization (Jetro) said the focus is not so much on the timing of its implementation as the content of the law: it should be investor-friendly and with well-planned fiscal spending to ensure the development of massive infrastructure projects that will really link the EEC to the global arena.

“Potential investors hope the content is as friendly for investment as possible and that it will be firmly retained for a long time without any significant changes,” said Jetro president Hiroki Mitsumata.

The Japanese Chamber of Commerce in Bangkok recently presented a paper titled “Expectations of Japanese Companies in Thailand towards the EEC Region”, specifying investor-friendly regulations and well-planned fiscal spending as foundations for further investment in EEC.

PPP Regulations

Jetro said it needs appropriate public-private partnership (PPP) regulations, to be applied to big investment in infrastructure aimed at connecting the EEC to other regions of Asean and the rest of the world.

Although the Thai government has mentioned clearly that huge infrastructure projects in the EEC come in the form of PPPs, there are no clear details on the proportion of investment costs and the potential risks that involved parties would shoulder.

Stanley Kang, chairman of the Joint Foreign Chambers of Commerce in Thailand, said foreign investors remain in the dark about the details of the PPP.

“We all know that the government will invest in those mega infrastructure projects, but when and how they will start, particularly the PPP model specifics, remain obscure,” said Mr Kang.

Massive infrastructure projects on the EEC development list include: the 215-billion-baht U-tapao airport expansion, the Map Ta Phut deep-sea port expansion (10 billion baht), the Laem Chabang deep-sea port expansion (35 billion), the double-track railway (64 billion), the high-speed train (64 billion) and the motorway (35 billion).

The projects need to pass environmental health and impact assessments (EHIA), which could be party to potential socioeconomic problems and strongly opposed by local communities as well as non-governmental organisations, according to the Thailand Development Research Institute (TDRI).

TDRI president Somkiat Tangkitvanich said the biggest challenge is the expansion of the Laem Chabang port, which involves land reclamations, which the villagers would strongly resist.

“I think the toughest issue is the EHIA for land reclamations and the strong opposition it faces, which could lower investor confidence in the EEC,” said Mr Somkiat. But he agreed that the seaport expansion would improve the connectivity of the EEC to the world.

A prominent example is the coal-fired power plants in the southern coastal cities of Krabi and Songkhla, which have been delayed for more than two years due to opposition from local communities, forcing the government to void the previous EHIA and conduct a second one.

This has resulted in another two years of delayed implementation, leaving the possibility of power shortages in the region unresolved.

Insufficient Water Supply

Mr Mitsumata also said that a stable supply of electricity and reinforcement of water management for droughts are necessary for the EEC — factors most Japanese companies are worried about.

Mr Kang concurred on the water issue, saying this is the biggest issue investors want sorted out, through a clearer management plan from the government.

“The government tries to assure investors there will be sufficient water supply for new industries in the EEC. However, they have yet to clarify how to secure water supply in the long run,” said Mr Kang.

Recently, Universal Utilities Plc, a tap water provider to mainly the eastern industrial areas, said it plans to use raw water from Cambodia’s Stung Nam hydropower dam to meet rising demand in the EEC.

But the plan is widely seen as costly and would make water prices uncompetitively high, causing the government to assign Royal Thai Irrigation the task of conducting a new study to improve the water supply projects.

It is also unclear which natural water sources will be used for the EEC and the costs of producing tap water to supply the EEC industrial zone.

“Water supply is a long-term challenge, particularly in the dry season. There are limited raw water resources in the EEC areas but the demand is about to rise sharply with the development of the EEC,” said Mr Somkiat.

According to the SET-listed Eastern Water Resources Development and Management Plc, total raw water from major natural water sources in the eastern areas is logged at 509 million cubic metres. Of the total amount, some 344 million cubic metres are used for the industrial zone, while the rest is allocated to nearby communities. In short, there is not enough water to supply the whole EEC.

Panya Consultants Co executive director Choolit Vatcharasinthu, who is also the water adviser for Royal Thai Irrigation, said the government has not yet said how it will manage the use of natural resources in the EEC, particularly water supply over the next 10 years.

“In fact, Thailand has the potential to have its own water supply. What we need is new water reservoirs that have to be constructed since the Stung Nam water project is quite expensive and might not be worth the investment,” said Mr Choolit.

He said the tap water supply from the Stung Nam project could cost up to 14-16 baht per unit, well above the current 2-3 baht and that would render all investment in the EEC uncompetitive.

Mr Choolit estimated that water demand in the first phase of EEC over the next five years could reach 200 million cubic metres per day.

“At this stage, we have ample raw water supply, but everything depends on the management of the supply,” he said.

NLA concern

Industry Minister Uttama Savanayana has continued to reiterate that the government is listening to the concerns of potential investors and is trying to tackle all the problems in efforts to win their confidence and encourage private investment.

The government has admitted there are some structures under the PPP model that might not be suitable for investment, but Mr Uttama said it is working on forming appropriate PPP regulations to facilitate investor needs.

“We know there are some glitches with the PPP and we are trying to tackle the problems. We are also trying to shorten all the PPP processes since we aim to start opening auctions for several EEC infrastructure projects by next year,” said Mr Uttama.

He said the government has also cut down on detailed paperwork and complicated legislative processes to shorten the PPP execution process from six months to four to help accelerate the start of the EEC projects next year.

However, NLA members have warned against being too accommodating to investors in the EEC bill, as favouring foreign investors could backfire on the government as locals could lose out on the benefits of the EEC.

This opposition from NLA members is seen as a concern that could drag on and result in further delays in implementing the EEC bill.

Source: https://www.bangkokpost.com/news/politics/1339203/who-wants-in-on-the-eec-