| ผู้เขียน | Wirot Poonsuwan |
|---|
Effective in March this year, the new Public Private Partnership Act of 2019 or the New PPP Act came into force and, with a nice surprise, replaced the PPP Act of 2013 in its entirety after only six years since its enactment. As an alternative to the typical bidding process, the New PPP Act is breaking ground to offer a one-on-one dealing to attract large private capital and expertise from overseas alone or in alliance with local conglomerates.
PPP revitalized—100% foreign ownership allowed:
In an effort to return to the golden era of the late 1980s, when the PPP industry was liberated and infrastructure projects in Thailand reached its peak of prosperity, PPP laws one after another were enacted just to meet with a lackluster interest from the private sector, especially those from industrialized countries.
Participants in PPP project selection process represent one limited pattern: few repeated groups of local giants to add probability of getting the projects, joint-ventured with multinational owners of technology from abroad.
There is no variety. Winners of competitive bidding are always consortiums led by a few local big names.
100%-owned foreign operators of Thai infrastructure projects are unheard of. That’s about to change.
Huge foreign resources of capital and technology have remained untapped. Overall international interest in Thai PPP is low, unavoidably resulting in the nation’s infrastructures chiefly funded by government procurement budgets, shooting up the country’s public debt level, with a mere fraction financed by PPP.
The main purpose of the New PPP Act is aimed at stirring private interest on the global scene, thrusted by investment promotional privileges and the Eastern Economic Corridor special rights.
23 mega projects in pipeline:
Inter-city high-speed rail, urban elevated trams, international airports, and deep-sea ports, those are familiar transportation projects that appear in the news frequently either in the bidding process, past the bidding process, or near signing the contract, even in some selection disputes.
Many of these privately funded projects have smoothly proceeded to construction stages, completion, and testing prior to commercial operation. They are all real tangible successful projects.
But the number of such projects is only few and far between among all the 23 project types in various sectors of businesses listed in the government’s 5-year strategic plan of 2017-2021. The official total investment budget of the projects in the plan is humongous: 1.62 trillion baht or roughly USD 52 billion!
It is two more years to go until the end of the plan and, notwithstanding the hype on high-speed rail, airports and seaports; most of the 23 sectors just sit there, waiting for private investors to pour their money in.
Investor’s point of view:
Under all the old PPP laws, foreign investors, who own technology, expertise and capital, and who are driven by profits and rates of returns, were thinking this: “Why should I initiate the project and approach the Thai government when in the end there will be a compulsory competitive bidding and I may not get the project anyway?”
This mindset sometimes transpired after a Thai government agency or state enterprise, generally not well-versed in PPP laws themselves, wishes to launch a project on their own after initially drawing an attention and interest from and entering into a preliminary discussion with a foreign multinational prominent in their field—not realizing there are complications and steps under the old PPP laws that the agency had to follow.
To move ahead with the owner agency, the multinational had to study the old PPP law to determine the legal feasibility of the project.
Nearly always, those multinationals were turned off by the old PPP laws, including the PPP Act of 2013, and thought it would be a waste of their money and time to promote the project further as there is to be an international competitive bid, in which they had little hope in winning. The multinational withdrew and preferred to stay away.
Old laws, obsolete ways:
The first PPP Act of 1992 was wrongly focused on anti-corruption; that’s why it was cancelled. The last PPP Act of 2013 placed too much emphasis on transparency—and it did not work. Nothing seemed quite right.
There was a brief mention of a one-on-one dealing in the old PPP Act of 2013, but there were no details and the bidding requirement was overwhelming.
The PPP mood has been dampened. Multinationals wish there were no PPP laws at all or the old PPP laws would have to be drastically improved.
Cabinet approval is decisive factor in New PPP Act
The New PPP Act 2019 is a change in the status quo that foreign investors have been looking for: an ability to singly seek a Thai infrastructure project as a 100%-foreign owned entity with no reliance on Thai partners and without any needs to walk through a bidding selection process.
The new law more elaborately contains three sections dealing with one-on-one scenarios, where an interested investor, foreign or Thai, can undertake an expensive infrastructure project using its own money without a need to participate in competitive bidding.
There are six preconditions to selecting a private-sector investor to run a PPP project without any bidding required:
(1) The project must be in alignment with the 23 project types announced by the PPP Policy Committee, which in turn reflect the master plan developed by the National Economic and Social Development Board. This step is easily and readily implementable;
(2) The owner government agency must specify a reason why a selection of the private sector by bidding should not be required;
(3) That reason is in conformity with rules on no-bidding to be prescribed by the PPP Policy Committee (to date no such rules are available);
(4) The no-bidding exception is approved by the cabinet minister in charge of the government agency;
(5) The no-bidding method must be approved by the PPP Policy Committee which is chaired by the Prime Minister and staffed by top economic, development and legal cabinet ministers and bureaucrats; and
(6) The Cabinet approves of the selection without bidding.
Next steps going forward:
In step 5, an unprecedented significant positive breakthrough the new law provides is for the private-sector investor to be able to appear in front of the PPP Policy Committee to present its case and answer questions.
Hopes of active participation by the private sector in developing infrastructure projects crucial to national advancement and the betterment of Thai people’s quality of life have been rekindled by the new law. The PPP Policy Committee will just have to quickly issue rules governing the no-bidding selection method to clarify any remaining doubts and seriously carry them out.
Wirot Poonsuwan is the Senior Counsel and Head of Special Projects at Bangkok law firm Blumenthal Richter & Sumet and can be contacted at [email protected].
