Delivering Thailand's Infrastructure Pipeline - The PPP push

The Kingdom of Thailand has announced an ambitious pipeline of mega infrastructure projects to increase connectivity and support economic development in the region – including multiple rail developments, expressways, hospitals and ports.

In this article we provide a high level overview of the laws the Kingdom of Thailand has introduced to support the delivery of its infrastructure pipeline, and mechanisms to attract domestic and foreign investment into infrastructure.

The PPP Act

Overview

On 11 March 2019, the Public-Private Partnership Act B.E. 2562 (2019) (PPP Act) was enacted to govern public private partnership (PPP) projects in Thailand and provide a transparent framework for the development and delivery of such projects.

The PPP Act replaces the previous Private Investment in State Undertaking Act B.E. 2556 (2013) (PISU Act). The PPP Act largely follows international best practice, providing a structure within which PPP projects can be developed by a government entity and provides a process to guide such projects from conception through to delivery. It also aims to facilitate domestic and international investment, streamline the review and approvals processes (which were previously criticised for being too lengthy under the PISU Act) and increase transparency of those processes.

The PPP Act applies to infrastructure projects that:

• require private sector funding;
• are valued at over THB5 billion (approximately USD182 million) (or are valued at under THB5 billion if the Commission requires);and
• fall within one of the following sectors: road, rail, air, ports (or transport by water), water management (irrigation, water works or water treatment), energy, communications, public health, education, housing, conference centres and any other projects provided by Royal Decree.¹

The PPP Act also establishes the Public-Private Partnership Policy Commission (Commission) to guide decision making. The Commission comprises up to 17 members from both the public and private sector, including the Prime Minister, Minister of Finance, Secretary General of Board of Investment, Director-General of the State Enterprise Office, relevant experts and private sector participants from the Thai Bankers’ Association, Board of Trade of Thailand and Federation of Thai Industries.²

The State Enterprise Policy Office PPP Unit (the Office) supports the Commission by evaluating projects, drafting documents for approval by the Commission, developing information databases and running training on PPP projects to project handling agencies.³

Developing a project

There are three key stages in developing and delivering a PPP project under the PPP Act:

Project approval

The Office is responsible for preparing ‘project preparation plans’ for approval by the Commission. In June 2020, the Commission approved the Public-Private Partnership Project Preparation Plan for 2020-27, listing a total of 92 projects (the Plan).⁴

The project handling agency responsible for developing the relevant project listed in the Plan is required to undertake a feasibility study, outline any supporting measures required to deliver the project (such as under the law on investment promotion or land arrangements, prepare principles for the project (such as objectives and scope of the project, the form of the PPP and duties and responsibilities of the State and the private party) and submit these documents for approval by the responsible Minister and then the Commission.⁵ Once this is approved, the Office will then propose the PPP project to the Council of Ministers for approval.⁶

Selecting a private sector partner

The selection and appointment of a private party is a competitive bidding process (unless other selection methods have been approved by the responsible Minister and the Commission).⁷ The broad process for private party appointment is as follows:

Implementation

Once the partnership agreement is signed, the responsible Minister appoints a supervisory committee (comprising of a representative from the responsible ministry, the Office of the Attorney-General and the Office) to monitor compliance with the partnership agreement, assist with dispute resolution and provide regular reporting.⁸

State rights

If it is determined that a project could adversely affect citizens, property or the economy, or if in the interests of national security, the project-handling agency, with the Council of Minister’s approval, is empowered to: step into the project (or assign another person to the project temporarily), amend the PPP contract or terminate the PPP contract.⁹ In such circumstances, compensation will be payable to the private party if the cause of the action is not attributable to the private party. This is a significant power retained by the State that may be controversial for private sector sponsors and contractors.

PPP Promotion Fund

The PPP Promotion Fund has been established within the Ministry of Finance.¹⁰ Appropriation requests can be made to the Fund Committee (being the Permanent Secretary of the Ministry of Finance, Secretary-General National Economic and Social Development Board, Budget Bureau Chief and the Director-General of the Comptroller General’s Department) of the PPP Promotion Fund where a project-handling agency does not have budget for the appointment of specialist advisers or training in connection with PPP projects.¹¹ This will assist in ensuring that projects taken to market are structured on the basis of international best practice.

Establishment of the Eastern Economic Corridor

The Eastern Economic Corridor (EEC) is a special economic zone on Thailand’s eastern seaboard (covering an area of 13,000 km² across the Chachoengsao, Chonburi and Rayong provinces). It was established under the Eastern Special Development Zone Act B.E. 2561 (2018) on 14 May 2018 (ESDZ Act).

Key infrastructure projects currently being undertaken within the EEC include:

• U-Tapao Airport and Eastern Airport City (establishing a third main airport in Thailand);
• High-Speed Rail Connecting 3 Airports (mass transit rail project linking Don Mueang International Airport, Suvarnabhumi Airport, and U-Tapao International Airport);
• Leam Chabang Port Phase III (construction of a new deep sea port);
• Map Ta Phut Industrial Port Phase III (expansion); and
• U-Tapao Aircraft Maintenance Centre.

Infrastructure projects being undertaken in the EEC benefit from the “PPP EEC Track”, accelerating processes to allow contract award within 8 - 10 months. Project proponents benefit from a central point of contact to process licences, approvals and permits. The broad process is as follows:¹²

There are also 12 targets industries for promoting advanced technology and innovation within the EEC as follows:

• Next-generation Automotive;
• Intelligent Electronics;
• Advanced Agriculture and Biotechnology;
• Food for the Future;
• High-value and Medical Tourism;
• Automation and Robotics;
• Aviation and Logistics;
• Medical and Comprehensive Healthcare;
• Biofuel and Biochemical;
• Digital;
• Defence; and
• Education and Human Resource Development.

Under the ESDZ Act private sector entities operating within the ‘special economic promotion zones’ of the EEC region benefit from additional privileges.¹³ Depending on the location and industry, these privileges include exemptions for corporate income tax, exemptions from import duties on machinery and raw materials, rights to lease state land for up to 50 years (renewable upon approval for a further 49 years) and the ability to employ unskilled foreign workers. Specific privileges have also been announced in respect of the production of trains and equipment relating to the rail system, recognising the role of rail in mass transit in the region.

Other opportunities for Australia

For our Australian clients, it is important to remember that the Thailand-Australia Free Trade Agreement has eliminated a number of tariffs on goods imported from Australia.

Conclusion

The PPP Act and ESDZ Act are positive steps to facilitating the delivery of Thailand’s pipeline of PPP projects, and attracting greater foreign and local investment to the region. These laws facilitate the necessary regulatory framework, seeking to balance the need for timely delivery and robust assessment.

¹Sections 7, 8 and 9 PPP Act.
²Section 13 PPP Act.
³Section 21 PPP Act.
⁴Section 12 PPP Act and for a copy of the English translation of the Plan.
⁵Sections 22, 23 and 28 PPP Act.
⁶Sections 28 and 29 PPP Act.
⁷Sections 32 and 34 PPP Act.
⁸Sections 43 and 44 PPP Act.
⁹Section 50 PPP Act.
¹⁰Section 51 PPP Act.
¹¹Section 54 PPP Act.
¹²See here.
¹³See Announcement of the Board of Investment No. 6/2561 and Announcement of the Board of Investment No. 2/2563 extends the application period for such incentives to 30 December 2021.

If you would like to understand more about the PPP Act, please contact: