Yuthana Promsin, Partner and Co-founder of Juslaws & Consult, on Thailand’s push to encourage the use of PPPs: Viewpoint

Anticipating the opportunities and challenges of its economy’s transition into the ASEAN Economic Community, Thailand has overhauled its approach to public-private partnerships (PPP) to encourage both greater participation by government agencies and private investors and PPP development in areas that will lead to the more efficient construction and operation of public facilities important to the kingdom’s future. While there has been a law authorising PPPs in Thailand since 1992, there were only 40 projects approved under that law. In 2013, the Private Investments in State Undertakings Act (PISUA) became effective. It sought to revitalise the PPP sector by establishing the Private Investment in State Undertakings Policy Committee, chaired by the country’s prime minister, to guide and oversee PPP activities and add clarity and controls to the process of proposing and conducting PPP projects.

The committee was tasked with working with the State Enterprise Policy Office (SEPO) to prepare a strategic plan establishing a policy framework for PPP investments in various state activities, including the designation and prioritisation of projects, the targets for private investments, and implementation timeframes. The committee was directed to consider the opinions of state agencies and members of the public. The strategic plan, when completed, was then subject to approval by the Cabinet.

The PISUA made substantial changes to the approval process for projects. For all projects over BT1bn ($30.1m), the governmental agency responsible for the project is required to retain a consultant approved by the committee to prepare an independent project appraisal report, including a feasibility study, to be submitted to the cabinet minister responsible for consideration and approval. Next, the agency must submit the project appraisal report to SEPO, which may thereafter request amendments to the report. If SEPO approves the project, it is then submitted to the committee for consideration and approval. If SEPO does not approve the project, it is sent back to the relevant cabinet minister, who has the right to present it to the committee for consideration regardless of any objection from SEPO. Projects that are approved by the committee that require government funds or loan guarantees require further approval by the Cabinet. A number of time limits are set to encourage the prompt consideration and processing of applications for PPP project approvals.

Approved projects are presumptively required to undergo a competitive bidding process, which may be waived with the approval of the committee in certain circumstances. Final approvals of the private investor selected and the terms of the investment contract are up to the Cabinet. PPP projects are then put under the watch of a supervisory committee until they are completed. PPP projects that do not exceed the BT1bn threshold are required to comply in principle with the foregoing procedures, with the exception that Cabinet approval is not required and the use of an independent consultant to prepare the appraisal report is not mandatory.

There are substantial benefits of PPP investments to both governmental and private investor stakeholders. For the government, it allows infrastructure and other public service improvements to be made with off-balance-sheet financing. It also promotes innovation and cost efficiencies by allowing private investors to do what they do best. For the private investor, it allows access to secure, long-term investments that can extend for 20-50 years and to markets that were traditionally serviced by established contractors lacking in the strong motivation to innovate and maximise efficiencies due to the risks inherent in investing their own funds into projects. Thailand’s resurgent efforts to open its public projects to private investment appear poised to lead to synergistic improvements in its position in the ASEAN Economic Community.