Public-private partnership opportunities for foreign investors in Thailand
On the to-do-list before the general election date: The revised PPP Promotion Act, passed through the National Legislative Assembly (NLA) already in 2018 and is awaiting royal approval before being published in the Royal Gazette. The new act allows state agencies to propose projects and open the way for joint investments with private investors in infrastructure projects and commercial development nearby. The prospective PPP developments cover 12 categories of the national infrastructure plan — roads (highways and motorways), railways, airports, seaports, water management, irrigation, energy, telecommunications, science/technology, hospitals, schools and housing for low-income earners.
The need for speed on Thailand’s late public-private partnership party
A public-private partnership enables the state sector to outsource public services to the foreign and domestic private sector and private companies to invest and engage in public infrastructure and energy projects. The economic benefit of public-private partnerships for public welfare is disputed, but they can create an attractive business opportunity for foreign enterprises.
Under Thailand’s legislation, a PPP is defined as “Public sector’s investment with the private sector in any form or allowing private sector investment by issuing a permit, granting of a concession or of any form of right”. It is the declared objective of the legislation to promoted PPP investments by standardizations, facilitation, and transparency.
Thailand is currently in a rush to successfully realize PPP projects of various scope and size. This opens a particular window of opportunities for foreign investors in Thailand’s infrastructure and energy, but also other industries.
A brief history of the regulatory framework for PPPs in Thailand
PPSU Act 1992: Thailand’s experiences with PPP schemes are mixed at best. Its first legislation, the Private Participation in State Undertaking Act 1992, had no success.
PISU Act 2013: The Private Investment in State Undertaking Act 2013 had the bad reputation to be exorbitant complicated, lengthy and inefficient. Its track record is frustratingly short and too many foreign business opportunities are left unused. Typical time-wasters are extensive project review periods, the EIA environmental impact assessment process, and committee decision-making procedures. In addition, there are gray areas of the bureaucracy, a frightening criminal liability and a lack of transparency.
PPP EEC Track 2018: Under the EEC legislation, a fast track structure has been implemented.
PISU Promotion Act 2019: A substantial revision of the PISU 2013 shall speed up the PPP projects process. This shall reduce the time for project approval by the PPP board from an average of 44 months under the current law to about six months. The law will also specifically define PPP projects by giving priority to infrastructure projects, which the government wants to promote, such as roads, railways, airports, and seaports. The scope of the PPP projects would be narrowed and it would not cover public land rent. The new draft PPP law has been approved by the Cabinet in December 2018 and shall be passed by the National Legislative Assembly (NLA) before the general election scheduled for February 2019.
Not ignoring the initial difficulties for PPP schemes in the past, the latest developments show clear signs of a change for the better. Correctly applied, the new legal and regulatory framework gives well-advised foreign enterprises the chance to participate in Thailand”s PPP ventures not only fair and easy but also successful and sustainable. To be late to Thailand’s public-private partnership party might be a costly experience.
PPPs in the fast lane: Seven swift opportunities
The development of Thailand’s PPP environment is a work in progress. The following seven-point list should see merely as an inspiration than a menu card. Specific advice on the opportunities in the given case is available.
1. PISU slow-track: The government gained some experiences with the existing legislation, and inefficiencies and glitches are steadily removed. This does not make the slow-track to the all-time favorite for foreign enterprises, but it is still one of seven possible routes. Projects under the PPP Masterplan 2015 – 2018 are promised to receive support and close monitoring from the public sector
Under the PPP Law (PISU Act), project preparation takes eight to ten months, project proposal takes six to eight months, and private selection requires seven months till the project is ready for bidding. After an additional 12 to 18 months passed, the contracts can be signed, resulting in a total duration of 40 months.
2. PISU fast track: Some projects are already fast-tracked but the government with conventional means. The shrunk time schedule of nine instead of 25 months is in most cases not achieved in practice. At least it shows the efforts for improvements and the awareness of a need for acceleration. Current fast-tracked projects include electric train lines, high-speed lines, and motorways.
Under the fast track by the PISU Act, project preparation is reduced to 3.5 months. Project proposal takes 4 months. private selection requires six weeks and after 9 months the project is ready for bidding. After a total duration of 20 months, the fast-tracked contracts can be signed.
3. BOI: An investment promotion by the Board of Investment can under some aspects act as an accelerator for a PPP as well. More details on request.
4. PPP EEC TRACK: Under the Eastern Economic Corridor Act, PPP projects in the three Thai provinces Rayong, Chonburi, and Chachoengsao obtain a foreign investment-centric regulatory framework which speeds up PPP processes by cutting red-tape and avoiding the engagement of one aspect by various authorities.
Under the new PPP EEC TRACK, project preparation and project proposal take 3.5 to 4.5 months, while private selection requires 4.5 to 5.5 months. The project is ready for biddings after 3.5 to 4.5 months and the contracts can be signed after eight to ten months.
The PPP EEC TRACK system follows five requirements (“5Cs”), which are certainty, consolidation, concurrence, checks & balances and commitment.
5. Superfast EEC: A super fast PPP track with a process duration of three months is under discussion. The fast as it gets for selected projects, hopefully not only available for Sino-Thai PPPs.
6. Thailand 4.0 will make more tools and modules available to speed-up PPP in whole Thailand.
7. S44IV: Section 44 of Thailand”s interim constitution gives the army the ultimate and incontestable power to bypass existing laws to remove barriers and please foreign investors. This is the “nuclear option” to realize public-private partnership ventures on the fly.
Professional services from Bangkok
PUGNATORIUS Ltd. supports and advises foreign companies to access the Thai infrastructure markets. Huge infrastructure projects are one of the law firm’s areas of competence, long-standing experience, and unique market reputation. A “fit for purpose” legal and tax support of infrastructure ventures for foreign companies, investors, and financial institutions. The law firm offers professional assistance, advice, and support in Thailand regarding these steps:
- Monitoring and short-listing of current government procurement projects
- Purchasing of bidding documents and formal registration of bidder
- Support and assistance in the preparation and timely submission of bids
- Monitoring of the bidding process and Thai developments
- The accomplishment of legal requirements and efficient tax structures
- Overall legal project management in Thailand and continuous reporting
The terms for assigning PUGNATORIUS Ltd. are described at “Legal advice and transaction support for foreign investments in Thailand’s roads, rails, ports, and airports.”