# _Past Strength and Future Weakness_

What accounts for this good performance? First, the Thai planning system was effective in articulating effective strategic visions and in coordinating government agencies and state enterprises in providing infrastructure accordingly. For example, Thailand has not suffered from power shortages in spite of rapid industrialization, suggesting that the cutbacks in energy spending at various times were consistent with demand trends and energy reserves. Second, Thailand spends a higher percentage of its GDP on infrastructure than many other Southeast Asian countries, even taking into account the significant slowdown during the 1998 to 2003 period (Figure 13.A). Public and private infrastructure expenditure in Thailand equaled 15 percent of GDP in 2003, compared to 7 percent in China and 3 percent in Indonesia and the Philippines, although the bulk of the difference accrues to the power sector.<sup>9</sup> This investment has contributed substantially to promoting Thailand as industrial center in the region, and to establishing a competitive edge over previously competing areas such as the CALA areas and the Manila peri-urban area in the Philippines (Webster and Theeratham 2004).

There are a number of weaknesses that infrastructure delivery going forward has to address (Webster and Theeratham 2004). First, some of the high-profile projects, such as the new Suvarnabhumi airport or the Bangkok mass rail system network, are to be completed between 10 to 20 years later than originally proposed. Second, participation of stakeholders early on at the project design stage is fairly limited,<sup>10</sup> and detailed project design is often postponed until after construction has begun. These factors contribute to conflict and holdup. Third, infrastructure choices should be made before land use patterns become so established that retrofitting infrastructure becomes enormously expensive.

Fourth, while Thailand ́s infrastructure investment may look healthy compared to its neighbors, it is still feeling the pinch from the Asian crisis. In 2003, private investment was just over half the 1996 level, accounting for 15 percent of GDP, compared to 32 percent of GDP in 1996 (Figure 13.B). Similarly, public investment in 2003 was no more than 60 percent of the 1996 level. There are signs of a recent pick-up. Private investment grew on average by 13.5 percent in 2003 and 2004, helped by capacity utilization rising above 70 percent (Figure 13.C) and good corporate earning ratios. Domestic cement sales, imports of capital goods and construction permits are on the increase, and domestic care sales have already reached pre-crisis levels (Figure 13.D). Investment promotion packages from the Board of Investment also point upwards, although promoted firms still are reluctant to lunch the start of their operations and new capital investments registered at the Ministry of Commerce remain low (Figure 13.E and Figure 13.F).

> 9 NESDB’s estimates are much lower due to a very narrow definition of infrastructure (Webster and Theeratham 2004).  The international comparisons are indicative only due to data gaps.

> 10 The Environmental Impact Assessment for the Suvarnabhumi airport was less than five pages long and not publicly disclosed, even though 600,000 people are projected to live in this area by 2020.

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