Thailand to launch big infrastructure projects next year

BANGKOK (Reuters) - Increased spending on infrastructure projects by Thailand’s military government should help boost economic growth rates by about 1 percentage point over the next two years, the transport minister said on Monday.

Arkhom Termpittayapaisith told Reuters that some 20 infrastructure projects worth nearly 1.8 trillion baht ($50.2 billion) and covering rail, roads, air transport and ports throughout Thailand should get underway before 2018.

“The year 2016 and 2017 will be the year of public infrastructure construction, the highest in history,” he said in an interview, adding that the cabinet is expected to approve the projects, some of them long-expected, on Tuesday.

Financing will come from various sources including the government budget, borrowing and public-private partnerships.

Thailand is hoping the projects will help boost the economy, Southeast Asia’s second-largest, which has yet to regain traction more than a year after the military overthrew a democratically-elected government in a coup.

Slow growth in top trade partners has cut demand for exports while high household debt has strangled consumer spending.

The projects include a Sino-Thai rail project worth 468 billion baht that will cover a total distance of 873 km and connect the city of Nong Khai on the Thai-Laos border with the capital Bangkok.

“It will become a legacy if we can create this connectivity here,” Arkhom said, referring to the junta whose coup last May ended prolonged political unrest.

Asked what the projects’ impact on growth would be, Arkhom said: “We see it around 1 percent.” He did not elaborate but added that the likely boost to GDP “is not considered small”.

China is offering to lend to the project at an interest rate of 2.5 percent, but Arkhom said Thailand wanted a lower cost of 2 percent and might seek to borrow from domestic sources.

The two countries will next discuss the project on Dec. 3-4, he added.

The project could be a boon for Thai trade and tourism and strengthen China’s strategic foothold in a country that has seen its traditionally strong relationship with the United States cool since the coup.

The state planning agency forecasts economic growth of 2.9 percent this year and 3.0-4.0 percent next year, driven by investment. The economy grew just 0.9 percent in 2014, the weakest rate in three years.

($1 = 35.86 baht)

Editing by Orathai Sriring and Catherine Evans