Thailand is deeply in debt
The parliament debated heatedly for two days, but the result of the vote was already certain in advance. Yesterday, the House of Representatives gave the green light to the government's infrastructure plan, which will borrow 7 trillion baht over the next 2 years.
But the parliamentary debate is not yet over. A committee will check the bill, for which it will have 30 days, and then it will be discussed (and voted) in a second and third term.
According to the Thailand Development Research Institute (TDRI), the country is at high risk of entering a vicious debt cycle, similar to many European countries that are struggling to finance their budget deficits. Not only the 2 trillion baht (payable back in 50 years) puts a great burden on Thailand, but also populist schemes such as the tax refund for buyers of a first home and first car, the 30-baht health program, free bus rides and the much-discussed and highly controversial rice mortgage system.
Economist Somchai Jitsuchon expects Thailand's national debt to exceed the (statutory) ceiling of 60 percent of gross domestic product, unless the economy grows by more than 6 percent annually. "When the economy grows slower, by 4 to 5 percent, the national debt can skyrocket because the country's tax system is very sensitive to economic growth."
The accompanying infographics show how the cake is divided and which works are involved.
(Source: bangkok mail, March 30, 2013)
It seems very interesting to me to know which companies will carry out these infrastructure mega projects and to what extent the companies of the PT politicians - many PT cabinet members and members of parliament have companies - can ultimately be linked to the implementing companies.
Already a double track to Hua Hin in 2017? And let the high-speed train drive over it in 2018? Then they are certainly already building very hard. It would be an achievement that the Netherlands could learn from. There it is still not possible to train full speed to Paris, despite the fact that construction of the high speed train started in 2000.
It is still difficult with those large amounts. A Thai trillion is a European trillion. It's a good thing I don't have that much money in the bank, you'd be confused.
For your information, that it is not possible in the Netherlands, think of the Betuwe line, in Thailand we call it corruption, for me in the Netherlands ignorance?
Think of the construction of the airport line to the city, how long would it take us?
Dear Jansen
The delay in the construction of both the Betuwelijn and the HSL Amsterdam-Antwerp was largely NOT due to construction.
The delay was due to expropriation problems, participation problems, environmental problems, political problems, in short, external problems.
I don't expect this to happen in Thailand.
And building a kilometer of HSL can be done in 15 days, including everything.
To what extent “payments to third parties” can cause delays?
The problems you described is what I mean.
Do not doubt the construction companies, but what is happening around them.
Greetings from Thailand.
In a letter submitted to the Bangkok Post, the writer noted that the infographic with the amounts was missing a piece of cake: what flows away in bribes.
I also do not believe that the timetable for the construction of all those lines can be correct. The planning alone will take years. Hua Hin in 2017? Maybe 2020.
Regardless of what remains hanging on the bow and whether it will all be transparent, I still think that the entire project is economically justified. Good infrastructure is very important for a growing economy. Those amounts will make you dizzy so let's put it into perspective.
Thailand has a Gross National Product of USD 345 billion (IMF, 2011). 25% of that amount is invested per year. (In China that percentage is almost 50% and in the US a very meager 15%). A total of USD 80 billion is invested annually in Thailand, the projects in question will add an extra USD 7 billion every year for 10 years.
Another calculation. 7 trillion baht will be spent in 2 years, which is 300 billion baht per year and therefore 5.000 baht/inhabitant/year, so it looks much neater. (I'm not counting the interest).
Moreover, it is very important to distinguish between consumer and investment spending, not everything the government spends is 'populist'. The 30-baht health program is fine, facilitating home ownership is an investment, free bus transport, call it a subsidy, only that rice mortgage system is purely consumptive, which will not help the farmers in the long term. That money could have been better spent on sensible investments.
Accountant Tino Do not include the interest? That way I can also count myself rich. I once read the amount of 3 trillion baht in interest payments, but it was not stated on what percentage that was based. Maybe it's more and certainly not less. You write that the farmers do not get along in the long term with the mortgage system for rice. Feel free to write now. Only a small number of farmers benefit from the system; especially the landowners. Not to mention the corruption associated with the system.
You are absolutely right about the rice mortgage system.
As for the total amount of interest on that 2 trillion baht, I read amounts of up to 5 trillion, depending entirely on how much you pay off and the interest rate. If you assume 7 percent interest per year on the total amount of 2 trillion, that is an extra 2.500 baht per year per inhabitant, less than 10 baht per day on average!
Of course Thailand is in debt, I just think that 'deep in debt' and those Doomsday scenarios are highly exaggerated. If interest rates do not rise dramatically and Thailand's economy continues to grow at 5-7 percent per year, there will be no problem and Thailand will have a nice railway network in 10-15 years. I hereby invite you to travel first class from Bangkok to Chiang Mai by high-speed train at my expense in 10 years time!
@ Tino I dare to defend the expression 'deep in debt', because in addition to those 2 trillion baht plus interest, there are numerous schemes that cost money. People who know more about it than I do point out that the government debt percentage used by the government is being manipulated. That is not so difficult, as Greece has proven. I completely agree with you that Thailand needs a better rail network. It has been badly neglected for decades.
Dick and Fluminis,
I got stuck in a wasp's nest, my apologies. My knowledge of economics is indeed very limited. If the IMF and the EU have also not noticed the Greek manipulation, I better remain silent. Relying only on your common sense is not enough in this problem.
Sorry Tino, but you should read your economics lessons carefully again.
You are completely wrong on all the points you mention about consumer and investment expenditure.
The 30 bath hospital system is of course a joke and others foot the bill. In addition, I know from a doctor that people often give painkillers where real medicines are needed, but they are not allowed to write them out at all from the management because they cost money, hospital use is not an investment for consumption.
Free bus transport, let me believe the myth that there is such a thing as free, but consumptive.
A house is consumption (especially in Thailand where people put it down to use) not an investment, although governments would like you to believe this.
And going into debt as a country to benefit your voters (farmers) is as amoral as hell. Let the children pay for the pleasure of today!
All the better. Then Thailand will be cheap again to travel. Less good for the Farangs who live there. They will probably try to extort more money from them. It won't be long before all countries have too much government debt. I wonder what will happen then.
“Not so good for the Farangs who live there. They will probably try to extort more money from them” – I think it's the other way around.
If the water is up to your waist, why not go further until the water is up to your lips.
A planned economic growth of more than 6% is a piece of cake… they think.
But the products produced in Thailand have a low added value and there is a lot of competition, especially in the rice market.
Establishing and producing a company for the export of Thai products is a bureaucratic disaster. So they work against their own economy and exports.
Like Greece, the country has a gigantic civil service and, as is known, the government does not count as part of the Gross Domestic Product, but government expenditure does count, but they are generally Italian.
I have written it before “Pride comes before a fall”. This loan amount will cost the Thais in 5 years, especially if the scheduled travelers from Bangkok to Changmai do not reach the 34.000 (as calculated) daily HST.
34.000 every day means that half of Bangkok (6.000.000) have to travel to Changmai annually for 2.000 baht. According to a Thai, the ratio BKK-Changmai can be compared to Amsterdam versus Rotterdam.
But do you believe that 17 trains with 1,000 people (15 trainsets) will run up and down every day. I have seen that once in my life and that was in the Efteling.
Why don't they first build 1 trajectory, but jump straight into the deep end.
Asia is not Europe, with other countries stepping in to help.
I am afraid that Thailand wants to renew the country, but the country is more ready for employment and export and production of high-quality products.
Politics in Thailand, just like in the Netherlands, is concerned with matters that are not in the direct interest of the citizen.
It is still a while before Thailand will also order submarines.
Oh, a warned person counts for two.
I read here that there is a tax refund for first home buyers.
Does that also apply if you have a house built, is that also deductible?
Can someone tell me more about this?
To be honest, I don't know if the regulation still applies. But you don't qualify because you don't pay income tax in Thailand. The scheme is therefore only interesting for a limited population group. Thais who earn less than 15.000 baht a month do not pay income tax, so there is nothing to give back.
The Thai government advises to borrow 3 trillion Baht.
For the development of employment and possibly higher costs in building the new infrastructure (see our Delta Works).
Why?
That they go wet with 3 trillion is 100% certain.
Can we do some swaps in euro-baht ratio and the baht goes back to 60 for one euro. Are we (Europeans) better off on balance?
Do Thai government.
PS The advantage for Thailand is that their competitive position in world trade will become much better. It is only about the heads of the Thais, but according to the Thai government that is a detail because there is a super fast train.