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06BANGKOK551 MEGAPROJECTS CONFERENCE PRODUCES MORE SMOKE THAN LIGHT

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“51041”,”1/30/2006 9:13″,”06BANGKOK551″,

 

“Embassy Bangkok”,”UNCLASSIFIED”,””,

“This record is a partial extract of the original cable.

The full text of the original cable is not available.

 

300913Z Jan 06

“,”UNCLAS SECTION 01 OF 03 BANGKOK 000551

 

SIPDIS

 

STATE FOR EAP/MLS AND EB

STATE FOR EB/MGOODMAN

TREASURY FOR OASIA

COMMERCE FOR 4430/EAP/MAC/OKSA

STATE PASS TO USTR FOR WEISEL

 

E.O. 12958: N/A

TAGS: ETRD, ECON, EFIN, TH

SUBJECT: MEGAPROJECTS CONFERENCE PRODUCES MORE SMOKE THAN

LIGHT

 

REF: 05 BANGKOK 2137

 

05 BANGKOK 3463

05 BANGKOK 7124

 

1. Sensitive but unclassified. Please handle accordingly.

Not for internet distribution.

 

2. (SBU) Summary. Led by Prime Minister Thaksin, the RTG

hosted a conference to inform international companies and

the Bangkok diplomatic corps about the \”megaprojects\”

infrastructure development program. To woo those bidders

with \”cutting-edge and appropriate technology,\” Thaksin has

– without reference to parliament – swept aside the need for

bidders to abide by Thai government procurement laws.

However, the nature of the RTG\’s programs are so broadly

defined and the parameters for a successful bid so unclear

that most companies are either skeptical about the process

or unsure where to begin. The manifest ability of Thaksin to

liberalize the economy based on cabinet decree could be

considered positive in light of the degree of liberalization

that will be required if our FTA negotiations are

successful. But we question the durability of measures taken

in this fashion; they could just as easily be reversed by a

new government. We are also concerned that FTA

implementation via decree could be perceived by many Thais

as an undemocratic bypassing of the parliament abetted by

the USG. End Summary.

 

\”The Potential Our Synergy May Bring\”

————————————-

 

3. (U) On January 26, about 1300 representatives of

international companies and foreign diplomats attended the

RTG\’s unveiling of \”Thailand: Partnership for Development\”,

a call by Prime Minister Thaksin to the world to help turn

Thailand into \”a modern, competitive, knowledge-based

economy.\” Thaksin\’s stated goal is to \”engage in a global

search to find the best and most suitable talents in the

world.to be our partners in development.\” This is the

latest iteration of the US$43 billion, five-year

\”megaprojects\” infrastructure development program which the

Thaksin government has been touting for the last year (Ref A

and B).

 

4. (U) Following the PM\’s brief opening remarks, the meeting

was divided into five groups with relevant ministry

officials to discuss projects under their jurisdiction:

 

– Infrastructure and construction with a focus on

expanding Bangkok\’s mass transit system and creating an

integrated, nationwide water resource management system.

– Natural resources and environment focusing on waste-to-

energy technology, creation of a bio-diversity database and

a digital map of natural resources.

– Information and communication technology for the

creation of a government virtual private network and

undefined software for various ministries. Also \”e-

education\” for distance learning programs.

– National defense, largely the packaging of a series of

planned weapons procurement programs.

– Agriculture, science and technology, culture and public

health services, to include food traceability, modernization

of the tuna and dairy industries, development of alternative

energy resources and establishment of \”world class\”

universities and medical service centers including research

and development facilities.

 

\”The Scope of Our Cooperation is Virtually Boundless\”

——————————————— ——–

 

5. (U) There is no bidding process and no government-

mandated specifications to comply with. Offers can comprise

one aspect of a project, whether mentioned specifically as a

need of the RTG or not, or include an entire sector.

Technical proposals are required to be submitted by April 28

with financing proposals to follow one – two months

thereafter. Due to an apparent concern that requiring a

counter trade component to any proposal could mean not

getting the best available technologies, counter trade is

not required except for defense procurement. Every proposal

will be reviewed by a relevant ministry \”evaluating

committee\” comprised of bureaucrats, senior officials and

\”experts.\” Final consideration of proposals will be

considered by a committee chaired by the PM. This approach

is meant to assure companies of the transparency of the

selection process.

 

6. (SBU) The reaction of companies and analysts with whom we

have spoken is uncertainty at best and cynicism at worst.

All averred that they have never seen an approach quite like

this. Several mentioned that if the RTG is to undertake all

projects which appear to have been identified, the US$43

billion earmarked will not come close to covering the costs.

Others asked how proposals will be weighed against each

other; \”they will be comparing apples and broccoli\” said

one. In response to the RTG\’s statement that projects will

be judged based on their \”return on investment, internal

rate of return, appropriateness of the technology and

financing flexibility offered\” an executive of a large

multinational asked us \”which of these is most important?

Not all these goals are mutually supportive. And how about

goals like integration with existing projects, use of local

suppliers and personnel. How important is rapid project

completion versus the most cost efficient approach?\”

 

\”Public scrutiny by 63 million Thai People\”

——————————————-

 

7. (SBU) Several executives expressed concern that this

exercise is to provide cover for projects and contractors

already secretly chosen by the government. One argued that

his company would not want to submit any proprietary ideas

for fear that the government could simply appropriate the

approach and assign the project to another firm; that this

is just a way for the RTG to get free feasibility studies.

An analyst argued that the only firms that will make serious

bids are those from such nations as China in which the

government may have political motives for pursuing projects

even if they are not profitable for the implementing

companies. Several companies have told us that they will

submit basic bids or \”a statement of capabilities\” rather

than spend the time and money to prepare a detailed

document. This would serve to indicate a general desire to

appear supportive and interested without committing

resources to what many perceive as too nebulous an approach

to take seriously. Interestingly, the Thai language press

has focused on Thaksin \”selling the country to foreigners\”

rather than any other aspect of the event.

 

8. (SBU) As he has since the megaprojects were announced,

Thaksin again promised that the government would maintain

fiscal discipline by keeping the government debt/GDP ratio

below 50 percent and the percent of the annual budget

devoted to debt service below 15 percent. Many observers

believe that his original plan was to finance much of the

megaproject\’s cost through revenue generated by

privatization of such assets as the EGAT, the electric

utility. With the indefinite delay in EGAT IPO (Ref C), the

RTG has developed the \”tell us what financing you can

arrange\” approach to infrastructure construction. Initial

indications are that the RTG may not have much success with

this approach.

 

9. (SBU) Comment: The good news is that the RTG changed its

previous fairly restrictive government procurement

procedures to attract as many foreign companies as possible.

Counter trade, local partner, \”Buy Thai\” and other previous

requirements for selling to the RTG have all been waived for

this particular set of bids. How this was done without an

act of parliament to change or suspend the three relevant

government procurement laws is unclear. The bad news is

that this is another example of the PM having a broad vision

of an end result but not a clear view of how to get there.

If we ascribe the best intentions to this approach, it is an

innovative way to allow companies the freedom to propose

what they consider to be the best approach to a problem. But

with the lack of project parameters, it is too broad for

most companies to feel comfortable making a detailed

proposal. At least one company assumed the worst, \”all the

doors are open for corruption because the powers that be can

like a project simply because it benefits them.\” We expect

that ties to ministries (or ministers) will prove a critical

factor in determining contract recipients given the lack of

other factors by which to compare competing bids.

 

10. (SBU) Thaksin\’s apparent willingness to dispense with

normal government procurement practices (and law) could be a

useful precedent for our FTA negotiations. In those

negotiations, Thai negotiators have often argued an

inability to proceed with some liberalization because of

existing laws that prevent them from making commitments. The

megaprojects example demonstrates that the Thaksin

government can dispense with restrictive trade law when they

need to. On the other hand, we would not want the changes

needed to comply with an FTA made via questionable and

potentially short-duration legal maneuvers.

Written by thaicables

July 10, 2011 at 3:57 am

Posted in Economy, Unclassified

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