ADB has partnered with the Government of Thailand since Thailand joined ADB as a founding member in 1966. The establishment of the Thailand Resident Mission in Bangkok in 2005 marked a new chapter in Thailand’s relationship and cooperation with ADB. Core areas of the ADB–Thailand partnership include support for infrastructure and capital market development, environmentally sustainable development, and regional economic cooperation, particularly under the Greater Mekong Subregion (GMS) framework.
As the Thai government encourages development partners in Thailand to coordinate their assistance, ADB works in partnership with the Agence Française de Développement, the Japan International Cooperation Agency, European Union, United Nations agencies, US Agency for International Development (USAID), and the World Bank in areas that are consistent with ADB’s country partnership strategy (CPS) for Thailand.
Cumulative lending and non-lending operations
Despite its absence from an active borrowing program with ADB since 2000, Thailand remains fully engaged with ADB in the form of a development partnership that has primarily consisted of technical assistance (TA), knowledge sharing, and capacity building.
As of 31 December 2011, the cumulative amount of ADB’s lending operations for Thailand (both public and private sector loans) stood at approximately $6.14 billion for 89 projects.
In recent years, TA and knowledge sharing have played a major role in Thailand’s engagement with ADB. In 2011, ADB approved $4.55 million in TA and grants to Thailand.
Cumulative direct value-added cofinancing for Thailand since 1979 amounted to $435.7 million for six investment projects, and $10.3 million for 27 TA projects as of end-2011.
Five pillars for cooperation
Under the country operations business plan (COBP), 2012-2014, there are five pillars for cooperation.
1. Mainstreaming PPPs and infrastructure development
The Government of Thailand has reaffirmed its strong support for public–private partnerships (PPPs) in infrastructure development projects and as a cross-cutting agenda. ADB has provided a series of TAs and staff consulting services to create an enabling environment for private sector participation and direct investment.
ADB has approved the $1.5 million TA: Mainstreaming PPPs in 2010 to streamline processes and guidelines and improve sectoral, legal, and regulatory frameworks for catalyzing PPP investments in Thailand.
In the transport sector, the program for 2012 includes a project preparatory TA (PPTA) on the PPP Motorway project and a policy and advisory TA on Reform and Renewal of Thailand’s Railway Sector. For 2012, ADB has also programmed PPTAs on the Energy Efficient Municipalities Project and Provincial Water Supply Project.
ADB is currently processing support to Thailand in three subsectors: railways, roads, and urban transport. The planned collaboration includes support for
- modernization of the State Railway of Thailand,
- PPP investments in regional roads, and
- mass rapid transit system in Bangkok.
In the wake of massive floods in 2011, ADB stands ready to support Thailand on water and flood management, both in terms of technical or financial assistance.
Private sector operations
The development of a strong and dynamic private sector is essential to long-term economic growth. ADB aims to strengthen the role of the private sector in Asia and supports investors and private entities in promoting infrastructure development in its developing member countries (DMCs).
ADB’s private sector operations in Thailand began in 1985. As of end-2011, ADB has approved a total of $694.8 million in nonsovereign financing for 12 private sector projects in Thailand. Total outstanding balances and undisbursed commitments of private sector transactions in Thailand as of December 2011 totaled $393.5 million, representing 7.3% of ADB’s total nonsovereign portfolio.
In late 2003, ADB extended a $40 million loan, $70 million political risk guarantee, and $100 million loan through the complementary financing scheme to construct and operate a coal-fired power plant (BLCP Power Project) on a build-own-operate basis. The project promotes fuel diversification in electricity generation, which decreases Thailand’s dependence on natural gas and is the most efficient base load power generator in the country.
In 2010, ADB assisted with innovative financing, totaling $206.3 million, for two solar power projects in Thailand, ADB’s first solar energy projects.
In 2011, ADB approved a $170 million loan for the construction of a 1,600 megawatt combined-cycle power plant in Nong Saeng District, Saraburi Province. It is the first PPP project of over $1 billion in Thailand that taps international financial markets since the credit crisis.
ADB’s Trade Finance Program (TFP) fills market gaps in trade finance by providing guarantees and loans through more than 200 partner banks. Eight banks operating in Thailand are confirming banks in TFP. In 2011, TFP guaranteed 50 transactions totaling over $18 million in support of Thailand’s trade with DMCs in the program. Almost half of TFP’s transactions in 2011 supported trade between DMCs.
2. Capital market development
ADB’s support for capital market development over the past few years has been very successful and praised. ADB has been working closely with all agencies involved in this area including the Ministry of Finance (MOF), the Stock Exchange of Thailand (SET), the Security Exchange Commission (SEC), and the Bank of Thailand (BOT).
ADB and the government have developed a medium-term capital market reform program, which will be critical to the sustainable development of the economy over the next decade. In February 2011, ADB and the Ministry of Finance signed a $300 million loan agreement for Thailand’s capital market development. The loan is part of a series of sustained ADB assistance that started in 2006 to support the government’s efforts to deepen and diversify Thailand’s capital market, which is critical to support increased domestic financing of investment and to sustain higher longer-term economic growth.
ADB has continued its support for knowledge sharing in capital development through a series of TAs and is willing to provide technical support for the establishment of a mortgage insurance company. In the meantime, ADB’s support for Thailand’s capital development also underscores the promotion of regional integration as it will help develop and integrate capital markets in the Association of Southeast Asian Nations (ASEAN).
3. Climate change and energy efficiency
Thailand’s use of energy per unit of GDP is high. It is highly dependent on natural gas for its energy production.
ADB plans to expand its operations in climate change and energy efficiency in Thailand. Most of the work of ADB’s Private Sector Operations Department in Thailand is already focused on clean energy. ADB will support PPP-type operations and sub-sovereign financing (e.g. support to municipalities to improve energy efficiency). In addition, ADB wants to promote Carbon Market Initiative (CMI) schemes in order to add value to both public and private financing activities and help many clean energy projects address financing issues upfront.
4. Economic and social reforms towards inclusive growth
To tackle the problem of rising inequality and imbalanced growth, the government has carried out broad national reform focusing on decentralization and sustainable growth. It has set up a National Reform Committee to study a reform agenda over the 2010–2013 period and has introduced various social and economic welfare schemes at the grassroots level.
ADB has been working closely with the National Reform Committee and the Ministry of Finance on the 2011 TA project on Economic and Social Reforms toward Inclusive Growth. Building on its support for Thailand’s capital market development, ADB will concentrate on such issues as microfinance and micro insurance, pension schemes, and financial literacy.
On 30 January 2012, ADB and the Ministry of Finance signed a $1.5 million TA grant under the Japan Fund for Poverty Reduction (JFPR). The TA for the Development of a Strategic Framework for Financial Inclusion aims to support the Thai government’s initiatives to develop a strategic framework for financial inclusion and improve low-income earners’ access to a full range of financial services.
5. Regional cooperation and South-South cooperation
ADB has maintained its high priority on regional cooperation and integration through the Greater Mekong Subregion (GMS), Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), Association of Southeast Nations (ASEAN), and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
ADB will coordinate closely with the Government of Thailand to strengthen and leverage its role as a regional development partner through joint programming with the Thailand International Development Cooperation Agency (TICA) for technical assistance and Neighboring Countries Economic Development Cooperation Agency (NEDA) for lending operations mainly in GMS countries and other DMCs.
Under ADB’s Transport Facilitation program, ADB supported Thailand in finalizing the agreement on the implementation of bilateral traffic rights exchange with Cambodia. Starting on 14 June 2012, trucks and buses may enter into each country’s territory through the Poipet-Aranyaprathet borders, either Phnom Penh and Sihanoukville, or Bangkok and Laem Chabang.
ADB also supported Thailand in reaching an agreement with Lao PDR and Viet Nam to extend traffic rights under the East–West Corridor and include three capitals and two deep sea ports, linking Bangkok–Laem Chabang, Ha Noi–Haiphong, and Vientiane–Thannaleng. An addendum to the memorandum of understanding (MOU) is expected to be signed within 2012.
With a view to upgrading the transport industry in the GMS and to involving the private sector in transport facilitation in GMS corridors, the GMS Business Forum has established a GMS Freight Transport Association (FRETA). An MOU for the establishment of FRETA was signed in Nay Pyi Taw during the 4th GMS Summit in 2011.
To help implement the GMS East–West Economic Corridor (EWEC), in collaboration with local chambers of commerce along the EWEC and relevant provincial government agencies, ADB is carrying out a TA project to provide capacity development and establish different types of organic vegetable clusters along the EWEC. The project helps link the EWEC organic clusters with regional and global supply and value chains by providing training in organic production, certification process, and packing and labeling, and linking with processors and high-end markets.
Moving ahead, Thailand and ADB will continue to work together to cofinance development projects, develop knowledge-sharing programs in the areas of trade and capital market with neighboring countries, facilitate subregional trade and investment, and contribute to the development of more efficient and liquid bond markets in Asia.