The key output of this TA is a comparative assessment of infrastructure development in Thailand and the Republic of Korea to identify a range of lessons and good practices and an analysis of the adequacy and effectiveness of policy measures in the two countries and the distributional impacts of infrastructure development on different sectors. The TA was monitored through regular reporting, building consensus with workshops, and soliciting comments and suggestions from key stakeholders. It included an inception workshop in Thailand one month after consultants were mobilized. A series of smaller workshops were held to discuss the development and the progress of the TA with the National Economic and Social Development Board (NESDB), the Thailand Development Research Institute (TDRI), and the Ministry of Strategy and Finance of the Republic of Korea. In Thailand, NESDB and TDRI are the main infrastructure think tanks of the country.
The TA's impact is lessons learned for enhancing infrastructure provision in the key sectors of energy, transport, and water supply for developing member countries in Asia. The TA's outcome is a comparative assessment of Thailand and the Republic of Korea on their infrastructure development in energy, transport, and water supply.
|Project Rationale and Linkage to Country/Regional Strategy
Financing Asia's infrastructure is a complex issue. All countries prepare medium to long term development plans and strategies for the key sectors of energy, transport, and water supply but they do not always come to fruition. The public sector has problems of constrained access to funds, lack of competition, and governance and corruption issues further complicate the picture. Private sector investors prefer to prioritize low-risk countries. The lack of a transparent and consistent regulatory environment and a paucity of resources and policy support measures to meet the standards of global best practice further complicate matters. Land acquisition can be challenging when large-scale projects are involved. Untraditional financing, such as pension funds, early support mechanisms, and sovereign investment funds that support various investments, partial government subsidies that buy down project risk such as the "viability-gap funding" provided in India and the Indonesia Infrastructure Finance Facility, which when operational will provide long tenor project financing, are some of the several options for promoting infrastructure financing.
Much of the Republic of Korea's economic growth was centered on policies which called for extensive infrastructure development. Beginning in the mid-1960s, the country focused on railway and highway projects. In the 1970s, however, as the country approached full employment, bottlenecks became apparent. Emphasis then shifted to heavy industry and chemicals, followed by telecommunications. In parallel, investments in deepwater ports were added to the ongoing investments in roads and railways. Infrastructure spending has averaged 8% of gross domestic product (GDP), most notably for telecommunications and broadband internet access. This enables a leadership position in the knowledge economy. However, private investments have not been forthcoming to the fullest extent, and the Government of the Republic of Korea is currently experimenting with new, far-reaching reforms to leverage private financing and also include enhancing the use of information technology systems and e-commerce to facilitate project transactions.
In light of this, it is instructive to learn from the infrastructure success story of the Republic of Korea. During the Asian financial crisis of 1997 1998, infrastructure programs were among the first to be cut in developing economies such as Indonesia, the Philippines, and Thailand and to a much lesser extent in the Republic of Korea. As soon as the economy began to bounce back in the Republic of Korea, the government increased investment to pre-crisis levels to create jobs and stimulate the economy. Thailand also has built high-quality roads and energy and telecoms infrastructure. While road and electricity coverage have risen to 99%, some gaps exist in the quality of service delivery, management, and sector regulation. There are also imbalances in the transport connectivity mix, with roads outstripping railways by a significant margin which continue to under perform and unable to complement road networks. The State Railway of Thailand has accumulated more than $2 billion in debts, which adds to the difficult financial condition of the sector. The country''s key infrastructure sectors such as energy and transport remain hostage to volatile global oil prices. As for water supply on the other hand, only 60% of the country's urban centers are covered by the services of a metropolitan or provincial water authority. The quality of service in the other 40% is largely poor, ranging up to fair and further work is required to connect more households and improve service delivery levels.