MEGAPROJECTS CONFERENCE PRODUCES MORE SMOKE THAN

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SUBJECT: MEGAPROJECTS CONFERENCE PRODUCES MORE SMOKE THAN
LIGHT

REF: 05 BANGKOK 2137

05 BANGKOK 3463
05 BANGKOK 7124


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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.