Thailand Mega Infrastructure Projects 2013-2020

Thai #Mega Infrastructure Projects 2013-2020

Guideline and tutorial for non-Thai businesses: Thai #Mega Infrastructure Projects 2013-2020

• This white paper highlights certain aspects of the biggest investment project Thailand ever made. It is the purpose of this presentation to serve as guideline for foreign businesses and investors and to clearly indicate, how PUGNATORIUS can help and assist to successfully accomplish big-ticket infrastructure projects in the Land of Smile.

• The presentation is divided in three parts: ✓Part I. Scope and size of the infrastructure projects ✓Part II. Legal and business environment, time frame and status update ✓Part III. Considerations for foreign businesses to participate in the bidding

process • This document will be continuously updated, enhanced and improved. The

latest version is available at www.pugnatorius.com/MEGA • A print-out or pdf-version, Powerpoint, eBook is available on request. • This publication contains general information only and PUGNATORIUS is

not, by means of this publication, rendering professional advice or services.

Part I. Scope and size of the infrastructure projects

Sophisticated solutions in a complex legal environment. Serious legal and tax advice in the land of smile.

• Please feel free to contact us in our Bangkok office for questions, comments and other requests by phone or e-mail in Thai, English or German language.

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Bangkok 10330 | Kingdom of Thailand

☎ +66 22072647 | [email protected]

!• PUGNATORIUS Limited is an independent legal practice

based in Bangkok, Thailand. The law office provides inter-national corporations, investors and foreign law firms withpremium legal and tax services relating to Thailand, Southeast Asia and off-shore jurisdictions.

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The largest investment program in the history of Thailand is about to start!

• With the city of Bangkok closer to the heart of Asia than most other Asian cities, Thailand is positioned to become an international business hub in the coming decades. The country has one of the fastest growing economies on the map, world-scale production capacities, infrastructure with developed supporting sectors and attractive tax and duty incentive packages that significantly defray operating costs that expedite your return on investment.

• A modal shift in transport for greater competitiveness is the name of the game behind the government's massive THB 2 trillion infrastructure development program, which will be kicked off in 2013 with the tendering of four high-speed-rail projects.

• Thailand Prime Minister Yingluck Shinawatra has urged the international private sector to invest in Thailand's mega infrastructure projects. Under an off-budget financing loan bill the Ministry of Finance will borrow the money from both domestic and overseas sources to mostly sponsor large new transport development projects to cut national logistic costs.

Scope of infrastructure improvements

Non-highspeed trains 14 %

Bangkok metro/subway 25 %

Cargo stations and customs houses 1,5 %

Road upgrades 15,0 %

Sea ports 1,6 %

Highspeed trains 42,7 %

The program will create 500,000 jobs during the course of investment more than there

are unemployed people in Thailand,

All train related activities count for 80%

Example: Nong Khai - Isan

• High speed rail link and a four-lane highway between Bangkok and Nong Khai.

• Upgrade of many border checkpoints in the Notheast as special trade zonesto increase trade and investment.

• Building of dams to contain water and prevent flooding.

• Benefits from tourism through more attractions including the naga fireballs on the Mekong.

• Reforestation projects will plant three times as many trees as those lost by the project.

„ASEAN Connectivity“ and other projects

• Rail network development ✓11 projects Thailand - Lao ✓3 projects Thailand - Cambodia ✓5 projects Thailand - Malaysia ✓8 projects Thailand - Myanmar

• Road network development ✓45 projects road expansion from 2 to 4 lanes (1.864 km) ✓235 projects rehabilitation Main corridor (2.162 km) ✓3 motorway road networks (326 km) ✓11 highway projects supporting AEC connectivity (292 km) ✓Highway supporting gateways to Second Bangkok International Airport at

Nong Ngu Hao, Laem Chabang port and Chiangsan port (159 km) ✓Royal coast (328 km)

• Many projects still lack a feasibility study and environmental impact assessments.

„ASEAN Connectivity“ and other projects

• Rail network development ✓11 projects Thailand - Lao ✓3 projects Thailand - Cambodia ✓5 projects Thailand - Malaysia ✓8 projects Thailand - Myanmar

• Road network development ✓45 projects road expansion from 2 to 4 lanes (1.864 km) ✓235 projects rehabilitation Main corridor (2.162 km) ✓3 motorway road networks (326 km) ✓11 highway projects supporting AEC connectivity (292 km) ✓Highway supporting gateways to Second Bangkok International Airport at

Nong Ngu Hao, Laem Chabang port and Chiangsan port (159 km) ✓Royal coast (328 km)

Many projects still lack a feasibility study

and environmental impact assessments!

Railway network and high speed train projects

• Double track the existing network ✓North: Lopburi – Paknumpol - Denchai (385 km) ✓Northeast (upper) : Mabkabal – Jira – KhonKhan – Nong khai (464 km) ✓Northeast (lower) : Jira – Ubon ratchathani 309 km. ✓South : Nakornpathom-Hua Hin-Chumphon-Surat thani-Padang besa (927 km)

• New double track projects ✓North : Denchai-ChiangRai-ChiangKong (326 km) ✓Northeast (middle) : BanPai-Mukdahan-Nakorn panom (347 km) ✓Middle : Pache – Nakorn Lung (15 km)

• Upgrade signaling and telecommunication system

• Underpass and overpass to reduce 108 rail-road intersections

• High speed train projects ✓Bangkok – Phisanulok – ChiangMai (745 km) ✓Bangkok – Nakorn Ratchasima- Nongkhai (615 km) ✓Bangkok – Pattaya – Rayong (221 km) ✓Bangkok – Hua Hin – Padang Besar (982 km)

Mass rapid transit projects

• Light Red Line: Banksue-Makkasan-Hua Mak & Bangsue – Hua Lumpong (25.9 km)

• Dark Red Line: Rungsit – Thamasat Univeristy, Rungsit campus (10 km) Phayathai-Bangsue-Don Mung (21.8 km)

• Airport Rail Link: Phayathai-Bangsue-Don Mung (21.8 km) • Light Red Line: Bangsue-Talingchun-Saraya (29 km) • Blue Line: Bangsue-Taphar & Hua Lumphon-Bangkae (27 km) • Dark Green Line: Baring-Samud Prakarn – Bang poo (22.2 km) and

MorChid-Sapan Mai- Kukod (19 km) • Pink Line: Kharai-Minburi (34.5 km) • Orange Line: Cultural Center-Minburi (21.8 km.) BangYai-Bangsue (23 km) • Purple Line: BangYai-Bangsue (23 km) • Yellow Line: Landpral – Samrong (30.4 km)

The lion’s share will flow into the upgrade of the country’s overburdened railway network

• Investment volume ✓THB 2 trillion = approx. US$ 70 billion = approx. Euro 50 billion

• Investment allocation ✓64% of the total budget will fund 31 rail-related projects, 24% will go to 13

road projects, 7% to seven water-transport projects, and the rest to four air-transport projects.

✓The projects include four lines high-speed railway lines (Bangkok to Chaing Mai; Bangkok to Nong Khai, connecting to Laos and China; Bangkok to Rayong; and Bangkok to Had Yai) dual train track development across the country; motorway expansion and better road networks connecting ASEAN economic corridors; sea ports; and border facilities to enhance border trade.

✓In Bangkok, where new roads cannot be built, the combined length of the electric-train routes will be expanded by 10 times from 40 kilometers to 468.8km

• Projects will be completed by 2020, with repayments spread over 50 years

Modal shift17,7 %

Mobility29,7 %

Promote and support0,5 %

Connectivity52,1 %

• ASEAN economic corridors • Gateway improvements of

ports and airports • Network development of road,

rail, inland waterway• Road to rail and water

Please see the complete and updated presentation at

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www.pugnatorius.com/mega

Part II. Legal and business environment, time frame

and status update



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Legal and financial environment of the projects

• Typical contract forms in Thailand ✓Long-term BTO concessions and BOT for ports ✓Management and lease contracts (ports, subway, regional airports) ✓Privatization (Airport Authority of Thailand)

• Major negotiation points of foreign infrastructure investments ✓Revenue sharing ✓Cost sharing ✓Risk sharing ✓Pricing ✓Commercial viability

• The Government will issue a royal decree to seek loans for the plan, to be approved by the House of Representatives and the Senate. About THB 90 billion will come from public-private partnerships, and about THB 30 billion will be funded directly from the government budget.

Time schedule and latest update

• October 5, 2012: The biggest investment in Thailand's history was announced by Prime Minister Yingluck Shinawatra in her opening address at the Thailand Investment Conference.

• March 29, 2013: The House of Representatives voted to approve the first reading of the government's infrastructure loan bill.

• September 21, 2013: Thailand's Parliament approved the bill to borrow THB 2 trillion to finance seven-year infrastructure projects.

• October 9, 2013: Senate gives green light to the THB 2.2 trillion loan bill. !!!

• Till September 2014, about THB 300 billion is already likely to be disbursed, according to the planning agency.

• We keep you updated at bit.ly/thaimega

http://bit.ly/thaimega

Part III. Considerations for foreign businesses to

participate in the bidding process



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These are real projects, not just pipe dreams!

General roadmap for foreign bidders in Thailands Mega Infrastructure Projects

Identification

Scope, type, size, location and

duration

Segregation of problem cases

Procurement

Observance of bidding

requirements

Winning the bidding process

Legal design

Foreign business licenses and other business licenses

Contractual relationship to the government and

Thai partners

Ask for details regarding our local knowledge, skills, tools and techniques to handle big projects

Tax structuring

Profit taxes, VAT, Withholding Tax

Offshore structuring

Step 1: Identification of the target: Which infrastructure project to chose


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Experiences and recommendations not to back the wrong horse before the project even begins


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Step 2: Mastering the Bidding Process: Typical steps in a Thai governmental tender


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How can PUGNATORIUS support your project?

• Structuring and establishment of a legal environment and structure to do business in Thailand as a foreign investor.

• Legal support during all phases of the project. ✓Corporate and investment law ✓Contract and finance law ✓Construction contracts (analysis, drafting, and negotiation) ✓Breach of contract and warranty claims ✓Construction litigation, fraud, misrepresentation ✓...

• International and Thai domestic tax structuring. • Thai industry practice and policies • PUGNATORIUS establishes contacts with regional authorities, liaises with

government agencies, handles government relations and finds helpful partners.



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www.PUGNATORIUS.com/mega

http://www.PUGNATORIUS.com/mega

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Thailand Mega Infrastructure Projects 2013-2020