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.