Cover photo: “Industrial” by Life of Pix from Pexels
Volume 3 Number 4 : November 2019| Article
Thailand debt to GDP ratio is considered low, compared relatively to other countries in OECD. However in just a few recent years leading by a junta government, Thailand decided to launched the largest mega project among the ASEAN countries, the “Eastern Economic Corridor” or in abbreviation EEC. This mega project is the starting point of debt creation, with a large amount of money of 43 billion USD invested for just only the first 5 years of the investment. But why would the government believe in these projects and is it going to pay-off to people as one may think?
EEC Project What is it?
For short, EEC is a mega project of infrastructure investment concentrated in 3 provinces (for now), including Chonburi, Cha Choeng Sao and Rayong. Its investment is very widely spread into infrastructure like a high-speed rail system, smart cities, dual-track railway, industry, airport, ports, etc. The investment’s purposes can be viewed in various dimensions, but one of the key purposes is that EEC would serve to draw the concentration of economics away from Bangkok and would serve as a central hub for reaching Asia’s trade route.
What should EEC concern?
When it comes to urban economic policy concerning the issue of too much economic concentration in certain cities, the past policy mistake can be viewed from China’s development plan. According to past research analysis on urbanization policy done in China by Ding, C. and X. Zhao (2012), they show that main failure of China’s policy failure is occurred by mechanism failure. China was trying to drown the economic concentration away to other rural cities, however, they create no mechanism for people in the rural area to capture benefit from industrialization hence the policy become ineffective and failed to increase the living standard to people.
Thailand’s EEC mega infrastructure investment must carefully consider these issues as well. As mega-project investment in the past seems to become a failure in the sense that the wage growth remain stagnated even after large infrastructure push, which suggested that the productivity of people does not increase much from those added infrastructure. Moreover, the large amount of profit is not shares to overall population fairly, most of the past mega-project investment goes into the hand of large firms, which meant that the agglomeration benefits is not realized among the majority of people. For example, people were used to be prohibited from using their car assets to generate income through the use of technology like GRAB or UBER platform. This is an example to shows the mechanism that is inhibited people from receiving industrialization’s benefit. While the airport infrastructure and tourism’s investment could potentially attract more tourists, people could not use their private car assets to serve as a service for the increasing number of tourists, while the public bus transportation, on the other hands, remains shortage and taxi is not enough to serve tourist, hence it is considered inefficient.
“Accessibility” is the key
Japan case is completely opposite of China’s policy failure, unlike trying to enforce control and, Japan’s 4th national development plan focused on trying to keep pushing the economic concentration in Japan further, but actually promote the “income-transferring scheme”, which focus on making the city’s agglomeration benefit reachable to majority people even to the rural area which is considered quite far away from Tokyo’s city centre. Japan accomplished this through massive infrastructure investment which serves to create accessibility to people to reach the existed agglomeration benefits. From this stated facts that Japan has achieved, and reflected that concentrated city’s economy is not a problem if the benefit is accessible to the majority.
Future will determine the outcome
Whether EEC’s project will become a success, or a failure (where those debts for such large investment remains to Thai people without a well gain benefit) is still unknown, future will determine the result. However, to make this project truly become successful, one must not only focused on how these investments impact the GDP through the increase of government spending and investment. The Thai government must carefully address the mechanisms that prohibited the majority of people to gain the benefit from industrialization and agglomeration and focusing on providing enough mechanisms for accessibility as Japan did successfully. How one would design these mechanisms would be a challenging question, however significant, in determining the success of the EEC.
Reference:
-Ding, C. and X. Zhao, “Urbanization in Japan, South Korea, and China: Policy and Reality,” Chapter 39 in Brooks, Donaghy, and Knapp (Eds.), The Oxford Handbook of Urban Economics and Planning, 2012.
-ThaiResidents Team, 2018, “Thailand’s EEC project to boost GDP beyond 5%”, Thai Residents, retrieved from:http://thairesidents.com/money/thailands-eec-project-boost-gdp-beyond-5/
