Thailand may issue bond to fund rail project with China

[BANGKOK] Thailand's military government may issue an infrastructure bond to fund a 400-billion baht (S$16.6 billion) rail project jointly with China, instead of taking out a high-interest Chinese loan, a Thai deputy prime minister said on Friday.

Thailand and China agreed in December to build the rail line from the Thai border with Laos to ports and industrial zones in eastern Thailand.

China has ambitious plans for rail links from the southern Chinese city of Kunming through Laos to Thailand, and Thailand wants to modernise its ageing rail network.

Thailand will not borrow in yuan as the currency is likely to strengthen in the future, adding to financial costs, Pridiyathorn Devakula told reporters. "We have many options; we can issue an infrastructure bond in Thailand. It's not a worry," he said. "China may think we are an emerging (market) but actually, our financial market is very big." If China wants to offer loans to Thailand, he said, it would need to offer lower interest rates and financing in other currencies.

Pridiyathorn did not say whether such a bond issue would cover the entire project or give an indication of how much Thailand would contribute to the joint project. "There are many details to consider. The borrowing is not as important as the project's structure and management," he said.

This month, the Bangkok Post quoted Deputy Transport Minister Arkhom Termpittayapaisith as saying China had proposed the two countries seek loans from the Export-Import Bank of China with an interest rate of 2-4 per cent, which Thailand considered too high.

Two rail lines are included in the project. More than 700 km of track will connect the Thai city of Nong Khai on the Lao border with Bangkok and the industrialised eastern seaboard.

Another line would link Bangkok with the central province of Saraburi, an industrial hub about 110 km away.

REUTERS