- PPP: Back on the Agenda in Thailand
- February 15, 2013
- Law Firm: Norton Rose Canada LLP - Montreal Office
The Government of Thailand is on the verge of enacting new legislation governing Public-Private Partnerships (PPP) projects.
The draft legislation, which will replace the Private Participation in State Undertakings Act B.E. 2535 (PPP Act B.E. 2535) (1992), was approved by the House of Representatives in October 2012 and was subsequently passed by the Senate with some minor amendment in January 2013. It is currently being finalised by the House of Representatives before being submitted for the royal endorsement.
The new legislation is expected to encourage greater participation from the private sector and stimulate the growth of the PPP sector in Thailand towards the implementation of much needed infrastructure projects by creating a more streamlined process for undertaking PPP projects.
Whilst on the whole, this new legislation will be a welcome development for potential investors and commercial lenders in the region, certain of the new proposals are likely to also give cause for concern; in particular, the ability of the PPP Policy Committee to amend or terminate a concession contract which does not comply with the legislation upon approval from Cabinet.
What is new?
The new legislation contains a number of major changes from the PPP Act B.E. 2535, including:
- the requirement for a 5-year PPP National Strategy, which will serve as a roadmap for the development of PPP projects in Thailand. The PPP National Strategy will specify, among others, the sectors in which PPP projects are contemplated, as well as the priority for development of such PPP projects;
- the establishment of a PPP Policy Committee, which will be responsible for the preparation of the PPP National Strategy for approval by Cabinet. The PPP Policy Committee will also be in charge of granting in-principle approvals for PPP projects under the new legislation;
- the designation of the State Enterprise Policy Office as the entity responsible for conducting initial reviews of proposed projects and advancing qualifying projects for consideration by the PPP Policy Committee; and
- the introduction of provisions specifically addressing amendments to PPP project-related contracts and the necessary actions to be undertaken prior to the expiry of such contracts.
What projects will be subject to the new legislation?
The new legislation will apply to government projects valued at THB 1 billion or more (or any higher amount as may be designated under the relevant ministerial regulation to be issued under the new legislation).
Projects valued under THB 1 billion may still be subject to the new legislation if designated as such by the PPP Policy Committee.
What are the implications for existing projects?
The new legislation will apply to existing projects. However, projects which are at the consideration or procurement stages at the time the new legislation takes effect will continue to be governed by the PPP Act B.E. 2535 until the relevant stage is completed. Thereafter, subsequent stages of the projects will proceed pursuant to the provisions of the new legislation.
What are the implications for failing to comply with provisions of the new legislation?
Unlike the PPP Act B.E. 2535, the new legislation will contain a specific section dealing with projects which fail to comply with its provisions.
If a project breaches the provisions of the new legislation, the PPP Policy Committee may seek approval from Cabinet to amend or terminate the concession contract for that project if it considers such action appropriate.
However, the PPP Policy Committee, having taken into account the availability of services and/or the impact on the public, may allow the project to continue, provided that the project complies with the provisions of the new legislation going forward.
This is likely to be a potential concern for private sector investors and commercial lenders who will need to consider how to address the risk of the project being terminated or key terms being amended in such circumstances after financial close and when the project is already in construction or operation.