CHAPTER 5 ANALYSIS
5.3 Urban Development under a Partnership between the Public and Private
5.3.6 Benefits
All sectors expect to gain benefit from making an investment, either in the form of tangible or intangible benefits. There are both direct benefits which can be clearly identified, and indirect benefits which have not been clarified at this moment.
Expectations on future benefits is varied, depending on the role and characteristics of each organization. Likewise, the public and private sectors have different expectations towards benefits due to their different roles and characteristics.
The public sector mainly concentrates on public benefits. Although the public sector has made a lot of investment, the expected outcome may not always be financial benefits or profits, especially true for investment in public services for elevating the quality of life. Therefore, the public sector usually expects intangible benefits, such as increased quality of life, enhanced life security, or a better urban environment. Thus, the cost-effectiveness of the public investment cannot be calculated into financial profits. This does not mean that the public investment would always result in loss or should have no expectation of tangible benefits. However, gaining benefit in the form of tangible profits is not the main operational target of the public sector because, if the public sector aims to seek profits, several groups of people without financial potential may be hindered from accessing public services.
In the case of LRT construction in Khon Kaen city, the partnership between the 5 local administrative organizations (Khon Kaen City Municipality, Sila Town Municipality, Mueang Kao Subdistrict Municipality, Tha Phra Subdistrict Municipality, and Samran Subdistrict Municipality) representing the public sector and the private sector in managing the project, is regarded as a provision of public services in respect of the public utility, which is the duty of local administrative organizations. Benefits to the government could be both tangible and intangible, and could be received both directly and indirectly. It is undoubtable that the first benefit expected by local administrative organizations should be the alleviation of traffic congestion and a better environment in Khon Kaen city. A key objective of this project is to solve the traffic problem, with the expectation that people will reduce their use of private vehicles and turn to increasingly use the public transport system, possibly resulting in improved pollution levels in Khon Kaen city (output) and better quality of life (outcome). These benefits may not be measured in financial value.
Nevertheless, in this project, apart from the investment in the feasibility study on the Bus Rapid Transit: BRT project, the public sector (local administrative organizations) did not make a financial investment in the construction (The third representative of a local administrative organization, personal communication, 2018; The sixth representative of a local administrative organization, personal communication, 2019), but did make other kinds of investment, for example, participation in driving the project, attending the brainstorm sessions to express opinions towards the project, joining in the public hearings, and so on.
As well, the local administrative organizations may gain other kinds of benefits, possibly in the form of indirect benefits. When the LRT runs through the areas of the 5 Municipalities, the city will absolutely expand, especially in the areas of Samran Subdistrict Municipality and Tha Phra Subdistrict Municipality located at the borders of Khon Kaen city, due to growth of the areas along the LRT route. Several large and small business units are likely to be set up, as well as areas developed for business operations around the tracks and stations (TOD) with business investment that should generate more income for the local administrative organizations (The second representative of a local administrative organization, personal communication,
2018; The fifth representative of a local government, personal communication, 2019).
Also, local people will be able to go to Khon Kaen city more conveniently.
Contrary to the public sector, the private sector normally concentrates on seeking profits from investment. Thus, when it comes to benefits, the private sector will be our focus, rather than the public sector. In the case of LRT construction in Khon Kaen city, almost all investment, from the beginning, has been made by the private sector. Particularly, a budget of over 20 million baht from the private sector has been provided to support the operations of Khon Kaen Transit System Co., Ltd., which so far has not been able to earn sufficient income on their own (The fifth representative of a local administrative organization, personal communication, February 13, 2019; The third representative of the private sector, personal communication, May 31, 2019). This is a rather high amount of investment, so it is stimulating curiosity about the benefits to be achieved by the private sector from this investment.
It is generally known that Khon Kaen City Development (KKTT) Co., Ltd.
was originated by the gathering of new generation business operators in Khon Kaen city who wish to see the proper development of Khon Kaen city, and to take part in helping elevate the urban quality of life in Khon Kaen city. Moreover, this development would be a basis for accommodating the economic growth of Khon Kaen city. Thus, business operators under the name of Khon Kaen City Development (KKTT) Co., Ltd. play a rather significant role in driving the LRT project in Khon Kaen city in association with local administrative organizations. The benefits to be returned to Khon Kaen City Development (KKTT) Co., Ltd. may not be a financial return, especially at the start of the project, which has not generated income for any party yet. However, when considering each partner in detail, it was found that there are business operators in the real estate business who own land next to the LRT route along Mittraphap Road, and in the automobile assembly business, or the construction material business. These businesses may gain many types of benefit from this project.
Particulaly in relation to the construction and assembly of the LRT, some co-founders of Khon Kaen City Development (KKTT) Co., Ltd. have owned this kind of business for some time, and have tended to join in the bidding of the construction or other related operations because they viewed that, although the concession of this project
given to Khon Kaen people would imply conflicts of interest, it would be better than having foreign investment (The fifth representative of a local administrative organization, personal communication, February 13, 2019). Another group of business operators to gain benefit from this project includes those whose land or business entities are located on Mittraphap Road. Although their lands or businesses were there before the start of the project (The fourth representative of the private sector, personal communication, September 3, 2019), it is undeniable that they will receive benefits from the project. For example, the LRT project may increase the price of land along Mittraphap Road, as well as housing estates or condominiums on that land, and the LRT helps people gain access to business centers, such as markets, more conveniently. In other words, the LRT project provides indirect benefits for these business operators. Considering this overview, the LRT may promote economic growth in Khon Kaen city, and that should be beneficial for business units in Khon Kaen city one way or another.
Nevertheless, the 2nd representative of the private sector affirmed that the participation of business operators in this project does not focus on personal benefits.
Although the business sector would like to see profits, it is not necessary to always be like that. Moreover, the LRT project is planning to enter the stock market in the form of an infrastructure fund so that Khon Kaen people are able to hold shares and gain benefits from the project (The third representative of private sector, personal communication, May 31, 2019), as well as develop a social enterprise in order to distribute benefits to people, especially those in Khon Kaen city. After completion of the project, the private sector will try to fade out in order to continue driving other projects.
In summary, considering the overall benefits in terms of urban or provincial development from the LRT project of Khon Kaen city driven by the private sector in association with the public sector in the locality, Khon Kaen city and Khon Kaen Province should gain benefits from this project (The representative of local media, personal communication, December 18, 2018) because this project has the potential to accommodate economic growth in the city in the future. However, these benefits may be linked to some business groups, especially business operators who are co-founders of Khon Kaen City Development (KKTT) Co., Ltd. Nonetheless, if this project enters
the stock market, the benefits are likely to be distributed to people in Khon Kaen city, but not all people, just those who are able to invest in the stock market. In this regard, if this project can be developed into a social enterprise, some benefits should belong to a greater number of Khon Kaen people. Anyhow, next is to consider which form of benefit is to be provided, and which group of people should oversee the operations (control rights) and manage the income or benefits (income rights).