Investing in Infrastructure Funds

Infrastructure funds are widely recognised as innovative financing tools that support economic expansion and long-term national competitiveness in many countries. By leveraging private capital and government support, infrastructure funds allow countries to finance the large infrastructure projects essential for their development. For project developers and investors, infrastructure funds provide opportunities to participate in infrastructure projects with varying levels of risk and return.

The Capital Market Supervisory Board (CMSB), under the Stock Exchange of Thailand (SEC), has issued criteria, conditions and procedures for the establishment and management of infrastructure funds in Thailand. Applications to establish an infrastructure fund may now be submitted to the SEC for approval.

Advantages of Infrastructure Funds

Infrastructure Funds provide some distinct advantages over schemes financed solely by state enterprises through budget borrowing or bond issuing and/or private investor financing. Firstly, infrastructure funds provide project developers with alternative sources of funds for their projects and reduce their borrowing needs. Secondly, both small and large investors can invest in the form of ‘investment units’. Thirdly, funds help the country overall by avoiding the increase of public debt.

Incentives for infrastructure project developers and investors

To attract infrastructure project developers and investors, the Government of Thailand has approved the following incentives for the establishment of investment in infrastructure funds.

  1. exemption on value added taxes, specific business taxes, and stamp duties incurred when transferring assets to the infrastructure fund for the purpose of establishing the fund, provided that such assets will be transferred back to the transferor or transferred to other government sectors;
  1. exemption on personal income tax incurred from a dividend or profit sharing received from the infrastructure fund by individual investors for a period of 10 years from the date of establishing the infrastructure fund; and
  1. reduction on official fees for the transfer of fixed assets, the registration of mortgages and the registration of leases to 0.01 %, but not exceeding Baht 100,000, for transactions where one party is the infrastructure fund.

The Ministry of Finance and the Ministry of Interior are preparing the related regulations to implement these measures, which are subject to change or other conditions.

Key regulations

The first step towards establishing infrastructure funds in Thailand came in 2008 when the Government studied how the country could develop large infrastructure projects without incurring more public debt. On 10 November 2009, the Cabinet approved the establishment of infrastructure funds in Thailand and appointed the Ministry of Finance to study and provide details regarding the structure and procedures associated with establishing a fund.

On 16 January, 2011, the CMSB, under the SEC, issued Notification No. Kor. Nor. 1/2554 regarding the criteria, conditions, and procedures for the establishment and management of infrastructure funds. The CMSB issued further notifications effective 16 September 2011, regarding fund regulation, including borrowing restrictions for funds, fund schemes, fund prospectuses, the appointment and duties of fund managers, agreements between the unit holders and the fund management company, and the registration of funds. Applications to establish an infrastructure fund may now be submitted to the SEC for approval. Key provisions with regard to establishing a fund, investments, and management of funds are summarised in the table below:

Type of fundInfrastructure funds are to be established in the form of closed-end funds. Investment units sold to the public must be listed on the SET. The investment units cannot be redeemed.
Size and investment ratioThe registered capital of the infrastructure fund shall not be less than Baht two billion with a policy to invest in infrastructure assets not less than Baht 1.5 billion. If the infrastructure fund invests in multiple infrastructure assets, each asset must have a value of not less than Baht 1 billion.In October 2011, the SEC relaxed requirements on the size of the fund by agreeing to reduce the required value of each asset investment from Baht 1 billion to Baht 500 million for investments in SPP (Small Power Producer) projects and VSPP (Very Small Power Producer) projects.
Permissible investment Types of assets   Funds may invest in physical assets such as land, buildings, structures, machinery or equipment. Funds may invest in non-physical assets such as leasehold rights, concession rights, rights to future revenue, and rights to receivables or claims under certain commercial contracts with regard to relevant infrastructure assets. Infrastructure funds must invest directly in the infrastructure assets or hold shares in a company that invests in not less than 75% of the total assets of an infrastructure project. Types of projects   Infrastructure funds may invest in the following types of projects, both brownfield and greenfield: rail transit systems; electricity; water; roads, highways, and concession ways; airfields or airports; deep water ports; telecommunications; and alternative energy.
Investment restrictions Investment must focus on infrastructure projects which benefit the general public of Thailand. Infrastructure business assets must undergo a due diligence exercise and have an analysis conducted by a qualified financial advisor prior to investment by the infrastructure fund. Since the benefit of the general public of Thailand’ is not defined, the SEC has clarified that infrastructure projects that sell portions of their final products to private investors may, in fact, benefit the general public of Thailand and will not be disqualified on this criterion alone.
Unit allocation For a fund investing in a brownfield project, all investment units must be offered to the public. For a fund investing in a greenfield project not exceeding 30% of total assets, the investment units may be offered to the public and high net-worth investors through private placement. For a fund investing in a greenfield project exceeding 30% of total assets, all investment units shall be offered to high net-worth investors.
Borrowing restriction The fund may borrow only for the purposes of acquiring, investing or improving the infrastructure assets or refinancing, on the condition that the debt:equity ratio of the infrastructure fund must not exceed 3:1.
Dividend allocationThe infrastructure fund must pay dividends to the unit-holders in the amount of not less than 90% of the net profit but is prohibited from paying a dividend while having a deficit.


Project developers seeking financing options, investors seeking new investments to diversify their portfolios, and government entities wishing to develop large infrastructure projects may consider infrastructure funds. The Thai government is providing incentives for state enterprises, private sector project developers and investors to explore the opportunities associated with such funds. Project developers interested in setting up a fund should consult with a financial advisor and a legal advisor to determine the appropriate structure in order to maximise benefits and attract investors.

Ms. Sethsathira is the head of the Energy, Chemical, Infrastructure, and Project Finance Practice Groups. In her over 20 years of practice, she has amassed vast experience in project development and the financing and acquisition of energy, infrastructure, and petrochemical projects.

Mr. Boonsong is the leader of the Real Estate, Hotel/Resort & Property Development Practice Group, a member of the Trade & Commerce practice group and head of the Insurance Practice Group. He is recognized for providing advice and applying his expertise to serve a wide variety of multinational clients in a broad range of commercial transactions involving mergers & acquisitions, insurance company acquisitions, power projects, oil, gas and petrochemical matters, real estate, hotel/resort and property development, real estate investment trusts (REITs), infrastructure funds, regulatory insurance issues, and environmental law.

Mr. Manussiripen is active in a number of areas of the Corporate & Commercial Practice Group, including real estate, insurance, mergers & acquisitions, and labour. His focus is on infrastructure funds, property funds, and real estate investment trusts (REITs).

Baker & McKenzie, Bangkok, has been serving clients since 1977. 35 years later, we have firmly consolidated our position as Thailand’s premier, full-service international consultancy. With 30 plus partners and over 100 associates, we are Thailand’s largest law firm. Our clients include leading international companies and most major Thai corporations.

This article first appeared in the January 2012 newsletter published by Baker & McKenzie. For more information, please visit