Big money pouring into Koh Samui

Local infra-structure fails to keep pace with headlong tourist-industry growth

Published on February 22, 2008


Property developers are investing nearly Bt10 billion in new hotels and resorts on Koh Samui this year.

The number of hotel and resort rooms on the tourist haven in the Gulf of Thailand will grow from 14,405 at the end of 2007 to 15,500 by the end of this year, according to a survey by the Tourist Association of Koh Samui.

However, the island's infrastructure, including waste treatment and water supply systems and roads, are falling further and further behind the aggressive growth of tourist facilities.

The association's president Sanee Puwasetthaworn says expansion by international hotel chains on Koh Samui since 2005 has been largely responsible for increasing the number of hotel and resort rooms from 10,000 to 14,405. Their investment has totalled nearly Bt30 billion, and they include Accor, Hyatt, Avasorn and Four Seasons.

The investment has followed the spiralling number of tourists visiting Koh Samui. From 937,763 visitors in 2004 to 1,030,623 in 2006, the number is expected to reach 1.5 million this year, following Thai Airways' launch of two flights per day between Bangkok and Koh Samui to add to Bangkok Airways' existing schedule.

Up to 80 per cent of tourists who visit Koh Samui are foreigners, mainly from the United States, Europe, Oceania, Asia, the Middle East and Africa.

It is perhaps not surprising that land prices have leapt by an average of 100 per cent over the past two years, in response to strong demand for land to develop resorts and hotels. Prices at the hugely popular Chaweng Beach have risen from Bt5 million per rai in 2005 to Bt10 million. Plots inland - so-called "mountain view" properties - have increased in price from Bt2 million per rai to Bt5 million over the same period.

Sanee says demand for land to develop five-star hotels and resorts on Koh Samui has continued to grow but there is no more land at beach locations, so investors have moved inland, to be satisfied with mountain views.

As well as hotels and resorts, investors have also been keen to develop residential projects for sale on the island. There was a rush of growth in 2005 and 2006, to reach nearly Bt10 billion a year. But most of the developers suspended their projects abruptly when the recent interim government announced plans to amend the Foreign Business Act, particularly as it related to nominee issues.

Pisarn Tangkasombat, president of Arayaburi Group, which has developed five hotels and resorts on Koh Samui, says both foreign investors and local developers who could be regarded as nominees of foreign investors suspended new and existing projects. They were concerned that their projects might be declared illegal.

As it happened, the interim government ran out of time before amending the Foreign Business Act. Pisarn says that if the new government announces a policy of expanding investment in the country and clarifies its attitude to amending the Foreign Business Act, the developers will return to their suspended projects.

Some foreign developers have already started to rebuild their projects by finding local partners to do the work. Others have sold their projects to local investors, Pisarn says.

"We believe the property market, especially that for residential projects, will recover this year, when land developers with nominee issues change their businesses to comply with the law and the government makes clear its policy on the Foreign Business Act," he says.

One of the biggest problems facing Koh Samui is the ability of the island's infrastructure to cope with the flood of development.

Tourist Association of Koh Samui director Satirapong Surinvarangkul says Koh Samui's status is only that of a district within Surat Thani province. As a result, its infrastructure is nowhere near as good as that at Phuket, which has provincial status. So when the population of Koh Samui district doubles, from only 50,000 people to 200,000, and nearly 1 million tourists visit each year, the infrastructure proves to be sorely inadequate.

Glaring problems exist with Koh Samui's waste treatment, water supply and transportation systems.

Satirapong says the island's waste-treatment system has the capacity to clear only 70 tonnes of waste a day, but the local and visiting populations create more than double that amount. The question is how to solve the infrastructure problems and develop Koh Samui as a permanent tourist destination.

The island's tourist association has proposed to the Surat Thani Provincial Administration Organisation that it set aside a budget to develop the district's infrastructure. However, several Koh Samui communities have decided not to wait for that and have begun local projects to support the district's growth.

"We cannot say our endeavours will succeed, but we believe that if we try to achieve stable growth, perhaps we will succeed," Satirapong says.
Somluck Srimalee

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