The Mass Transit Authority (MTA) has started construction of the first phase of a railway, covering 22 kilometres.

The MTA also would build the 30-km second phase, while the Bangkok Transit System Corporation's scheme would cover a further 20 kms, Mr Rak said.

With traffic snarls in the capital crippling foreign investment, Mr Sukavich's plans for the three electric train links had been welcomed by the international community, Mr Rak said.

'There is no denying that, in the past, foreign investors have been deterred by traffic jams in the capital,' he said.

'One of the problems Prime Minister Chuan Leekpai has had getting a mass transit system built stems from regular changes to government appointments.

'But if Mr Sukavich, who was the former managing director of Caltex Thailand, stays in office, there will be big changes,' Mr Rak said.

A recent change boosting foreign investment was putting down a comprehensive telecommunications network, Mr Rak said.

In the past, most Thai families had to wait 20 years to get telephone line, he said.

'Now, they can get installation in most places within a month and, over the last two years, two million lines have been connected,' Mr Rak said.

'The telephone system is important for foreign investors because now they can conduct business over the phone or via fax.

'They will not have to use the roads which will ease traffic congestion immensely.' The country also had installed international direct dialling which allowed foreigners instant access to local markets, Mr Rak said.

Although traffic and underdeveloped communication links were unsolved problems, cheap labour and rents, especially compared with Hong Kong and Singapore, were an attraction to investors, he said.

Despite Mr Sukavich's ambitious five-year plan for expressways and railways, which included an underground and a sky rail, tourists would still be hit by traffic jams, Mr Rak said.

'Businessmen will no longer suffer; it will only be visitors who are in the capital for short periods and want to see Bangkok's many wats [temples] who will face traffic problems,' he said.

'To date, this has not been a major concern as tourism increased by 9.6 per cent last year.' Tourism was the country's most important source of foreign exchange. Last year, the industry generated US$5 billion, accounting for four per cent of gross domestic product (GDP).

Thailand had attracted a 'substantial' amount of foreign investments from 1987 to 1990, Mr Rak said.

However, traffic bottlenecks and a military coup in 1991 had led to a foreign investment decline, he said.

'But the decline is only a short-term one as Southeast Asian markets remain attractive to investors from the United States and Europe,' Mr Rak said.

'Thailand is still a developing country and there are a lot of opportunities for foreigners.' Thailand also embarked on a programme of decentralisation, targeting cities outside Bangkok as havens for foreign capital, Mr Rak said.

The seaside resort town of Rayong, east of Bangkok, was being promoted as a centre for business, Mr Rak said.

With the manufacturing sector forecast to remain buoyant until 1999, foreign investors in industries such as garments, jewellery, canned food, plastics and rubber were eyeing markets outside Bangkok.

A new seaport near Hua Hin, in the south, would serve the local steel manufacturing industry and as a trade hub for exporting gas extracted from the Gulf of Thailand.

A drawcard for foreign investors wanting to beat the Bangkok traffic chaos was a new industrial estate 30 kilometres south of the northern city of Chiang Mai.

'Many companies from Israel have invested in this area to make use of the cheap labour and rents for diamond cutting,' Mr Rak said.

'The estate is a major centre for production of silicon chips and computer hardware.

'The Board of Investment (BOI) is trying to encourage foreign investors to look at provinces outside Bangkok and is promoting southern ports and Chiang Mai.' The national train network was well developed and many foreign mining companies had set up operations in the ruby-rich western provinces, Mr Rak said.

Canned food manufacturing had developed rapidly in southern Surat Thani province, Mr Rak said.

'It is a long way from Bangkok but the BOI's plan is to spread development across the nation,' he said.

'Companies operating in the south have easy export access through the well-developed port system there.' Malaysian, Thai and Indonesian investors had put money in the south following work on a multi-billion-baht container terminal in Surat Thani.

Mr Rak said Thailand had seen many infrastructural changes during the reign of King Bhumiphol Adulyadej.

'He has always pushed for the country's development and has taken on a major role in encouraging foreign business,' Mr Rak said.

'Thailand, which celebrates its national day today, would not be the international player it is without His Majesty's help.'