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    Southeast Asia
     Oct 22, 2010

China, Thailand foster high-speed link
By Michael Mackey

BANGKOK - Thailand and China have agreed to proceed with rail connections that will connect the two countries through neighboring Laos. The planned links aim to enhance rising trade flows sparked by the new China-Association of Southeast Nations (ASEAN) free-trade agreement and facilitate with modern infrastructure the regionís move towards a common ASEAN market.

Thai Prime Minister Abhisit Vejjajiva emphasized his government's plans for new logistical and infrastructure projects, with rail expenditures prominent among them, during a roadshow in New

York in late September. He said in a speech that his government had approved a framework for Thailand-China cooperation in building a high-speed train route connecting Thailand's poor northeastern region through the Thai border town of Nong Khai to China.

The plan also calls for high-speed routes connecting Nong Khai to Bangkok and then eastwards to the industrially driven Thai Eastern Seaboard, with a third line linking the capital to the country's southern region near the Malaysian border at Padang Basar.

"These high-speed trains will not only facilitate the rapid movement of goods and people, but will provide even more benefits to Thailand once ASEAN becomes a single market and Thailand becomes a stronger production base for the Economic Community," Abhisit said.

The three confirmed routes will connect to a conventional railway China is building to its southern border and across Laos. Beijing has provided concessional loans for that link, although no sums or timetables have been mentioned for the project, which will go from Vientiane, the Laotian capital, to Boten near the Chinese border in Luang Namtha province in northern Laos. Lao Minister for Planning and Investment Sinlavong Khouthphaythoune is pushing for the link to be built within five years, according to official media.

Once these missing links are in place, China's existing rail network will become connected to Thailand and eventually onward south to Malaysia and Singapore. Beijing believes its all doable within three years; Thai politicians are more cautious. "If there is any delay, I suspect it will be at our end, not theirs," said Thai Finance Minister Korn Chatikavanij over the summer.

His guarded timetable speaks to the projects' still many unanswered questions, including the role of Chinese finance and labor in building the new lines. "The main issue is the missing links. The other is money," said Pierre Chartier, economics affairs officer at the United Nations Economic and Social Commission for Asia and the Pacific's transport and tourism division.

Chartier also looked beyond the China-Thailand connection.

"There is no physical rail connection between China and Laos, China and Myanmar, Myanmar and Thailand, Thailand and Cambodia, Cambodia and Vietnam, Vietnam and Laos. There's a lot of work to do" said Chartier. "The good news is that all feasibility studies have been completed."

It's still unclear whether Bangkok will accept Chinese export credits or government soft loans to help fund the estimated US$10 billion railway projects. Such financing is usually conditional on accepting Chinese labor - a condition that makes sense in technically challenged countries like Laos, but less so for Thailand's more developed work force.

Noting that some 64,000 Chinese workers are working on the railroad in Laos, one State Railway of Thailand official chafed at the suggestion that even 100 Chinese engineers be dispatched to Thailand for the project.

"We're actually working to try and create jobs for Thai people and Thai engineers, to develop our own expertise," said the official. "I don't believe that [bringing Chinese workers in Thailand] will be done easily."

There are also inter-operability concerns. "Most Southeast Asian countries are developing meter gauge. Whether they are going to move to a standard gauge like they have in China is difficult to say," said Chartier.

Some of the feasibility studies, he said, include plans for the track to have an envelope large enough to accommodate later changes if necessary. That embeds higher logistical costs to trade, as China is incurs with Mongolia where inconsistent gauges mean ore exports must be loaded into new train cars at the border.

Interlinking uncertainties
The bigger question surrounding Thailand's plans are of commercial viability. Thailand's Office of Transport and Traffic Policy and Planning, which foresees four rather than three high-speed rail lines, projects daily passenger numbers of 128,000 by 2017, rising to 192,000 in 2032. Those projections fail to indicate with specifics the projects' target market and whether passengers in poor regions will be able to afford the ticket prices that will need to be charged to re-coup the sizable running costs and capital investments.

The project's cargo-moving potential makes more economic sense. However, analysts note that most cargo does not require high-speed lines unless it is of exceptionally high value, including components used in just-in-time manufacturing processes. They say cargo volumes generally require a decent but not breakneck speed and reliability. Identifying exactly what cargo will be moved in relation to the current and future needs of Thai industries is key to justifying the investment in high-speed lines, they say.

The Thai side is beset with political problems that could eventually derail Abhisit's plans. His coalition government is unstable, and pushing major infrastructure spending into the geographical territory of the political opposition raises political risks before a general election due by the end of 2011. Already one of the opposition parties, Pheua Thai, has questioned the lack of transparency surrounding the plans.

The crucial implementing decisions will likely be made by the next elected government. Either way, it will face a tough internal test from the Thai bureaucracy, which has become reluctant to sign off on big-ticket infrastructure projects on the fears of officials that with a change in government they could be prosecuted for corruption - as happened to certain officials after the 2006 military coup that ousted premier Thaksin Shinawatra.

Part of the problem is Thailand's mixed track record with so-called public private partnership (PPP) investment schemes. Some have made money while others have incurred losses, including expressway projects in Bangkok. Deputy finance minister Pradit Phataraprasit recently acknowledged, "Historically, we have not been able to leverage PPPs well."

Other countries in the region, including Cambodia, are moving more quickly with an eye towards greater regional connectivity. A southern 240-kilometer line running between the Cambodian capital of Phnom Penh to the deepwater port of Sihanoukville is expected to start operations next May, said Peter Broch, senior transport economist with the Asian Development Bank (ADB).

It is one of two major rail restoration projects underway in Cambodia - the second being a 350-kilometer northern line that will link Phnom Penh to Poipet, just across the border from the Thai town of Aranyaprayet. Work on the line is due to start "very soon, right after the rainy season", said Broch, who predicted a May 2012 completion date. Together the two re-established lines will cost US$142 million, with the ADB leading and Australia's international aid agency, AusAID, contributing $25 million of the sum.

However, other high-speed rail ambitions recently came undone in Vietnam amid rising market concerns about the country's financial management. A proposed $56 billion north-south line that aimed to reduce rail travel times between the capital, Hanoi, and the commercial hub of Ho Chi Minh City from 30 hours to six ran into resistance and was scrapped on the drawing board by the National Assembly.

Others see a more hopeful model in Malaysia. The country's national railway company, Keretapi Tanah Melayu Berhad (KTMB), operates commuter, inter-city and freight services on peninsular Malaysia and has held its commercial own amid a rapid expansion in car ownership. While passenger numbers roughly halved from 7.6 million to 3.7 million from 1992-2007, freight loads rose from 3.6 million tonnes to 4.7 million tonnes over the same period.

KTMB notes that total tonne kilometers, a measure of both freight and passenger loads, rose from over 1 billion to 1.4 billion over the same time. KTMB is now pursing a strategy of mixing consolidation and growth, according to chairman Tan Sri Dato' Sri Lim Ah Lek.

Thailand's grand plan would eventually link with Malaysia through high-speed lines, creating a north-south link that reaches to China. As Asian economies look more towards regional rather than Western trade for future growth, it's a forward-looking plan with the potential to position Thailand as a highly efficient regional hub connecting China to Southeast Asia. But politics and nationalism could yet derail those economic ambitions.

Michael Mackey is a Bangkok-based freelance journalist.

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