China On Track

Proposed Chinese investments in the Thai rail network offer lucrative returns, but can Thailand get on board? 

"Moving things forward, as Korn conferred when speaking at Bangkok’s FCCT in August, means taking SRT out of the equation." 

Thailand’s recent decision to proceed with a rail connection to China shows a firming of its logistics and hub ambitions, but some all too enduring problems remain.
The Thailand-China negotiation framework will be submitted for consideration by Parliament, Thai Prime Minister Abhisit Vejjajiva said in early September. Neither he nor government websites have elaborated much on details leading to very different accounts circulating about what the deal actually entails.
Discrepancies that get noticed are money – from how much it will actually cost (somewhere between THB 300 and 350bn), the controversial role of Chinese labour in building it, how a decision will eventually be made and the timetable for it being built.
A proposed MoU is set to be signed by year’s end and Beijing believes construction can be done within three years.
Thailand’s track record might suggest that this is a tad ambitious.
The crux issue of whether it is conventional, bullet or high-speed, in this case 200 kmph, is also unresolved. But this is perhaps moot point given an average speed of 60kmph on Thailand’s railways today.
The general assumption is that three dual-track lines will be developed, with China principally interested in routes running from  Nong-Khai - Bangkok (624 km on the current State Railway of Thailand map), and Bangkok to Padang Besar (which according to the SRT is 874 km south of Bangkok although the Southern border with Malaysia is further still at 1143 km). A third line connecting Bangkok to Rayong on the Eastern Seaboard has also been touted, though China’s involvement in this line is not yet certain, despite its engagement with the SRT and Bangkok’s skytrain and metro systems. China’s offer to share technological expertise does however make it a attractive partner and Bangkok Mass Transit System (BTSC) is already pondering linkages with China’s Changchun Railway Vehicles Co (CRC), to develop projects outside Thailand.
The returns for China though far exceed contracts for its own businesses and industry. Once connected at Nong Khai to a conventional railway China is building from Kunming in South Western Yunnan province across Vietnam and Laos, once these ‘missing links’ are in place, China opens up industry in its western provinces long isolated from its eastern ports.
Don’t doubt that this is a major piece of infrastructure, one with big strategic implications in a way that has never been done before.
It’s the first major infrastructure project in recent memory proposed outside the golden arc of Bangkok and the Eastern Seaboard. It not only binds Thailand to China and both of them to South East Asia, but connects Thailand’s hinterland to the heart of its modern industry. The project is tacit recognition of the country’s long neglected need for stronger internal links as well as a future strongly tied to the Chinese market.
But if ever there is a symbol of China’s reach and the hegemony it is building within Southeast Asia, this is but one. China is touting direct rail links from its borders to warm sea ports in Pakistan, Bangladesh and Myanmar.
But once connected, if built, what will it move? Projections abound, each revealing contradictions and raising more questions, but leaving the big one – how and where will money be made – unanswered.
Thailand is said to be focused in the preliminary stages on passenger traffic, but is there the traffic and enough people to pay modern fares? Thailand’s migrant labour travels on the cheap. Tourists and business travelers want speed, which, in the context of a two-week holiday or business meetings and golf, currently means flying.
The government’s own Office of Transport and Traffic Policy and Planning (OTTPP), in its own planning of upgrades and development of the SRT’s four main lines (north, north-east, east and southern) thinks so, projecting growth in passenger traffic from 128,000 in 2019 to 192,000 by 2031. Two-thirds of this, incidentally, travels on the Nong-Khai to Bangkok and Bangkok to the Deep South route – whichever way it goes.
One of the biggest problems here well might be consumer resistance. State Railways of Thailand which runs the country's existing rail network at a massive loss, is highly politicized, prone to strikes, historically opposed to any attempts at privatization and changing their monopoly isn’t going to go down well.
Thai finance minister Korn Chatikavanich said recently on negotiations with China, “If there is any delay, I suspect it will be at our end, not theirs.”
Moving things forward, as Korn conferred when speaking at Bangkok’s FCCT in August, means taking SRT out of the equation. This does indeed seem to be the government’s plan.
As for cargo, OTTPP doesn’t even mention it. Yet in planning vernacular this is a project ultimately justified by freight and cargo needs reliability over high speeds, unless its value added. Sorting out what exactly the line will move whilst trying to connect realistically to the current and future needs of Thailand’s industries remains an onerous task.
Another headache is financing. The Thai Cabinet has rejected purchasing Chinese Export Credits worth THB 12.47bn, usually conditional on accepting Chinese labour, but it seems China is still keen to provide support in manpower, training and technology transfer, building on existing SRT relations.
Then there is the vexed issue of Private-Public Partnerships (PPPs). The government, aware of a flaky record, has been keen to promote the fact that it is actively looking for private sector buy-in on its national infrastructure blueprints.  Yet they also admit that in order to be truly effective reform is also needed. Explaining Thailand’s mixed record, Pradit Phataraprasit, the Deputy Finance Minister acknowledges that success has been held back by, “the current PPP law of 1992, and the absence of a champion within government to drive PPP projects.”
The government has sought to bridge this gap by proposing a variety of PPP arrangements, including Build-Own-Operate-Transfer, Build-Own-Operate, Build-Transfer-Operate and Build-Operate-Transfer. But with feasibility studies pending and agency jurisdictions yet to defined, the private sector remains deservedly cautious.
Whether Thailand utilizes the proposed railway for passengers, its own industries or serves as a transit point for Chinese goods, the returns are lucrative enough for Thailand to push forward in its reforms. Getting to the point when there will be smooth train services between key points in Thailand, the rest of the region and China looks to be a long, bumpy but necessary journey.
The hardest task of all might be starting the project. BRT

This article was first published in Business Report Thailand, Issue 1, October 2010