After a few challenging years that saw air safety rating downgrades and delays in major infrastructure projects, Thailand’s transport sector is beginning to regain momentum and the national transportation infrastructure is just now catching up with the remarkable growth in traveller numbers. Significant progress is being achieved with the construction of rail and road networks, and issues around meeting international standards are being resolved as the country lays the groundwork to become a regional transportation and logistics hub.
Canals to Skytrains
Until the 18th century canals were the primary means for transport in Thailand and urban dirt tracks were secondary to the waterways. The first regular earthen road was laid during the reign of King Rama IV (1851-68), while more extensive works were undertaken under King Rama V (1868-1910). A road network of more than 1000 km was developed during that period.
Thailand’s first rail line, the Paknam Railway, ran from near the current Hua Lamphong station to Paknam at the mouth of the Chao Phraya River (in what is now Samut Prakan). It was opened in 1893 and was in operation until 1959. The line to Ayutthaya was established in 1894, and a Thonburi-to-Petchaburi service was inaugurated in 1904. For a time, the country had two separate networks – the northern routes designed by German engineers and the southern routes by the British. In 1917 the systems were combined and all lines adopted the same gauge. But it was not until the Rama IV Bridge was completed in 1927 that the networks were connected. The first bus service began in 1907 and the first flight in Thailand was made in 1911, just one year after the first flight in Japan, at what is now the Royal Bangkok Sports Club. In 1913 the military formed an air unit, and the following year Don Mueang airfield was opened near Bangkok – making it the oldest operational airport in Asia. Thailand’s first international flight was made in 1922, a friendship mission to Hanoi in what was then French Indochina. The Aerial Transport Company of Siam was formed in 1930 and became Siamese Airways in 1947. In 1951 Siamese Airways and Pacific Overseas Airlines merged to become Thai Airways Company (TAC). Thai Airways International was created as a joint venture with Scandinavian Airlines in 1959, merging with TAC in 1988 and listing in 1991. By 1960 Thai Airways served nine overseas destinations, offering its first European flights in 1972 and establishing North American connections in 1980.
Reform & Development
In 1889 the Ministry of Transport (MoT) was founded under the purview of the Department of Public Works. Major reforms were undertaken in 2002, with the responsibility for the nation’s transportation activity consolidated under the ministry, which now controls the State Railway of Thailand, the Port Authority of Thailand, Thai Airways International and Airports of Thailand.
In Bangkok, the Bangkok Mass Transit Authority (BMTA) was formed in 1976, merging existing providers into a single entity. The BMTA master plan was established in 1994, under which Bangkok’s Skytrain, operated by Krungthep Thanakom, was completed in 1998. Six years later, the Metropolitan Rapid Transit (MRT) system was inaugurated and has experienced high growth in usage indicators since. Traffic has increased from about 4.6m people per month in 2000 to 20.8m in March 2018, for a daily average of 673,000 users. Monthly usage peaked at 21.2m in August 2016. For years, Bangkok had two Skytrain lines: the Sukhumvit Line that ran for 6.6 km from Mo Chit to On Nut, and the 8.5-km Silom Line from the National Stadium to the Saphan Taksin on the Chao Phraya River, with one major interchange at Siam. In 2011 the Sukhumvit Line, also known as the Green Line, was extended to Bearing. It was then further extended to Samut Prakan in 2018, and there are plans for it to connect to Bang Pu. The original MRT Blue Line, which ran 21 km from Bang Sue to Hua Lamphong, is currently being expanded to reach Lasok, and later to Tha Phra. The MRT Purple Line opened in 2016 linking Khlong Bang Phai with Tao Poon, very near to Bang Sue, but it did not initially connect with the rest of the system, requiring a 1-km bus trip from one line to the other. That problem was solved in 2017 when the missing link was added to connect the Purple and Blue lines, allowing for seamless transportation throughout the system.
Network Expansion
As part of the ongoing efforts to extend service beyond the centre of the city and reduce bottlenecks at key interchanges, more lines are in the works. The Purple Line is to be extended southwards from Tao Poon to Rat Burana, while a new Orange Line will run from the Thai Cultural Centre to Min Buri, before heading west to Taling Chan. A monorail Pink Line will run from Khae Rai on the Purple Line to Minburi, and the Green Line will be extended from Mo Chit to Ku Kot. The Yellow Line, which will also be a monorail, is planned to run from Ladprao on the original MRT line to Samrong on the Green Line extension. A further Dark Red line is planned from Hua Lamphong to Bang Sue.
Bidding on the Purple Line extension from Tao Poon to Rat Burana is to be held some time in 2018, with construction beginning later in the year. It is also expected that the west Orange Line will be approved by the end of 2018 and that work on the Pink, Yellow and Orange lines will begin that same year. A Gold Line, which is not part of the BMTA master plan, is being built along the Chao Phraya River, the first section of which is to be operational by 2019. It is a monorail that will connect the luxury mall Icon Siam with the existing network. The goal is to gradually expand the total length of rail in Bangkok from around 100 km in 2017 to more than 500 km by the end of 2029. The airport rail link that connects Suvarnabhumi Airport with the Bangkok Mass Transit System (BTS) Skytrain was inaugurated in 2010 and to some extent, it has been a victim of its own success. While it was designed to bring passengers to and from Suvarnabhumi Airport, it has proven popular with other users and is now serving 70,000 passengers per day. As a result, the line is often overburdened. In an effort to relieve congestion and improve service, more trains were added in early 2018, with the first train service starting at 6.00am rather than 5.30am. A link to connect all three airports in the Bangkok area – Suvarnabhumi, Don Mueang and U-Tapao – is currently being planned. The BT200bn ($5.8bn) project has been approved at the highest levels of government and is set to be open to foreign ownership under a 50-year build-operate-transfer concession. The bidding process began in 2018 and will close by November.
PPP Models
The concession system has evolved over time and has generally worked well in terms of bringing infrastructure projects to fruition. There are two systems used for public-private partnerships (PPPs): net cost and gross cost. In the former, the concessionaire receives all the revenues, but in doing so, assumes all the risk and may have to make extra payments to the government should profits break certain predetermined benchmarks. In the latter, the government collects the revenue directly and pays the concessionaire for running the line.
The original Blue Line was developed on a PPP net cost basis. The concessionaire, Bangkok Expressway and Metro Company (BEM), has lost a significant amount of money and accumulated a massive deficit on the line due to lower-than-expected ridership. The extension, however, is being carried out under the PPP gross cost system. BEM is developing the Purple Line on a gross-cost basis, whereas the skytrains were developed on a net-cost basis with the BTS as the operator. All extensions of the system are being handled as service contracts.
In early 2018 the Mass Rapid Transit Authority of Thailand (MRTA) and the Bangkok Metropolitan Administration (BMA) were in discussions about payments for the northern and southern extensions of the Green Line. MRTA is requesting BT78bn ($2.3bn) from the BMA for the construction work that has already been done on the lines, as the assets have already been transferred to the BMA. According to local press, the debt will be paid off between 2030 and 2042, though interest payments will begin next year. If the BMA were to pull out of the deal, the MRTA would be compelled to take over.
While the new lines are seen as vital to the development of the network, in some cases ridership has yet to reach commercially sustainable levels. At the same time, the well-utilised lines are not unified in terms of ticketing. While the lines would like to have a single card used for all lines, an agreement on how to split revenues has been difficult to reach. The introduction of a common ticket called a Mangmoom (spider) card, has been discussed for more than a decade. It became available in late June 2018 but only for limited use. “If commuters have to travel from one line to the other and pay two entrance fees, the travel price will be more expensive,” Sumet Ongkittikul, research director of transportation and logistics policy at the Thailand Research and Development Institute, told OBG.“The introduction of a single fee would bring Bangkok in line with most developed cities around the world.”
The national rail system is also being expanded and upgraded. The Office of Transport and Traffic Policy and Planning has released a 20-year rail development master plan, which includes dual-tracking, high-speed rail, electrification and freight terminal development. Of the master plan’s total BT2.7trn ($78.2m) projected cost, an estimated BT1.9bn ($55m) will be financed by the government, with the remainder from the private sector (see analysis).
Fast Lane
A host of existing motorways are being expanded and upgraded with new ones planned for construction. As of early 2018 almost one-quarter of the motorway connecting Bang Pa In to Nakhon Sawan was finished, with completion scheduled for 2020. Construction was also under way on the Bang Yai-Kanchanaburi motorway, which has a similar end date of 2020, while a highway running from Pattaya to Map Ta Phut is set for completion in 2019. Other planned motorway routes include Ratchaburi to Cha Am and Bang Pa In-Nakhon to Sawan.
Within the Bangkok area, expressways are also under development, including the Rama 3-Daokanong-Bangkok western outer-ring road and the Third Stage Expressway System. The Chalong Rat and the Burapha Withi Expressway are still under discussion, with work on both expected to be financed under the Thailand Future Fund, set to launch in October 2018 after several months of delay.
Traffic Congestion
The construction of rail lines over recent decades has helped increase the average speed of automobiles in Bangkok from an estimated 10 km per hour in the early 1990s to about 18 km per hour in 2018. This is still too slow, with many key points often gridlocked.
Thailand is said to have the world’s most congested roads, with Bangkok 12th in terms of congestion out of over 1360 cities around the world, according to the Global Traffic Scorecard by INRIX, a US-based traffic analytics company. Efforts are being made to correct this continuing problem. In late 2017 prime minister Prayut Chan-o-cha instructed the MoT to prioritise the alleviation of congestion, which would help to reduce logistics costs.
“Trucking is not as expensive in Thailand as in developed markets,” Lars Denta, the managing director at Maersk Line Thailand, told OBG. “However, it could be cheaper and more effective if traffic congestion could be alleviated,” he added.
The relatively high number of vehicles in the country is partly responsible for the high levels of traffic. In 2011 and 2012 the purchase of automobiles was encouraged under the government’s first-time car buyer scheme, which resulted in 1.1m units being sold in 2011 and 1.4m units in 2012. The scheme was thought to have directly resulted in an increase in congestion. After the programme ended, sales dropped, but they are now recovering. Car sales in Thailand were up 20.1% in December 2017 from a year earlier, the highest rate in four years. Total yearly sales were up 13.4% in 2017.
Road Blocks
The city bus system in Bangkok has faced significant challenges over the years. Annual passengers on BMTA services dropped from over 4m in 1992 to just over 1m in 2011. Originally, the BMTA had planned for five lines of bus services, but only one was ever put into service, running from Sathorn to Ratchapruek Road. This line is presently unprofitable, taking up an entire lane that could otherwise be used for cars. Nevertheless, in early 2017 the government decided to keep the line running and raise bus fares. A plan to introduce new buses into the city has been under development for a decade, but has been difficult to execute. In 2017 a pending deal to import 489 natural gas vehicle buses was scrapped when it was suspected that the units were made in China rather than Malaysia. The cancellation was followed by another deal to buy buses from a different supplier. By early 2018 the BMTA had received 100 of the new buses with the remaining 389 scheduled set for delivery in June 2018.
In an effort to service its debts, which are estimated at BT100bn ($2.9bn), the BMTA may increase fares by 30% in 2018. The last time fares were increased was in 2015.The BMTA is also expected to lay off an estimated 2000 employees when automated ticket machines are introduced in 2019. In 2018 colour-coded buses were added on eight routes in Bangkok: blue buses will operate in inner Bangkok and some northern areas; green buses will operate in the east and north-east; red buses will run in the south and the south-east; and yellow buses in the south-west areas. In addition, the MoT approved a new class of public transportation vehicles that can carry up to seven people and be booked in advance.
Competitive Skies
Despite increasing tourism, airlines in Thailand have been facing difficulties. The stocks of listed carriers have significantly underperformed as they are being squeezed by intense competition and rising fuel prices. However, according to the International Air Transport Association (IATA), airlines in the Asia-Pacific region should expect to see a rise in profits by end-2018, although the association warned that all carriers in South-east Asia will continue to face intense competition.
Although Thai Airways became profitable in the third quarter of 2017, the IATA warned that competition is on the rise and that it was also facing bottlenecks as it sought to hire qualified crew. Meanwhile, Thai Airway’s low-cost subsidiary Nok Air is reducing its fleet size and rationalising expenditures as it has been losing money since 2015. In addition to stiff competition, Nok Air has also been challenged with industrial action over labour disputes, the result of a pilot strike in February 2016. In late 2017 Thai Air, which owns 21% of Nok Air, approved a recapitalisation plan for the small carrier. Under the plan, capital will be lifted twice from BT625m ($8.1m) to BT1.14bn ($33m), and then again to BT2.27m ($65.7m). The near future looks somewhat brighter for NokScoot, the joint venture between Nok Air and Singapore’s budget airline Scoot, that is looking to return to profit in 2018 by achieving BT10bn ($289.5m) in sales. It is also planning two major route expansions, serving Tokyo and Seoul. In late 2017 the airline introduced a Bangkok to Xi’an route.
Improved Connectivity
Other airlines also added a wide range of routes in 2017 and 2018. These included four flights a week with Thai Airways introducing Bangkok to Beijing under their Phuket Express campaign, Turkish Airlines servicing Istanbul to Phuket direct and Thai AirAsia adding flights from Bangkok to Male, Jaipur and Tiruchirappalli. Jetstar Airways is adding four flights a week from Singapore to Hat Yai, while Bangkok Airways is planning new routes from Chiang Mai to Hanoi, Phuket to Yangon and will run more charter flights to China. Thai Airways will be adding more flights to Brussels, Oslo and Auckland, while its subsidiary Thai Smile Airways will be increasing its South-east Asia connections. Some South-east Asian carriers, including Thai Airways, are again looking at serving North America with nonstop flights. Although the margins are tight given the relatively low fares in the region, some airlines may decide it is worth the risk, particularly considering the improvements in aircraft technology. In addition to Thai Airways, other carriers considering the expansive move include Vietnam Airlines and Malaysia Airlines. In 2017 Singapore Airlines introduced a non-stop service from Singapore to San Francisco and is starting the world’s longest commercial flight, non-stop service from Singapore to New York, in October 2018. Although ASEAN has been working towards opening the skies, implementation has been slow and it is not yet clear when full operational freedom will be allowed for regional carriers outside of their home markets. Local standards in particular are acting as an impediment, despite the success of some high-level agreements.
Logistics Investment
In 2016 Thailand ranked 45th out of 160 countries in the World Bank’s Logistics Performance Index. The country was ahead of Greece, Vietnam, the Philippines and Indonesia, but behind Malaysia, India and China. Its overall score was 3.56, down from 3.96 in 2014, and its rank has declined from 31 in 2007 to 45 in 2016. In sub-categories, Thailand’s performance fell in terms of Customs and international shipments, although there were improvements in infrastructure, logistics quality and competence, tracking and tracing and timeliness. Transportation is a priority under Thailand’s 12th National Economic and Social Development Plan (NESDP) 2017-21, which has the goal of reducing logistics costs from 15% of GDP to 12%. Infrastructure and logistics are also a prominent feature in the 20-year National Strategy (2017–36), on which the NESDP is based.
A large infrastructure project that is part of the third phase of the Eastern Economic Corridor (EEC) development plan is the deepsea Laem Chabang port, which is expected to get under way in the near future, with total investments projected to reach BT140bn ($4.1bn). If the environmental impact assessment is completed by the end of 2018, the project could be finished by 2025. The third phase is estimated to increase the capacity of the port by 7m twenty-foot equivalent units (TEUs) to 18.8m TEUs, with car capacity moving from 1.3m TEUs to 3m TEUs. International investors have been invited to participate, with bidding scheduled for the end of 2018. “Laem Chabang Port can help position Thailand as a trans-shipment hub. Before reaching trans-shipment status, however, the country needs to increase its volume capacity to be on par with neighbouring Singapore. In order to increase our capacity, we need new to adopt new technology to climb up the value chain,” Chatchawan Ghettalae, vice-president of TIPS, a private container operator, told OBG. “Technology revamps have been the key focus for port operators as they contend with increases in competition and labour costs.” Meanwhile, Bangkok’s Sahathai Terminal – a privately operated facility offering maintenance, repair and on-site Customs clearance – is planning to invest BT800m ($23.2m) to improve services at its site located on the Chao Phraya River in Poochaosamingprai, Samut Prakarn province. In aggregate, the range of planned investments in Thailand’s public transport infrastructure and port facilities bode well for the future of the logistics sector. “The construction of high-speed rail and dual-track railways, the U-Tapao Airport upgrade and the new phase of the Laem Chabang Port will all benefit the logistics sector in the medium to long term,” Tipp Dalal, group CEO of Triple I Logistics Group, told OBG. “As a result, Thailand can be positioned as a multi-modal logistics hub and gateway to the region.”
Outlook
Steady progress is being made in the expansion of Thailand’s transportation networks, although challenges remain in regards to funding and the economic viability of certain projects. Nevertheless, even if some projects are slow to complete, the political will and long-term benefits are such that it is reasonable to expect that the planned infrastructure will eventually be built and much-needed services will be added. With a number of major tenders to be opened up to foreign bidders in 2018-19, there continue to be lucrative opportunities for interested international investors to take part in local projects as Thailand works to bridge its infrastructure gaps and transition into a high-income economy.
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