Fast-Track Logistics

Thailand

Economic News

22 Jul 2010
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Thailand is looking to overhaul the country's rail network, planning to combine state spending with private sector investments to revamp a system that in recent years has been overtaken by road transport as the economy's primary freight mover.



An effective cargo-moving network is essential for the Thai economy, with exports contributing some 70% to GDP. Despite possessing over 4000 km of track linking almost all major trade centres, only a fraction of domestic or export freight is transported by rail, with just 2.2% of cargos carried by train, according to Transport Ministry figures.



However, ministry plans call for large-scale investments to increase its share to 10% within the next 15 years, raising the amount of freight moved from the present level of 264,000 tonnes per annum to 576,000 tonnes. This greater utilisation of Thailand's rail network would result in a 27% reduction in logistics costs, officials estimate.



One of the projects identified by the State Railway of Thailand (SRT) as crucial to achieving this goal is the dual-track programme – the duplication of the country's main line tracks to allow for fast two-way traffic. This would replace the need to either strictly regulate the flow of up-and-down traffic or to halt some trains at sidings to allow others to pass.



In December 2009, the transport minister, Sophon Saram, said he was committed to starting work on the double-track project in 2010, with three mainline routes – a combined length of 400 km – identified for the initial stage of the project. The prioritised lines – running from Ban Map Kabao in Saraburi province to Nakhon Ratchasima, the Lop Buri to Nakhon Sawan connection, and the line from Hua Hin in Prachuap Khiri Khan to Nakhon Pathom – each had been chosen because of the high-value added returns expected for the economy, the minister said.



In order to earn those returns the state will have to make some serious investments from an already strained public purse. Speaking on January 26, after the cabinet gave its approval to the draft budget for the 2011 fiscal year that set a deficit of $12.7bn, the finance minister, Korn Chatikavanij, said that while state investments would total 16.5% of total outlays of $62.6bn, the government was also looking to the private sector to step up investment spending, especially in the rail segment of the transport industry.



Korn's call for private investment echoed that of Prime Minister Abhisit Vejjajiva, who in mid-November said the government planned to spend $3bn to improve the country's railway system and extend services but was looking to fund at least part of the scheme through a partnership with non-state enterprises.



"We welcome the private sector to join this $3bn project. As part of this, the government will also invite foreign investors especially from China to participate in this mega-investment," Abhisit said in a televised address.



While the prime minister underscored the need for twinning lines on key routes – which he said would result in increasing average speeds from 60 km to 120 km an hour – Abhisit said it was also vital to improve existing tracks, upgrade signaling systems and invest in modern rolling stock and locomotives as part of the wider economic stimulus programme.



The SRT itself is in the midst of a major overhaul, with chairman Suphot Sublom announcing on January 27 that a committee set up to draft new guidelines to improve administrative practices would complete its work in February.



Preliminary recommendations of the committee have already been released, including the proposal to divide the SRT into three distinct units, controlling rail operations, operation support and asset management. It has also been proposed that the authority establish a subsidiary to manage the operation of the Airport Rail Link, the new high-speed passenger line connecting Bangkok's Suvarnabhumi International Airport with the city centre, scheduled to begin operations early this year.



The main objective of the administrative reforms is to streamline management of the state rail authority and improve operational efficiency, Suphot said.



While investments will improve the operational safety and efficiency of the rail network, SRT still has to convince the private sector to switch from road to rail for cargo transportation. This may prove to be a harder task than improving infrastructure and rolling stock. With successive governments having invested heavily over a period of many years in the country's road grid, and having scaled back spending on rail freight services, it will be hard to win back customers, especially those who have built up their own road freighting capacity.



It will not just be a matter of "build it and they will come" for the new and improved SRT, the state enterprise and the government will have to ensure that, over an extended period of time, services match the expectations in order to make rail a preferred logistics choice.

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