Rail projects to connect Thailand’s industrial zones to the region

Despite some delays, Thailand is pushing ahead with a series of rail projects that will link its industrial hubs to China and restore historical routes to Laos and Vietnam.

With international technical and financial backing, the projects are expected to boost regional interconnectivity and reduce logistics costs, as well as bring millions of Chinese tourists to the country.

Construction delays

In mid-November Thailand’s parliament approved a draft cooperation framework for a Thai-Chinese railway project, which covers the construction of standard-gauge railways on two routes, totalling 867 km.

Ground is set to be broken late this year on the two lines, which will be built in four phases. The first route will connect Thailand's Nong Khai province, on the border with Laos, to Kaeng Khoi in the centre of the country, while the other will link Bangkok and the Map Ta Phut area in the eastern province of Rayong, which is the centre of much of Thailand’s industrial capacity, via Kaeng Khoi. The track will also be integrated within a broader regional network, linking Kunming, China to Thailand via Laos.

The launch date for construction on the line was recently pushed back to December, two months later than planned, on concerns that costs for two of the four sections of the railway were 30% higher than initial estimates. According to Arkhom Termpittayapaisith, minister of transport, the two delayed sections are the most difficult of the project, as they pass through mountainous areas. To help lower costs, the maximum speed of the track was reduced from 250 to 180 km per hour.

While much of the funding for the BT350bn ($9.8bn) rail project will be backed by China – on the condition that the cost of lending does not exceed prevailing domestic interest rates – the two governments will also establish special-purpose vehicle companies to manage train operation, maintenance and repairs. According to the draft framework approved in November, addition funding will come from Thailand’s budget and domestic borrowing.

Under the agreement, which will be structured as an engineering, procurement and construction scheme, China will undertake construction on the more technical aspects of the project, including tunnels and bridges. The remainder of the works will be open for bidding.

According to officials, the delay should not impact the scheduled completion of the project, with the full grid, consisting of more than 1800 km of track, expected to be running by 2020.

Estimates suggest that overall logistics costs could be significantly reduced once the extended rail network is fully operational. This should help boost Thailand’s reputation as a centre for industry and exports, and help it compete with emerging production centres in Myanmar, Vietnam and Cambodia, which have been attracting fresh investment from foreign manufacturers in recent years.

Japan buying into rail development

Japan is also pursuing a strategic role in Thailand’s infrastructure development, and is participating on a separate domestic railway project.

In May the government announced plans to cooperate with Japan on a $12bn high-speed line between Bangkok and the northern city of Chiang Mai, with the 670-km project expected to break ground as early as the second quarter of 2016.

However, in June officials said the need for a more detailed survey of the proposed route, much of which cuts through mountainous terrain, could delay the start of construction work until 2017.

Regional interest

With a track record of extensive industrial investments in the country, ranging from automotive manufacturing to electronics, Japan and its neighbours have much to gain from a stronger logistics network in Thailand.

Another project in the pipeline could be the restoration of a rail link with Cambodia – a route that has been dormant for 45 years – which could give Thailand greater access to Vietnam further to the east.

The State Railway of Thailand is also carrying out studies on reactivating a non-operational rail link with Myanmar. The line would connect the country with Thailand’s East-West industrial and logistics corridor, and improve access to ports in both countries, allowing Myanmar to diversify its trade relationships.

Tourism benefits

Regional tourism could also get a boost from greater connectivity. According to forecasts by Thai and Chinese transportation officials, the new Thailand-China rail link could bring an additional 2m tourists to Thailand each year, attracted by less expensive fares.

Furthermore, additions to the domestic rail network could help transport visitors to seaside resorts in areas like Phuket. According to Pheerapol Thawornsupacharoen, director of the Office of Transport and Traffic Policy and Planning, a feasibility study is already under way for a rail route linking Trang, Satun and Phuket provinces, which would help promote tourism in the south of the country.

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