Thailand’s rise to the forefront of economic development in South-east Asia over the past three decades was first fuelled by its agricultural prowess, which was then followed by its transition into a regional manufacturing powerhouse, before the more recent push to evolve into a knowledge-and service-based economy. Although numerous factors have aided the country’s achievements across disparate sectors, a common thread that runs through each of these industries has greatly improved their odds of success both internally and internationally: an increasingly modern, capable transportation network.
Regional Hub
Located at the nexus of South-east Asia with direct access to some of the busiest shipping lanes in the world, as well as land borders with some of the most dynamic countries in the region, Thailand is well placed as a centrally located hub to serve the financial, manufacturing, tourism and service needs of Asia. Although a myriad of countries in the region boast comparably suitable climates to produce quality agriculture products, and others also have access to an inexpensive and educated workforce to man large-scale manufacturing and service operations, Thailand has been able to differentiate itself by implementing more efficient cost-reducing transportation infrastructure to better move the people and products necessary for economic growth.
Thailand’s thriving manufacturing sector and its role as the second-largest economy in ASEAN has resulted in the country taking up a prominent position as a centre for regional supply chains. The Laem Chabang Port, for example, is one of the busiest in South-east Asia, while the strong tourism sector has helped drive up the number of air arrivals.
In terms of pure economic contribution to the economy, the transportation, storage and communications sector directly accounts for 7% of GDP and was valued at BT1.03trn ($29bn) in 2016, the first time the sector broke the BT1trn ($28.2bn) threshold. In 2016 the transportation and storage sector alone accounted for 1.2m jobs in the Thai workforce, an increase from the 937,320 people employed in 2011.
Big Plans
Although the state of transport infrastructure in Thailand has been improving for decades as a result of various government initiatives, which in many ways have driven the development of the sector well beyond that of its regional peers, the pace of implementation has at times lagged behind due to political and bureaucratic challenges. Seeking to rectify these problems, recent government efforts have combined numerous independent developmental plans under one umbrella.
The Thailand Infrastructure Development Master Plan 2015-22 (TIDMP) is the amalgamation of numerous strategic long and short-term visions designed to reduce the cost of logistics and transportation, and consequently improve the competitiveness of the economy as a whole. Similar to incomplete expenditure plans drawn up by previous governments, the TIDMP is expected to compensate for years of underspending on major construction works and fast-track further infrastructure development. The strategy aims to improve five priority sectors within the transport industry: inter-city rail networks, capacity enhancement for both highway networks linking key areas of Thailand as well as neighbouring countries, public transportation network development for the Bangkok Metropolitan Region (BMR), air transport capacity enhancement and maritime transport development. Investments made over this eight-year period are estimated to cost BT3.4trn ($95.8bn). Of this, a total of BT1.8tn ($50.7bn), or 53%, was earmarked for priority spending in the government’s action plan starting in 2016.
Funding for the BT1.8tn ($50.7bn) chunk of the ambitious plan will come from a mix of debt and public and private sources. About 63% of the total is to be financed by a host of state-owned enterprises (SOEs) active in the infrastructure sector, along with an assortment of loans. The rest of the financing will be sourced from the government budget, accounting for 12%, revenue diverted from SOEs (3%) and a toll road fund (1%), with the remaining 21% of costs to be covered by public-private partnerships (PPPs).
Fast Track
Spending plans are centred on heavy investment in 20 projects across five primary areas. These are expected to make the most significant impact on reducing traffic and energy costs, improving connectivity with neighbouring countries, distributing income and development equitably across Thailand, and accelerating private investment. The rail sector is earmarked for the largest amount of this funding, accounting for 65.9% of the total, followed by the development of mass rapid transit networks in the BMR, which will account for another 22.1%. The intercity road network will receive 8.9%, while the air and water transport segments will attract the remaining 2.9% and 0.2% of financing, respectively.
So far the most progress has been made on the projects primarily serving Bangkok and its surroundings, along with many of the multi-tiered development plans for road and rail, where there have been calls for a bolstering of transport corridors in the BMR before moving on to extending networks further towards the country’s border regions. “The most promising projects are the mass transit lines in Bangkok, so sadly investment will still be primarily in central Thailand,” Sumet Ongkittikul, research director for transportation and logistics policy at the Thailand Development Research Institute, told OBG.
Contracts concessioned by the government, rather than through PPPs, have resulted in the construction of numerous mass transit lines across the capital over the past decade, along with a slew of new motorways. Under this system, the Department of Highways contracts companies to construct these roadways or transit systems, and only after completion are these arterial connections offered up to private contractors to provide maintenance and upkeep in exchange for collecting tolls. This method of financing has also facilitated progress in mass transit systems in Bangkok, with a handful of lines already completed, while around half a dozen contracts to build new lines and extend existing routes have been concessioned to stakeholders.
Road Trip
Thailand’s highway and secondary road network is already substantially more developed than most of its neighbours, with 66,794 km of public highways and another 354 km of highways operated by the Expressway and Rapid Transit Authority of Thailand, according to Ministry of Transportation statistics. The bulk of the road network nationwide still consists largely of rural and local roads, of which there are 47,916 km and 352,157 km, respectively.
For the purposes of the TIDMP, much of the current road expansion is focused on a ring of roads surrounding Bangkok, along with extending modern four-lane highways out of the BMR and throughout the country. Other major motorways expected to be concessioned include the Pattaya-Map Ta Phut motorway, with a projected price tag of BT20.2bn ($569m), the Bang Pa In-Saraburi-Nakhon Ratchasima motorway (BT84.6bn, $2.4bn) and the Bang Yai-Ban Pong-Kanchanaburi motorway (BT55.6bn, $1.6bn).
Riding The Rails
Thailand’s rail system dates back to the turn of the 20th century; however, after experiencing a significant expansion during and shortly after the Second World War, further extension and modernisation efforts have occurred only intermittently, leaving the primary means of moving overland cargo around the country underdeveloped. Although plans for improvement have been on the books in one form or another for decades, a lack of financial commitment has resulted in only a fraction of the nation’s roughly 4000 km of rail lines upgraded to double-track specifications. Without this upgrade, trains will continue to operate much less efficiently, as they are currently unable to overtake slower trains or pass trains moving in opposite directions for large stretches of track, resulting in significant delays and slower delivery times. Although passenger trains average a speed of 60 km per hour (km/h) by operating largely on the relatively small amount of double-track lines, freight trains run at a much slower rate of just 39 km/h due to running almost exclusively on single-track lines.
The aforementioned TIDMP looks to address this issue in the first of its five key focus areas by prioritising upgrades to the overall rail infrastructure network, specifically calling for the construction of double-track lines along the six main routes. As of 2017 the double-tracking initiative is moving forward, with the upgrades being implemented in manageable lengths of around 200-300 km of rail at a time. Once the track upgrades are completed over a seven-year period, officials project the average speed of both passenger and freight trains will substantially increase to about 100-120 km/h.
Once successfully implemented, the amount of double-and triple-track lines will increase nearly 10-fold, from 2016 levels of 358 km to 3215 km of lines spanning 53 provinces. The addition of 2875 km of new double track will help facilitate a dramatic increase in traffic from an average of 200 trips per day to more than 800. This will increase the transport capabilities of the national rail system, boosting current annual rates of 11m tonnes of cargo and 45m passenger trips, to more than 50m tonnes of cargo and 75m passenger trips.
Of the planned upgrades, the first six routes are already in various stages of approval and construction, all of which are expected to be completed by the end of 2018. The combined length of these projects will add 903 km of new double-track lines at an estimated cost of BT129.3bn ($3.6bn), most of which will radiate from a central hub around Bangkok. The next wave of eight new routes will build on the progress of the previous projects, further extending the reach of double-track lines from the capital and filling in gaps elsewhere. These eight lines will add another 1626 km of double track to Bangkok rail services by 2022, with the remaining mileage to follow.
Speeding Into The Future
One of the most iconic fixtures of a developed economy is its efficient transportation infrastructure, which in many cases is represented by a high-speed railway. China now boasts two trains that can reach speeds of 380 km/h and 430 km/h, respectively, whisking passengers to and from Shanghai. Meanwhile in Europe, France, Spain, Germany, Italy and Japan all have operating trains that can reach at least 320 km/h.
In South-east Asia, plans for an interconnected high-speed rail line stretching from China in the north to Singapore in the south have yet to be realised. The plans include a corridor that would develop into a rail network, running all the way from Singapore to the southern Chinese city of Kunming, passing through cities in Malaysia, Thailand, Myanmar, Cambodia, Vietnam and Laos. There have been a number of funding and technical issues, however, as the numerous countries involved all maintain their own national development priorities, which often diverge from the collective advantages that a common rail project would yield. Thailand, for its part, looks to be making some progress in the planning stages of its own domestic high-speed rail system, which once completed would eventually connect the northern, southern and eastern edges of the country with the capital, Bangkok. Four separate lines emanating from Bangkok are laid out according to the TIDMP plan: a northern line stretching from Bangkok to Chiang Mai; another to the north-eastern city Nong Khai on the Laotian border, which would eventually link all the way through to China; a southern line reaching down to Hua Hin and eventually to Kuala Lumpur in Malaysia; and an south-eastern line to Rayong, in the direction of Cambodia.
Cooperation
The most advanced of these routes is the 673-km northern line to Chiang Mai, which is being developed with Japanese cooperation. A feasibility study on the BT500bn ($14bn) project was carried out by the Japan International Cooperation Agency in early 2016. Although final negotiations were still being concluded regarding the details of the contract as of mid-2017, construction is planned to take place in two phases. The first, linking Bangkok and Phitsanulok and covering 380 km, is expected to start in 2019. Work on the second, northern phase is scheduled to begin a year later, with the entire route planned for completion by 2023.
The second route to the north-east, which is being built in cooperation with Chinese interests, has run into protracted negotiations relating to cost concerns and the exact path the route will take. The Thai government has called for the high-speed rail system to be extended into Bangkok to link up with other modes of transportation, while the Chinese have been lobbying to end the line short of the capital, leaving the gap to be filled by existing standard-gauge track. Environmental permits have been secured for the first and second sections, spanning 15 km of the 253-km line, and bidding for construction of initial sections could be held as early as mid-2017, with construction commencing in August.
Development of the two southernmost rail lines has progressed more slowly and is expected to be contracted out to private sector interests to alleviate some the financial burden on the government. Two local conglomerates have expressed interest in participating in the lines: Charoen Pokphand Group, a major Thai corporation with varied business interests, announced its interest in the Rayong line, while the TCC Group was also looking into the Hua Hin route, according to local press reports.
Adding On
With the successful completion of the first Bangkok Metro and Skytrain lines, current development is focused on extending the range and connectivity of mass transit from the city centre into new boroughs. In 2017 the government allocated BT200bn ($5.6bn) for mass transit rail projects, with BT175bn ($4.9bn) coming from the national budget. This follows the BT85bn ($2.4bn) and BT50bn ($1.4bn) spent in 2016 and 2015, respectively, according to the Thailand Development Research Institute.
Following the construction of the Green Line extension in 2016, work is poised to begin on the Orange Line, which will stretch from the Thailand Cultural Centre to Bang Kapi and Min Buri. A contract was signed for the construction of the line in late 2016, and work is expected to begin by mid-2017. A joint venture consisting of CH Karnchang, Sino-Thai Engineering & Construction, Italian-Thai Development, and Unique Engineering and Construction signed a BT72.9bn ($2bn) deal to build the first 22. 6-km section of the line from the Thailand Cultural Centre to Suwinthawong, including the construction of 10 underground and seven elevated platforms. As construction works continue the government will also select a private operator to manage the line upon completion. A planned second phase would extend the route by 17.55 km west to Taling Chan.
Next up is the 30.4-km Yellow Line running from Lat Phrao to Samrong, via Pattanakarn, and the 34.5-km Pink Line from Khae Rai to Min Buri. The expected investment for the 23-station Yellow Line and 30-station Pink Line is projected to be BT55.8bn ($1.6bn) and BT56.7bn (1.59bn), respectively, with both routes to be built as monorail systems. Both PPP projects were awarded to consortiums, including the BTS Group, which already operates the two existing Skytrain lines. Announced by the Mass Rapid Transit Authority (MRTA) in December 2016, the winning BT105bn ($2.9bn) bid was awarded to BSR Joint Venture – consisting of BTS Group, Sino-Thai Engineering & Construction and Ratchaburi Electricity Generating Holding.
Unlike the concession system, where the government is responsible for construction, and then hands over maintenance and operations to private contractors, the Yellow and Pink Line PPP projects require the private partner to carry out the construction works as well. In return, the government will then subsidise around BT50bn ($1.4bn) of the infrastructure construction costs for each line. This government cost share is deemed necessary given the uncertainty of the future demand of the projects, and the need to keep costs and fares low enough to attract passengers. This will limit fares to a maximum of BT10 ($0.28) for each successive station.
In spite of the staggered progress of the various lines, all four are expected to be up and running by 2021. In order to meet the projected completion window of three to five years for each new line, annual government outlays for the mass rail projects are expected to fall between BT190bn-BT200bn ($5.35bn-$5.63bn) until completion.
Airtime
Thailand’s air transport sector continues to prove its resilience with passenger and freight travel continuing its upward trajectory in spite of floods, political protests, coups and economic slumps over the past decade. As a premier tourism hotspot and home to a thriving business sector, Thailand’s airports are continually striving to stay ahead of the rising tide of traffic coming in and out of the country.
Passenger traffic for six of the country’s primary airports – Suvarnabhumi, Don Mueang, Chiang Mai, Hat Yai, Phuket and Mae Fah Luang-Chiang Rai – is managed by Airports of Thailand (AoT), with overall passenger traffic increasing by 12.3% in 2016 to reach 119.9m. Bangkok remains by far the leader of the national airport network, with the Suvarnabhumi and Don Mueang airports accounting for approximately three-quarters of this total, serving 55.47m and 34.7m passengers, respectively, in 2016.
The high season for tourism throughout the country runs from October through to late February or early March, which falls in line with the North American and European winter. This is complemented by a smaller high season in July and August, when families from these markets take summer vacations.
Operator AoT is currently in the midst of its second phase of expansion for the country’s busiest air terminal, Suvarnabhumi, having already contracted works for an airport development project that is projected to boost annual capacity from its current listed (and exceeded) level of 45m passengers to 60m. Works for this BT62.5bn ($1.7bn) upgrade include the construction of a midfield satellite building and related support infrastructure, a 60,000-sq-metre extension of the existing main passenger terminal and upgraded utilities to support the expansions. Contracts for all works were concluded in 2016, with construction expected to be completed by 2019.
Given that the ongoing upgrade only gives the airport a small cushion of less than 5m passengers from 2016 levels, AoT announced plans in October 2016 for a third stage of development, which should further increase capacity to a proposed 90m by 2021. The BT54.6bn ($1.5bn) plan includes a new BT34.6bn ($975m) terminal and an additional runway.
Eastern Corridor
Over the years Thailand has fashioned itself into a premier industrial base within the region, developing infrastructure to support industrial capacity to serve the domestic population, while also taking advantage of trade agreements to export goods throughout the region. As part of an attempt to maintain this momentum, government policymakers and private industries are now looking to consolidate the country’s position as a manufacturing, tourism and health care destination, while also focusing on becoming a regional transportation hub capable of serving and enhancing each of these sectors, along with others. In order to make this goal a reality, much depends on the enhancement of the transport and logistics sector, as it will support industrial development in the future.
One particularly crucial geographic region in Thailand is of such importance to this strategy that it has attracted huge transportation infrastructure investment to improve all aspects of movement, including seaports, roadways, rail and airports. An epicentre of Thai industrial activity, as well as home to premier tourist sites and health care facilities, the Eastern Economic Corridor (EEC), located on Thailand’s eastern seaboard, spans a huge swath of the country, stretching across the provinces of Chonburi, Rayong and Chachoengsao. Unsurprisingly, the EEC is also located at a key transportation and logistics crossroads, intersecting both the East-West Economic Corridor and the North-South Economic Corridor, complete with access routes to the Indian and Pacific Oceans, along with neighbouring Cambodia, Laos, Myanmar, Vietnam and China.
Looking to bolster existing port, rail, airport and motorway infrastructure, the TIDMP has also called for substantial new investment in the transport sector. This includes BT200bn ($5.6bn) for the U-Tapao airport, BT10.15bn ($286m) for the Map Ta Phut Port, BT88bn ($2.5bn) for Laem Chabang Port, BT158bn ($4.4bn) for high-speed rail, BT64bn ($1.8bn) for the double tracking of existing railways and BT35bn ($986m) for works on new motorways.
“The development of the EEC and investment will definitely stimulate logistics demand from targeted industries, especially in Thailand’s eastern region and Bangkok. However, as investment ramps up, better logistics infrastructure will be needed, especially in terms of the rail network and connectivity of multi-modal transport,” Tipp Dalal, CEO of Triple I Logistics Group, told OBG.
Outlook
After years of relative inactivity, government efforts to reinvigorate infrastructure spending should kick-start a new wave of development across all segments of the transportation sector. While the country’s more advanced transportation and utility infrastructure gave it significant advantages over regional competitors such as Indonesia, Vietnam, the Philippines, Myanmar and others in previous years, the recent economic slowdown is creating a new urgency to boost efficiency across the board. The BT1.8trn ($50.7bn) worth of funding that is expected to be allocated by the end of 2017 should help Thailand sharpen its competitive edge in the field.
Much of the early efforts will continue to focus largely on the greater BMR, with further investment radiating outward in the medium term. As these earlier projects come to fruition, they should also lay the groundwork for other links, which form part of larger, international cooperative efforts designed to create greater cross-border efficiencies along a corridor extending from Singapore to China and beyond. Major investment in key air and seaports will also boost connectivity to these hubs. However, due to the bold nature of many of these planned expenditures, the ultimate success of such largescale, long-term projects will depend on sustained government backing, as well as cooperative efforts with the domestic and international private sector.
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