Train of thought: Infrastructure borrowings put railways back on track

In her first meeting with the foreign press corps in March 2012, Prime Minister Yingluck Shinawatra boldly announced that Thailand intended to go it alone on constructing high-speed rail services. The plan on the table up to that point had always been that Thailand would form a part of Chinese ambitions to build – and at least partly fund – fast rail services through South-east Asia, mainly for freight. Preferably, from Beijing’s point of view, Chinese freight.

COSTS: What the premier did not say was how much it would cost and, more cogently, where the money would come from. The answer to that question came three months later when the government announced a plan to borrow some BT1.6trn-2trn ($51bn-63.8bn) during the second half of 2012 to fund infrastructure projects, including high-speed rail.

Kittiratt Na-Ranong, the finance minister and deputy prime minister, was quoted as saying the projects earmarked for funding included expanding Bangkok’s Suvarnabhumi Airport and Laem Chabang deep-water port – and for the construction of high-speed railways. The plan still has to go before parliament and, even if the funding is approved, environmental impact assessments for the four lines could take up to two years. The links and preliminary costings have been announced as 745 km from Bangkok to Chiang Mai for BT229bn ($7.3bn), 615 km from Bangkok to Nong Khai for BT201bn ($6.4bn), 221 km from Bangkok to Rayong for BT72bn ($2.3bn) and 982 km from Bangkok to Padang Besar for BT298bn ($9.5bn).

CHINA: Youdtana Tupcharoen, the governor of the State Railways of Thailand (SRT), told OBG, “It is likely the lines from Bangkok to Chiang Mai and to Nong Khai will be built by Chinese construction companies, but we will ensure that we can procure rolling stock from any supplier.” According to Chula Sukmanop, director-general of the Office of Transport and Traffic Policy and Planning, the Ministry of Transport (MoT) and the Chinese were working together to produce a viable plan of action. “The ministry is talking with the Chinese on feasibility studies,” he told OBG. “At present there is no real information to work on. We have an informal deadline to have a feasibility study completed by September or October 2012.”

Like Youdtana, he saw the way ahead as negotiating not just with the Chinese but opening the project up to others. “Right now it’s just a wish list,” said Chula. “It’s like learning to ride a bicycle and then wishing for a sports car. You can wish for a sports car but every day meanwhile you have to ride a bicycle.”

The MoT had swiftly announced in April 2012, even before the funding statement, that one of the lines would be completed within the life of this government, or about three and a half years at the time. Enthusiasm for the project seemed to have overtaken the realities of building a railroad. It is perhaps more apposite to study the state of the current network. SRT has been underfunded for decades and sits atop a service where many of the locomotives are more than 50 years old and some fit only to provide spare parts.

And while stories abound about the need for and progress in double tracking, little is said publicly about the parlous state of much of the single track.

NEED FOR REPAIRS: Two incidents, the derailment of an oil train between Bang Sue and Don Muang and the airing on television of damaged railway lines around Laksi station in northern Bangkok, brought that into focus. The Laksi station tracks were swiftly repaired and Youdtana reaffirmed the long-term plan to replace all bad track. That would be an expensive job, especially for a body that carries a heavy debt burden. The 21 km of track between Bang Sue and Don Muang alone will cost BT5m ($159,500) to fix. Youdtana was quoted in the local press saying that the total bill for replacing tracks would be some BT21bn ($669.9m). However, he added that since the work was to be split among 21 contractors, it could be done in two years.

Ruth Banomyong, a faculty member in the Department of International Business, Logistics and Transport at Thammasat University, told OBG, “There is a need and a use for a good, robust rail network but do we need high-speed trains inside Thailand? Probably not.” However, there is a need for a reliable rail system to switch the majority of internal freight transport back to rail and off the roads. “We need to get the basics right,” added Ruth. “Who is going to manage it in a way that it will not lose money?”

There might be a lesson to be learned from other countries, such as Cambodia, he further suggested. “The state railway was moved back to be a department of the MoT, which could then directly outsource expansion and maintenance to the private sector,” said Ruth. The problem in Thailand was that no one had laid down a clear policy on whether the railways were supposed to be a public service or a money-making entity. “If it’s a public service, the answer is simple – find the money and pay for it,” Ruth said.

PASSENGER TRAINS: One of the reasons that SRT loses money and is heavily in debt is because of the low price of passenger tickets. “Train fares have not been revised for the past 20 years despite the fact that our expenditure, on the likes of energy and wages, has vastly increased,” Youdtana told OBG. “This consistent loss is thus due to our service obligation of keeping fares low, particularly for local commuters.”

Apart from fixed pricing, another drain on the country is that certain classes of ticket are directly subsidised. There are different kinds of subsidies on fares, based on destination. “Only third-class passengers are subsidised, not first or second,” Chula told OBG. Subsidies apply to about 40% of third-class passengers. SRT calculates what the fare should be and receives an annual amount from the state.

FREIGHT TRAINS: Some of the railway’s systems financial difficulties may stem from the fact that it is relatively under-utilised when it comes to moving freight. Chula said that it was current policy to shift freight transport from road to rail, using a truck only for the last local delivery. Even so it will take years to reverse the 20:80 rail-road split that currently prevails in Thailand. Delivery of twenty-foot equivalent units (TEUs) to Cambodia was a case in point. “For at least the next five years it will mainly done by road before they can be transported by rail,” he added.

But certainly the plan from the perspective of SRT is to increase the role of rail. As Youdtana told OBG, “Once our modernisation plan is completed, we expect freight carried on our network to rise from 11m tonnes a year to 37m tonnes by increasing the frequency and average speed of trains.”

From the perspective of the freightforwarders that OBG interviewed, a bigger complaint than either frequency or speed was the lack of a disciplined timetable. How long it took to deliver TEUs from, say, Laem Chabang port to Bangkok was less important than being able to rely on a specific arrival time. “We have been asking SRT to guarantee the time of delivery,” said Chula, “but that could be beyond its control because of its mandate on passenger services. It could be that no locomotive is available to haul freight because it is needed for a passenger train.”

However, there is now the prospect of light at the end of the train tunnel by a process, in essence, of partial privatisation. “The government would pay for the track and charge a fee for other people to run trains and even compete on certain routes,” said Chula. “We want to divide the responsibility for rail so the government funds the infrastructure. SRT doesn’t have the capacity to serve the demand so there is room for other people.” What is still an unknown is the length of the tunnel with light at the end of it.