STRENGTHENING THE BACKBONE

Thailand 2017 | TRANSPORT | REVIEW: TRANSPORT

The government is taking a new three-pronged approach to jumpstart the economy, with the development of infrastructure front and center in the plan.

Transport infrastructure is the backbone of any economy, and the government is looking to strengthen the country's transport sector through solid investment. Located near some of the busiest shipping lanes in the world as well as next to one of the largest economies in the world, Thailand has excellent potential for being a transshipment hub for the region. In addition to shipping, Thailand has also been looking into expanding its rail network, with high-speed railways being the main attraction. These new lines would cut travel time for passengers drastically with an aim of spreading economic investment. The government is pinning a lot of its hopes on big-ticket investments in transport infrastructure in an effort to jumpstart the economy. The investment in infrastructure is part of a three-pronged economic strategy to move the country forward. The plan will revolve around building up infrastructure, restricting the country's industrial base away from equipment manufacturing toward value-added industries, and implementing reform in the agricultural sector. As of September 2016, there were USD40 billion worth of transport infrastructure plans in the pipeline; however, they remain just that—plans in the pipeline. Less than 1% of that total figure has currently been invested as of August 19, 2016. Still, the government has approved 20 proposed big-ticket projects with the aim of beginning construction by 2022. Thailand's ranking in the World Economic Forum's Global Competitiveness Index for infrastructure fell in 2015-2016 to 44th globally from 38th in 2007-2008, while during the same period, Thailand's neighbor, Indonesia, rose from 89th to 62nd. The planned investments in and upgrading of the country's infrastructure will be welcome developments as Thailand looks to retain its competitive edge.

The main focus of the government's new approach will be the creation of the Eastern Economic Corridor, which will cover the already established industrial provinces of Chon Buri, Rayong, and Chacheongsao. The plan will provide for a complete overhaul of transport infrastructure in the region via the development of new high-speed rail networks and highways, as well as the modernization of deep-sea ports in the area, which together will boost Thailand's claim as a regional hub for trade. The establishment of a ferry link in the Chon Buri province with Phetchaburi in the south will improve the connectivity between the two provinces as well as for the whole of the Gulf of Thailand. Initially, these infrastructure works will cost around USD11.5 billion and will be supported by government spending; however, this price tag will rise to around USD40 billion over the next decade. The new zone aims to attract new industries such as airplane maintenance and petrochemical processing facilities as well as serve as a logistics hub for neighboring economies such as Cambodia and Vietnam. Thailand's once dominant and envied export-led economy has slumped due to a global slowdown, and much needed FDI has moved to the country's less costly neighbors. Economic growth projections for 2016 are lower than previously anticipated but represent nonetheless an improvement upon the previous year. Still, economists are optimistic about Thailand's prospects, especially with regard to the massive infrastructure program and its potential effects on the country as a whole.

HSR

One of main aspects of the government's new infrastructure development plan is the introduction of new high-speed railway projects. The two main projects in contention are the Thailand-China and the Thailand-Malaysia railways. While neither are yet set in stone, both have great potential, and the projects would be welcome by many. In September 2016, Malaysia and Thailand agreed to conduct a feasibility study for a proposed Kuala Lumpur-Bangkok high-speed rail link. The main aim of the project would be of course to boost the connectivity between the two countries as well as drive greater bilateral trade. The new link will complement the planned railway between Kuala Lumpur and Singapore, which will also be of a great benefit to Thailand. Along with the rail link, it was also announced that Malaysia would assist by providing religious and educational services to the southern provinces of Thailand in an effort to stem transnational crime between the two nations. Following the completion of the study, the target date for the 350km link to be up and running has been set for 2026.
The other major high-speed rail project is the line between Thailand and China; however, this project appears to still require a few of the creases to be ironed out, as after 13 bilateral meetings the two countries are still struggling to finalize specific details of the project. The proposed line is hoped to run from Thailand's industrialized east coast through Laos and into southern China. In March 2016, Thai Prime Minister Prayut Chan-o-cha told the press that the project had officially been derailed; however, in July 2016 the two countries were still negotiating and set a THB179 billion cap on a 252.5km stretch of the project. The leaders had failed to come up with a clear cost estimate and therefore decided to set a cap. In total, the project is expected to run 845km and will include depots and stations along the way. Some of the main sticking points about the deal are the myriad terms and conditions concerning investment sharing, total costs, interest rates, concessionary loans, and development rights for the land.

The desire by the two sides to implement the project is clear; despite the fact that the deal had not yet been finalized, the leaders of the two countries attended a groundbreaking ceremony in December 2015. At the latest meeting regarding the project, it seemed that there are two main problems with the final deal, namely spending on the feasibility study and future expenses related to training courses for Thai staff. The project is set to go ahead—at least in short form—in September 2016 when construction on the first 3.5km of the track will begin, establishing a connection between the Klang Dong and Pang Asok areas in Nakhon Ratchasima's Pak Chong district. Thai authorities are confident that the first section will cause few problems as the area is owned by the State Railway of Thailand and will not require expropriating any land from current owners. The area is also relatively flat and does not feature any mountains or large hills, allowing for the design requirements to remain relatively simple. The authorities plan to use domestic loans as well as funds from the state budget to construct the line, with government plans detailing its intent to employ foreign financing in the acquisition of the train carriages themselves.

After the completion of this section, it will make a start on the 11km Pak Chong-Khlong Khana Chit, the 119km Nakhon Ratchasima-Kaeng Khoi, and the 119km Kaeng Khoi-Bangkok sections of the line. However, the most recent survey of the Pak Chong-Khlong Khanan Chit section conducted by Chinese authorities revealed that the area is prone to mudslides; hence, it asked for a postponement of the design until November 2016 so that it can develop a more suitable way forward.

As the international high-speed railways continue in their negotiations, the domestic links are moving along nicely. In August 2016, the authorities in Thailand opted to use the Japanese Bullet Train for the Bangkok-Chiang Mai link. The Bullet Train is one of the most famous in the world and will be able to offer safety and reliability for the project. The Japanese Minister of Land, Infrastructure, Transport, and Tourism, Keiichi Ishii, said to the press that the train will offer low costs not only initially but in the long term due to low maintenance throughout its life cycle. Japan has long been interested in the Bangkok-Chiang Mai project, as well as the one in the lower East-West Corridor that will cover Kanchanaburi, Bangkok, Sa Kaeo Aranyaprathet, and Laem Chabang in Chon Buri. The initial project will be split into two phases. Phase I will connect Bangkok to Phitsanulok, while Phase II will then go onto Chiang Mai. Thailand, possibly after seeing how other similar projects are progressing in the country, has asked Japan to intensify its efforts in the feasibility studies to ensure they stay on track. Still, both sides have publically stated their satisfaction with the project's progress. For the future, Thailand has also asked Japan to conduct maintenance and technology training for Thai technicians to ensure they can run it in the long term.