Thailand’s military-backed government is looking to boost the country's ailing economy with a more than $100-billion infrastructure spending program that includes upgrading the national rail network and opening links to Southern China.
The Thai government's plans to upgrade the national railway system follow years of financial neglect. The goal is to revive Thailand’s place in a trans-Asian railway network running south to north, from Singapore to Kunming in southern China, and west to east, from Yangon, Myanmar, to Ho Chi Minh City in southern Vietnam.
The spending program has been part of the government’s bid to lift a stagnating economy after almost zero growth in 2014. Analysts forecast an expansion of slightly more than 3 percent this year.
A weak domestic economy and an uncertain international market have undermined exports -- Thailand’s traditional economic driver of past decades.
Infrastructure focus
The government says it plans to spend over $100 billion in a seven-year infrastructure program to begin this year, that will range from railway upgrades to water management.
Thailand’s prolonged period of political conflict of recent years has caused vital infrastructure spending to be delayed or overlooked.
But Thanomsiri Fongarunrung, an economist at Phatra Securities in Bangkok, said government spending now is needed to improve the flagging rail transport infrastructure.
“It’s only the [[government]] that can boost the economy through infrastructure investment. We also have the higher costs of transportation. You can reduce this by using rail, replacing the trucks and roads and it could be more effective in terms of costs of production and again our neighboring countries are expanding and we need a link to those growing areas,” said Thanomsiri Fongarunrung.
Railway plans
The government this week met with officials from the State Railway of Thailand (SRT) to restructure and reform the often debt ridden state authority.
Original plans for regional railway development date back to the 1990s.
The previous government of Prime Minister Yingluck Shinawatra had proposed a high-speed rail line. But the new plans by the military backed administration are to switch from high-speed rail to double tracking, a system that allows trains to run in each direction on a separate track. It also will facilitate trains capable of speeds of up to 180 kilometers per hour.
Asian Development Bank (ADB) senior economist in Bangkok, Luxmon Attapich, said given the economy’s present weakness, infrastructure spending will help ‘jump start’ growth.
“So investment in infrastructure is good in that sense; investment in railway. Again if you come back to double track railway all the feasibility studies have been done a long time ago. It is ready to go ahead, if the actual construction can go ahead this year, it will really help GDP [gross domestic product] this year,” said Attapich.
A key link in the rail plan would connect the Thai provincial town of Nong Khai, bordering Laos, and cover 620 kilometers south to the industrial coastal region of Map Ta Phut in Rayong and nearby Bangkok.
Strategic investment
Altogether, a rail network of six double tracks will cover more than 900 kilometers, with an investment cost of more than $4 billion.
The potential source of funding is China. China, Japan and South Korea all have bid for the rail development program. It was China that finally signed a memorandum of understanding with Thailand, though, and it will finance the new tracks. Thailand will operate the network, in turn repaying China.
The routes are in line with the long standing plans to link China and Southeast Asia.
Carl Thayer, a political scientist at Australia’s University of New South Wales, said the rail link extends China’s reach into the Association of South East Asian Nations (ASEAN) region.
“Thailand is part of ASEAN which is promoting connectivity and that includes rail, most definitely, bridges, roads, etc., and China has been a massive supporter of that, so the link to Yunnan, to Southern China provinces, to mainland South East Asia China has developed that capability,” said Thayer.
The moves follow the establishment by China of an Asian Infrastructure Investment Bank in late 2014, that includes member states of the 10-nation ASEAN group. The bank is seen as a counterweight to the Asian Development Bank (ADB) and World Bank.
The next step toward the greater integration of regional rail lines comes next month, when Thailand’s minister for transport, Prajin Juntong, is to hold talks in Vientiane with the Lao government to push for development of the dual track rail routes linking Bangkok, Vientiane and the Yunnan, China capital of Kunming.
