China-Thailand High-Speed Rail Project Back On Track

Source: www.thai-language.comThailand’s National Council for Peace and Order (NCPO) has approved a US$23 billion project to connect two high speed railways with China’s rail network by 2021.

Plans for the Thai railways show one rail will connect the town of Nong Khai, just south of Laos’s capital Vientiane, with Map Ta Phut, located to the southeast of Bangkok. This section of rail is projected to cost 392.5 billion baht (US$12.2 billion) and will run 737 kilometers. Chiang Khong, positioned along Thailand’s northern border, will be connected to Ban Phachi, in the central Ayutthaya regions slightly north of Bangkok, along a track 655 kilometers in length at an expected construction cost of 348.8 billion baht (US$10.85 billion).

Under the administration of Thailand’s previous prime minister, Yingluck Shinawatra, China and Thailand had reached a bilateral agreement wherein the high-speed rail projects would be partially paid for in rice, as well as through loan funding. Being part of a larger infrastructure development scheme, the project was thrown into limbo last March when a loan bill to fund the scheme was deemed unconstitutional.

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Further complications arose when Chan-ocha’s junta took over this past May, suspending more than US$62 billion worth of infrastructure projects approved by Shinawatra’s administration, until screened by the NCPO. Previous reports alleged the junta had abandoned the high-speed rail project.

The railway lines will directly link to Kunming, in China’s southern Yunnan province. Constructing these railways in Thailand is part of China’s scheme to build a 3,000km (1,860m) high-speed track stretching from Kunming to Singapore. This railway will pass through Laos, Thailand and Malaysia.

If completed, it is projected to boost the GDP of China, as well as those of the other countries involved, by US$375 billion.

Though expected to increase trade and income for all participating countries, some have described the project as “Chinese high-speed railway diplomacy,” an act to extend China’s power and influence through the use of its high-speed rail technology and expertise.

According to Geoff Wade of the College of Asia and the Pacific at the Australian National University, a new high-speed rail network could have profound effects on the economy of S.E. Asia. He writes “when the people of the mainland countries soon find, through the convenience of HSR [high-speed railways], that Kunming is their ‘closest neighbor’ but a few hours away, the Yunnan capital will gradually emerge as the hub of the Greater Mekong Region and will eventually become, in effect, the capital of mainland Southeast Asia.

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Thailand’s current rail network is old and outdated. The top speed is 50 kilometers per hour, and accidents occur frequently. A new high-speed rail network, especially one linked with China and other S.E. Asian nations, would increase Thailand’s transportation and trade capabilities substantially.

Permanent Secretary for Transport Soithip Traisuth has said urgent infrastructure projects are aimed at improving connections within the country’s transport network by providing gateways to border trade and linking key cities, seaports, airports and cargo rail transport centers.

Chinese engineers have been assisting the Thai government conduct feasibility studies and minimize projected costs. One cost reduction method is to lower the top speed at which the trains will operate. According to Soithip, “The high-speed train dual track standards will be maintained even though the maximum speed of the trains will have to be lowered from 200km/ph to 160km/ph. This is to allow a possible shift to a higher speed train system at a later date after more investment in the future.”

Construction is slated to begin next year and should be completed by 2021.

Since the NCPO seized power in May, China has acknowledged and cooperated with the new government. Furthermore, Thailand has sent a delegate to Beijing, with both sides reportedly agreeing to continue building and expanding relations. Completing these rail projects should serve to strengthen trade and economic ties between these two countries.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.

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