Sino-Thai railway project can wait until terms are right

So, it was not surprising when there were reports over the past few days that the rail cooperation between the Thai and Chinese governments might be put on hold because China’s rubber purchase deal from Thailand had not gone as planned.

The Sino-Thai railway project was planned to feature 873km dual tracks with a 1.435-metre gauge carrying trains at a speed of up to 180 km/hour. The line was to link Laem Chabang in Chon Buri province with Nong Khai, a province in the Northeast bordering Laos via Nakhon Ratchasima, Kaeng Khoi in Sara Buri province and Map Ta Phut and Bangkok with Kaeng Khoi.

The Sino-Thai railway development project has been on the table of the two nations for many years, going back to time of the Chuan Leekpai government in 1992, but it has never made much progress.

Under Prime Minister Prayut Chan-o-cha’s ministration, the talks on railway cooperation were resumed and that revived Thai dreams of a concrete high-speed railway though the speed would have been in the range of 160 to 180kph.

The critical issues in the negotiations involved interest rate on soft loans that China would provide for the project and the engineering works on some sections of the route, as China reportedly wanted to cut through the mountains.

Thailand sought an interest rate of 2 per cent per annum on the soft loans while China insisted on 2.5 per cent, arguing that Thailand was now an upper-middle income country.

According to a state agency study, the internal rate of return on the project is not much. It suggests that only if the rail line passes through Laos and links up with the southern part of China, where the economy is sizeable with a fast-growing trend, would it be worth making the investment.

We can guess who will reap the most benefits from the railway project?

It is important that China offer more assistance to Thailand in the same way it provides for Laos.

In the meantime, the Thai government is playing another card, turning to Japan for rail cooperation instead, rather than grasping at nothing. This is because the government has banked on the railway investment to boost the economy next year.

It would indeed be strange if the Sino-Thai railway project ends up on shelf, because then it would not make it to the fiscal 2016 budget’s transport development plan worth Bt1.79 trillion approved by the Cabinet meeting on Tuesday.

The rail cooperation between Thailand and Japan could overtake the Sino-Thai railway project. Both countries will jointly invest in improving the single-track railway from Kanchanaburi, a border province in the West, to link up with Sa Kaeo in Aranyaprathet located on the east side and upgrading it to become a double-track railway.

After that they will jointly invest in an extension of the rail line from Kanchanaburi to Phu Nam Ron and from Sa Kaeo to Khlong Luek to link up with Myanmar and Cambodia, respectively.

The rail line as located along the Lower East-West Economic Corridor is likely in favour of Japan’s production bases and its supply chains.

Thailand, however, has its own railway running from Bangkok to the Northeast, and though it features a single track with a metre gauge, it is under improvement to meet the safety standards to become a dual-track railway.

If there is no Sino-Thai railway project, Thailand will lose nothing except for a slide in land prices that have been skyrocketing in anticipation of the project and a slowdown in the economies driven by urbanisation.

There is no urgent need for the country to have a different railway track, especially one requiring a huge investment that could balloon to Bt500 billion from Bt400 billion previously estimated, if we do not get a good deal.