The sector must make a profit on a continuous basis to justify receiving extra money from the government’s coffers
Rail infrastructure is in particular need of government investment, according to Ruth Banomyong, assistant professor of international business and transport management at Thailand’s Thammasat University.
“It needs a complete overhaul,” he says. “Rail has not received sufficient funding, even for maintenance and rehabilitation. If the person that founded the Thai railway was still alive today, he would see that it hasn't changed at all.”
Banomyong cites two reasons for the sorry state of Thailand’s rail. First, as a state enterprise, he says the sector must make a profit on a continuous basis to justify receiving extra money from the government’s coffers.
Because the rail sector loses money, however, “this reduces the attractiveness from the budget bureau to send more funding,” fuelling a vicious cycle of poor performance and reduced investment.
The second reason is the rapid turnover of Thailand’s political elite. Investing in railway technology and infrastructure is always “a long-term objective”, according to Banomyong.
“Politicians in charge have felt that they can’t get any benefit from it and would prefer short or medium term plans,” Banomyong adds. “As a result, the rail industry has been left to its own devices.”
Bangkok Skytrain. Credit: 1000 Words / Shutterstock.com
However, in the past 12 months, signs that the Thai junta does want to make things better have been increasing. Last year, it announced an infrastructure action plan worth $25.2bn, covering 36 projects including rail, roads, air transport and ports across the country.
In March, the Thai cabinet approved a $7.2bn high-speed rail project that will link two of Bangkok’s main airports with another airport in the eastern province of Rayong. The route will run for approximately 220km, with trains reaching a maximum speed of 250km/h. A government spokesperson described it as the "flagship project of the Eastern Economic Corridor (EEC)", a scheme that aims to boost industry in the country’s eastern provinces.
Other high-speed lines include a Thailand-China cross-border route, the first phase of which is expected to be operational in 2021. Beijing considers the line to be part of its much-vaunted Belt and Road initiative, which aims to revive the ancient ‘Silk Road’ that connected China to the West during the Roman Empire.
Construction of a new rail megastation in the capital Bangkok is also 50% complete. When it opens, the station will act as a key hub for high-speed rail links, including both the Thai-China high-speed project and the ECC line.
If the plans are all successfully implemented, “we expect to see rail becoming a major driver of growth within the country and in terms of connectivity,” says Banomyong, adding that “it offers a way of disseminating growth from Thailand’s Bangkok-centric economy into other provinces.”
News of the new infrastructure projects has certainly helped revitalise shares in Thai’s national contractors, after a record slide of 18% in the first quarter of this year.
“These plans have helped generate more interest in the construction business,” says Banomyong. “If you look at the stock market and the stock prices of the various big construction companies, they are doing quite well.”
But following two decades without significant investment from any of the numerous Thai administrations, analysts remain cautious.
“None of these projects and plans are easy to execute,” says Banomyong. “They have been in the planning stage for over 30 years but have not been put into practice.”
New procurement regulations introduced in 2017 are expected to make it even harder for state agencies to spend money. According to Reuters, disbursements for public projects in Thailand fell by 5% in each of the previous two quarters.
“We have a lot of safeguards,” says Banomyong. “It is quite a tedious process getting through all of the various authorisations, licencing and different laws. It all slows down the process.”
The planned Thai-China rail project has been beset by delays following a series of technical, design and legal disagreements over the past few years. The Thai Prime Minister was recently forced to invoke Article 44 of the junta’s controversial 2014 constitution, which grants the government sweeping powers, to finally push the project over the line.
“It meant they could push various hurdles away and allow the Chinese to come in, not only with their equipment and technology but also the personnel to start building the railway,” says Banomyong.
In the end, Thailand will need greater political stability if it is to overhaul its infrastructure and kick-start economic development. In February, Prime Minister Prayuth Chan-ocha said elections will take place “no later” than February 2019.
But the junta has repeatedly promised and postponed elections since its 2014 coup, gradually turning Thailand “from an outward to an inward-looking country,” says Banomyong.
“Thailand in the past used to be open and forward looking,” he adds. “It wanted to be a leader in the region.”
Thailand will need greater political stability if it is to overhaul its infrastructure and kick-start economic development