Thailand s transportation infrastructure projects

Transcription

1 Thailand s transportation infrastructure projects Restructuring Thailand s transportation system A talk given by Transportation Minister Chadchart made it clear that the primary objective of the government is to restructure Thailand s transportation system by accelerating the expansion and improvement of Thailand s railways to correct the country s lopsided dependence on road transportation. Thus, 78% of the Bt2trn budgeted for investment in the country s transportation infrastructure over the next seven years would be devoted to railway development. Among other objectives, the government hopes to cut Thailand s lo gistics cost from 15.2% to 13.2% of GDP; create 1.6mn jobs; and raise annual GDP growth by 1ppt. Main components: High-speed train and Bangkok mass transit system The plan envisages a high-speed train linking Bangkok to the north, south, northeast and east. The emphasis will be on safety rather than outright speed which would favor the Japanese in our view although the Chinese are known to have a cost advantage. The minister said there is keen competition among four countries Japan, China, France and Ko rea. The other major component is the good progress made to expand Bangkok s mass transit system by 400km from the current 80km by Construction of new roads is part of the plan to link Thailand to a road network covering the six countries (southern China, Thailand, Myanmar, Laos, Cambodia and Vietnam) of the Greater Mekong Sub-region. Dawei: Thai government as promoter only Minister Chadchart emphasized that Thailand would be a promoter, not an investor, in the Dawei deep seaport project in Myanmar. However he said the Japanese are being invited to participate in the project. Thailand shows its commitment to the project by allocating a total of Bt93.5bn to build a motorway and support facilities to the Thai-Myanmar border from Kanchanaburi. To reach its full potential, Dawei could develop petrochemical and steel industries that complement automobile manufacturers and their supply chains now located in Thailand s central region. Challenges to implementation Given Thailand s record on large infrastr ucture project implementation, questions were raised about possible delays. Minister Chadchart admitted that obtaining clearance on environmental and health impacts could be met with delays. Also, Thailand s 0.6% unemployment rate could be a constraint given that the projects are estimated to create 1.6mn jobs. However, the minister is less concerned about opposition from the State Railways Union, arguing that the new generation of union leaders understands the need for Thailand s railways to reform.

2 The status of Thailand s transportation infrastructure projects Transportation Minister Chadchart Sittipunt provided a briefing for Thai fund managers and corporates on the status of Thailand s transportation infrastructure projects which we summarize below. A means to restructure Thailand s economy and enhance competitiveness Minister Chadchart made clear that the main objective of the Bt2trn planned spending on Thailand s transportation structure is to cut logistics cost in Thailand and maximize the economic benefit that would accrue to Thailand as regional integration (especially the growing economic linkages between southern China and mainland Southeast Asia) is fast becoming a reality. The investment spending and 1.6 million jobs that will result from project construction is a stimulus to growth in the coming years, but the real benefit to be derived is the enhanced competitiveness of the country after Thailand s transportation and logistics have been restructured. The gover nment conservatively estimates that improved transportation and logistics will increase GDP by 1% per year. Chart 1: 86% of freight is transported by road Water 12% Rail 2% Air 0% Road Water Rail Air Road 86% Modal shift for Thailand from road to rail Thailand s transportation infrastructure is road-biased. There are 200,000km of roads in the country but less than 4,000km of railroad track. Water transportation is also under-utilized as waterways measure only 5,000km. Thailand ranks 49th overall in terms of infrastructure quality (WEF Global Competitive Report 2012) but ranks relatively better for roads (36th) and airports (28th) and scores poorly on railways (57th). Road is the most expensive form of transportation, estimated at Bt1.72 per ton per km (t/km), followed by rail at Bt0.93/t/km and water 0.64/t/km. The issue is that 86% of Thailand s freight is transported by road and only 2% by rail. As a result, transportation consumes as much as 31% of Thailand s energy use (industrial production by comparison accounts for 41%). Typically, transportation accounts for about 15% of total energy use in advanced countries. Table 1: Infrastructure quality ranking Road Railway Port Air transport Hong Kong Singapore Korea Taiwan Malaysia Thailand Source: The Global Competitiveness Report (World Economic Forum), Offiice of Transport and Traffic Policy and Planning (OTP) It should then come as no surprise that Thailand s logistics cost amounts to 15.2% of GDP (Bt1.75trn) compared with 8.3% for the US. In developed countries roads account for less than 50% of freight transportation, usually as feeder roads for rail transport. There are other externa l costs of road transportation, namely, more accidents and greater emissions which damage the environment. The World Bank estimates the cost of transportation accidents in Thailand at Bt232bn per year (10,644 died from road accidents and 222 from rail accidents in 2010). Therefore, the main aim of the government s transportation investment program is to engineer a modal shift from road to rail. 2

3 Clear targets and objectives Minister Chadchart listed some well-defined targets and objectives including the following: Logistics cost to GDP should fall by no less than 2% of GDP to 13.2%. Train speed for freight to rise from 39 km/hr to 60km/hr, and to rise for passengers from 60km/hr to 100km/hr. Transportation of freight by rail to double from 2.5% to 5% of total; Passengers carried by rail to increase from 45mn trips per year to 75mn. Fuel savings of Bt100bn per year. Travel time from Bangkok to provincial cities within a 300km radius to be cut by half from three hours. As seen in the chart below, spending is expected to ramp up from US$5.43bn this year to an average of US$10.7bn during This number in itself would amount to about 2.5% of GDP per year. Chart 2: Spending for US$64,828mn (Bt2trn) investment plan over US$ Mn 12,000 10,000 8,000 6,000 5,437 7,761 11,109 10,871 10,289 6,451 6,109 4,000 3,147 3,124 2, Source: Report on Investment Plan for Transport sector ( ), OTP Chart 3: 78% of Bt2trn investment is for railway Road 19% Water 2% Air 0% Custom 1% Over three-quarters of the Bt 2trn budget devoted to rail As much as 78% of the Bt2trn transportation investment budget will be allocated to improving and expanding Thailand s antiquated and inadequate railway system. For example, Thailand has 4,000k m of railway track which comes to only 150km of rail track per head of population compared with 653km for China and 1,995km for Japan. Rail 78% The number of train passengers has fallen alarmingly from a peak of 87.8mn in 1993 to 45.8mn in 2011 despite government subsidies that enable free travel on economy class. The average age of Thailand s locomotive engine is 40 years old according to the minister. 3

4 Chart 4: Train passengers have declined (mn persons) In terms of the big picture, the plan for Thailand s railways calls for the following: 1. Building an entirely new high-speed rail system which links Bangkok to all four regions of the country to transport passengers and high-value goods. 2. Enhancing the existing standard (narrow) gauge railway system by building dual-railway tracks to serve smaller cities and for bulk transportation. We asked if the minister foresees obstacles and constraints in achieving these ambitious objectives. He said the prime minister places top priority on these projects and he was working very hard and making progress. In his view, the following are challenges: 1. The biggest challenge is winning environmental impact assessment (EIA) and health impact assessment (HIA) approval which can be a drawn-out process. Approval is very much at t he discretion of the expert panel without the law providing much guidance. 2. The projects are estimated to generate 1.6mn jobs which could be a major challenge because Thailand only has about 200,000 workers who are unemployed. Thousands of skilled workers and technicians will have to be trained to operate the more sophisticated train system that will be built. The minister was less concerned about resistance that could come from the State Railway of Thailand (SRT) union leaders. He argued that a younger generation has replaced the older union leaders and they understood the need to adjust in order to survive and thrive. He believed t hat the high-speed train would at the beginning be a new business unit under the SRT but will eventually be spun-off as a separate legal entity. Table 2: High speed rail project Full phase First phase North Bangkok-Chiangmai Bangkok-Chiangmai Northeast Bangkok-Nong Khai Bangkok-Korat East Bangkok-Rayong Bangkok-Pataya South Bangkok-Padang Besar Bangkok-Hua Hin High-speed rail The main component of the plan is to build a high-speed train system running on standard gauge track (1.435 meters) linking Bangkok to Chiangmai in the north, Korat in the northeast, Pattaya-Rayong in the east; and Huahin-Padang Besar in the south. Minister Chadchart made it clear that the government would emphasize safety of the trains rather than speed (maximum speed of 250km per hour would sufficient). In our view, this would favor the Japanese who have a strong safety 4

5 record. However, the Chinese are known to have a cost advantage. According to the Director of the Office of Transport and Traffic Policy and Planning (Krungthep Turakit 25 Jan), the Chinese proposal to build the Bangkok-Chiangmai highspeed train system costs Bt460mn per km while the Japanese system costs Bt600mn per km. The Minister believed that the very strong interest shown by the Japanese, Chinese, French and Koreans to bid for this key project would help Thailand procure a world-class system at reasonable cost. He was hopeful that the TOR for the high-speed train bidding would be ready by the end of the 3Q of this year. It was understood that passenger revenue from the high-speed train based on 30mn trips per year by 2022 at Bt36.5bn would only cover operating costs. But he presented estimates of value of time saved and reductions in accidents and pollution to be much higher at Bt52.7bn in the same year, thus justifying the government paying for a major portion of the project s construction costs. A trip by high-speed train from Bangkok to Chiangmai is estimated to cost Bt57 per person vs. Bt980 by car and Bt250 by bus, the cu rrent popular mode of transportation. Minister Chadchart also said that such train routes are meant to compete with low-cost airlines. The government hopes that the high-speed trains will be much more than public transportation, arguing that the sharp fall in commuting time to and from nearby provinces will decentralize Bangkok further, bringing with it better quality of life and greater economic opportunities. The high-speed train will also carry highvalue and time-sensitive (perishable) cargo. Currently, 30% of agricultural products transported by trucks are damaged and spoilt. For the government, therefore, it s not a tr ain, it s a future. Meter (narrow) gauge rail expansion The existing narrow gauge (1 meter) rail system will be expanded by 3000km largely by turning existing single track into dual track railway which will greatly increase capacity and safety. These would serve provincial cities and be the main mode of transportation for bulky goods such as agricultural products. The government estimates that with the aforementioned investment in place the number of passenger trips will increase from 76mn to 186mn per year. For goods, the tonnage carried would increase from 26mn to 124mn per year. Estimates were produced to show that a better rail transport system would help cut down the cost of transporting rice, a major agricultural export of Thailand, by nearly half from Bt1.71 per ton/km to Bt0.93per ton/km. Expanding Bangkok s mass transit system Bangkok is currently served by a mass transit system comprised of three lines with a distance totaling 80km. The 10 mass transit lines, construction of which is expected to completed by 2019, would add another 410km. Of these, six lines (100km) are under construction and should be completed by

6 Table 3: Progress of Mass Transit Projects Project Km Status Operate Under construction Purple Line 23 Under con 53% civil 2015 Blue Line extension 27 27% 2016 Green Line extension (Mochid-Sapanmai) 12 Wait for EIA to be approved, Expect to bid early Green Line extension (Baring- Samudprakarn) 13 4% 2015 Red Line: West bound (Bangsue Civil work completed 2016 Talingchun) - Track work E&M in Bangsue-Rungsit contract Red Line: North bound (Bangsue-Rungsit) 36 Bidding 2016 Prepare for bidding Red Line : Missing Link 19 EIA approved, Prepare Bidding 2017 (HuaLumpong-Bangsue-Hua Mak) Airport Rail Link Extension 21 EIA approved, Prepare Bidding 2017, January 2013 Connectivity in the Greater Mekong Subregion Thailand s road system is already well-developed and the annual budget to build and maintain roads is already adequate. Ther efore, investment in roads as part of the Bt2trn transportation infrastructure plan is more modest. In particular, it is meant to complement the Asia Development Bank s Greater Mekong Subregion project (started in 1990) aimed at linking by road countries such as Southern China, Myanmar, Thailand, Cambodia, Laos and Vietnam. On the Thai side the proposed road projects include: the Southern Economic Corridor which links Bangkok to major cities of Cambodia and Ho Chi Minh City; the East-West Economic Corridor which links Myanmar, north/northeast of Thailand, Laos and Da Nang port of Vietnam; and North-South Economic Corridor which links northern Thailand through Laos and Myanmar to Kunming, southern China. All in all there are 27 projects involving the three countries which share their border with Thailand. There are 11 projects involving Laos, three projects involving Cambodia, five projects involving Malaysia, and eight projects involving Myanmar. Chart 5: Greater Mekong Sub-region connectivity 6

7 Thailand s border trade with Myanmar, Laos, Cambodia and Malaysia amounted to about $23bn in 2012 or 10% of total exports. Trade with Malaysia accounts for nearly 60% of total border trade. However, the trade with Myanmar, Laos and Cambodia has grown quickly in recent years and it is likely that there is significant under-counting of actual trade given the long and unmarked border between Thailand and its neighboring countries. Moreover, other economic activities such as tourism and investment are likely to rise as connectivity is enhanced. Dawei: Thai government as promoter only We believe that in his presentation, Minister Chadchart made several important points about the planned deep seaport and industrial estate at Dawei in Myanmar. These points are summarized below. 1. He emphasized that the Thai governm ent will not invest in the project but would help promote it, inviting others to invest in the project. The Thai government strongly supports the project and demonstrates this by committing to build a motorway, a dual railroad system and other support facilities linking Thailand s Kanchanaburi Province to the Myanmar border which would then link up with Dawei. Investment on the Thai side would amount to Bt93.5bn over a seven-year period. The first phase (motorway) is set to be completed by 2015 would cost Bt70bn. 2. He referred to the meeting between PM Yingluck and Myanmar President Thien Sein at the end of last year and her recent meeting with new Japanese PM Abe last week in which it was made clear that Japan would be invited to become a key partner in the Dawei project. Previously, it appeared that the project would be largely driven by Thailand and Myanmar. 3. Minister Chadchart opined that the development of a deep sea port would be necessary to support the long-term economic development of Myanmar and that Dawei could fit the bill in this regard. In the initial phase, Myanmar wants to also develop an industrial estate catering to light, labor-intensive industries that are best-suited to the country s current economic needs (early industrialization and employment generation). For Myanmar, Dawei would be the main deep sea port. The Thilawa near Yangon now being co-developed by a Myanmar-Japanese joint venture has a shallow port and will be a feeder to Dawei. 4. On a broader perspective, however, the development of a petrochemical complex and a steel industry at Dawei would enhance the competitiveness and integration of major automobile manufacturers and their support industries which are now located in Thailand s central region. 7

8 Chart 6: Dawei linkages Chart 7: Dawei deep sea Port project 8