Thailand's great train push derails on politics (Feature)

By Peter Janssen Sep 16, 2008, 8:35 GMT

   Bangkok - With Thailand's government showing signs of derailing, it's time to take stock of the economic opportunities lost this year.

   Most long-time foreign investors don't fret too much about military coups and the rapid turnover in coalition governments and cabinets in Thailand but there is definitely an economic cost that comes with the instability, especially in terms of delays to infrastructure projects which require long-term planning and consistent policy.

   'All of us who have been doing business here for a while don't care too much about politics, because there is usually no impact,' said Stefan Buerkle, president of the German-Thai Chamber of Commerce, of the current political instability.

   'But of course, those who were looking for public infrastructure projects are the ones losing out,' he added. 'We expected a lot from this government and nothing moved.'

   What is moving is the government. Former prime minister Samak Sundaravej was forced to resign last week after being found guilty of moonlighting on the job. New elections loom on the near horizon.

   Samak's administration was keen on mega-projects, especially those involving trains, a relatively eco-friendly, fuel-efficient alternative to cars and trucks these days in light of escalating oil prices.

   In May the government approved in principle a 770 billion baht (22.3 billion dollars) investment in nine elevated train lines and subways in Bangkok covering 424 kilometres over the next 10-15 years. None of the projects had reached the bidding stage by September.

   There has also been much talk of boosting the rail network of the State Railways of Thailand (SRT), one of Thailand's oldest, most indebted state enterprises which has been losing money for the past three decades.

   The Royal State Railways of Siam, started by King Chulalongkorn in 1890, managed to construct 780 kilometres of rail line under his reign.

   Transformed into the State Railways of Thailand (SRT) in 1951, the country's railways now claims 4,041 kilometres of track nationwide, 26,400 employees and an accumulated debt of 51 billion baht (1.5 billion dollars).

   There has been little expansion of the rail network since 1951.

   This year, when oil prices peaked at 140 dollars per barrel, the national railways requested 137 billion baht (4 billion dollars) from the government to build 800 kilometres of double tracks over the next three years and modernize its trains - all of which are at least two decades old.

   Currently, some 93 per cent of Thailand's rail network is single tracked.

   SRT's ambition is to imitate the Indian Railways (IR) which has over the past three years managed to go from being a money-loser to a profit-maker by increasing its freight revenues and improving its management and services.

   'Though we cannot succeed in the short-term like in India, we have a target to raise cargo revenues from 30 per cent to 50 per cent (of total revenues),' said SRT Governor Yutthaha Thepcharoen in an interview last month.

   The plan was welcomed by Thailand's freight forwarders.

   'Based on my data, rail cargo this year is three times cheaper than road transport,' said Suwit Ratanachinda, president of the Thai International Freight Forwarders Association.

   The SRT currently handles just 2 per cent of Thailand's domestic cargo, a miniscule amount by world standards.

   'In the US and most European countries it is more than 20 per cent,' said Suwit. 'We could save the country a lot of fuel bills by switching to more freight cargo.'

    Unfortunately, the SRT's dual-track ambitions will need to wait until next year's budget, if then.

    Thailand's railway plans have a way of getting sidetracked by politics.

    Last month, for instance, much of the SRT's labour union joined a strike against the government to support the People's Alliance for Democracy call for Samak's resignation.

    The rail service only resumed full operations on Monday, after Samak's political career had been derailed.

    The SRT board of directors, an appointed body, resigned over the work strike, leaving the state enterprise boardless.

    Most state enterprise labour unions are opposed to any suggestions of reforms or privatization by elected governments.

    And most governments like to use the state enterprises as political tools. For instance, as part of their anti-inflation drive the Samak government declared free third-class train travel on the SRT for six months.

    'It's very obvious what the problem is at the SRT,' said Sumet Ongkittikul, a transport expert at the Thailand Development Research Insitute (TDRI), a think tank. 'They have operating costs but their revenue is below it because the government regulates the price.'

    'If it's not sorted out very soon, the SRT will be in a position where they have no where to go,' he warned.