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Thailand, China to Sign $5 Billion Rail Infrastructure Agreement

  • Ron Corben
  • VOA News

FILE - A high-speed railway train linking Shanghai and Kunming, of Yunnan province, is seen at a station during a partial operation, in Anshun, Guizhou province, China, Dec. 28, 2016.

In a major boost to Thailand's transportation infrastructure, the military government is set to sign a more than $5 billion agreement with China for a high-speed rail network.

The first stage of the rail, the 252 kilometers from Bangkok to Nakhon Ratchasima, is a key step in a line that, once complete, will stretch more than 1,260 kilometers to Kunming, in China's Yunnan province. The next stages will reach the Thai border with Laos.

Analysts see the rail line as an extension of China's One Belt, One Road initiative, expanding regional trade and investment. The project also highlights China's growing regional influence.

The agreement, expected to be signed in July, follows almost two years of delays in negotiations, with final details of the contract still to be made public.

The deal has also raised widespread criticism of the government's use of powerful clauses in an interim charter.

FILE - A man walks along rail tracks past moving and parked trains in Bangkok, Thailand, July 10, 2014. The military government is set to sign a more than $5 billion agreement with China for a high-speed rail network.
FILE - A man walks along rail tracks past moving and parked trains in Bangkok, Thailand, July 10, 2014. The military government is set to sign a more than $5 billion agreement with China for a high-speed rail network.

Economic boost for Thailand

Economists say investment in Thailand's rail infrastructure needs to be a priority.

Pavida Pananond, an associate professor of business studies at Thammasat University, said general improvements to Thailand's transportation network are welcome.

Several other countries, including Japan and South Korea, have put forward transportation plans and proposals for rail systems in recent years.

"It's good for Thailand and it's good for Thai business. I would say a clear 'yes' because Thailand is in dire need of better infrastructure, especially with regard to transport," Pavida said.

Thailand, she said, faces high transportation logistics costs due to a reliance on roads.

Talks surrounding the Sino-Thai rail agreement have been bogged down for over two years due to disputes over land access to China, debate over interest charges on loans from Chinese banks, and the eligibility of Chinese engineers and architects to work on the project.

Professor of economics Somphob Manarangsan said the rail project offers the region significant economic potential and a boost in Chinese foreign direct investment.

He said Thailand is also looking to China to invest in the government-backed Eastern Economic Corridor (EEC) that is targeting regional foreign investment.

"Thailand wants them [China] to move their regional supply chain outside of China to the mainland of ASEAN [Association of South East Asian Nations] area, which has Thailand at the hub, connecting to CLMV [Cambodia, Laos, Myanmar, Vietnam]," he told VOA.

The rail network includes a 410-kilometer section through Laos, in which China is contributing 70 percent of the total $5.8 billion cost. Laos sees the rail line as vital to enable it to export goods to the Thai seaport of Laem Chabang, near Bangkok.

Special powers raise concern

But the project has come under increasing criticism in Thailand after the military government, in power since May 2014, insisted on using powers under Section 44 of the interim charter that give the government absolute authority in policy application.

The government claims the use of the special power was to ensure Chinese investment, expertise, technology and equipment.

FILE - Thailand's Prime Minister Prayut Chan-o-cha listens to the opening remarks during the plenary session at the Asia-Pacific Economic Cooperation (APEC) Summit in Manila, Philippines, Nov. 19, 2015.
FILE - Thailand's Prime Minister Prayut Chan-o-cha listens to the opening remarks during the plenary session at the Asia-Pacific Economic Cooperation (APEC) Summit in Manila, Philippines, Nov. 19, 2015.

Former army chief and Thai Prime Minister Prayut Chan-o-cha told local media the use of the charter powers was to clear legal hurdles in the Thai-Sino rail project, "not a special favor to China but to Thailand's benefit."

But the use of the laws was challenged by organizations of Thai professional engineers and architects who said Chinese engineers were not registered to work in Thailand.

Thitinan Pongsudhirak, a political scientist at Chulalongkorn University, in a commentary, said Thailand should press for open bidding on the project to ensure the country ended up with the "best bid with the best value."

"Instead, opting for the Chinese plan is poised to violate a slew of Thai laws and undermine the government's own good governance agenda," Thitinan said.

Besides exemptions to Chinese engineers and architects working on the project, the charter articles also exempt state procurement laws and environmental regulations covering forest reserves, which will be set aside for the line's construction.

Thammasat University's Pavida said other concerns include levels of transparency on the agreement.

"People don't know the details. People haven't seen much information on the potential benefit, and partly, this is because the feasibility study has been done by the Chinese," she said.

"So, if you look at that and the Chinese try to sell their technology and then we let them do the feasibility study, so they would say, 'yes, it is feasible.' So that's one of the reasons why people do not have trust in the rush into this," she said.

Analysts said the government's push to sign an agreement comes as Thai's Prayut is due to visit China in September to attend meetings of the BRICS — Brazil, Russia, India, China and South Africa — forum in Xiamen.

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