February 6, 2017 1:00 am JST
Exclusive

China and Japan set for another high-speed railway fight

Thailand, Malaysia to start talks on 1,500km route

YUKAKO ONO and HIROSHI KOTANI, Nikkei staff writers

China displayed this model of a high-speed train at a railway cooperation ceremony in Thailand's Ayutthaya in December 2015.

BANGKOK -- Thailand and Malaysia are set to start talks on the construction of a 1,500km high-speed railway that would connect the two countries' capitals and enhance regional connectivity.

Arkhom Termpittayapaisith, Thailand's transport minister, told the Nikkei Asian Review that he hopes to meet with his Malaysian counterpart soon. "We will discuss how we can get foreign countries involved in the project like 'China or Japan' or 'China and Japan,'" he said. "But Malaysia seems to have more favor toward China."

The Bangkok-Kuala Lumpur route is a large section of the pan-Asia railway network plan -- initially proposed by former Malaysian Prime Minister Mahathir Mohamad at a 1995 meeting of leaders of the Association of Southeast Asian Nations.

The idea was to build a rail network that runs all the way from Singapore, to the southern Chinese city of Kunming, through Malaysia, Thailand, Myanmar, Cambodia, Vietnam and Laos.

Much of the existing rail network is old and unsuitable for high speed trains. Modernization work is underway to improve mobility of people and goods and help boost the regional economy.

"ASEAN cities should be connected by high speed rail," Arkhom said, adding that, unlike air routes, a railway connection "can promote cities along the railway line."

China involvement

Today, the concept chimes closely with Chinese leader Xi Jinping's Belt and Road initiative, which aims to create an economic corridor from Asia to Europe by developing overland and maritime routes.

Chinese involvement in regional transport networks is on the increase. A railway link between Kunming and the Laotian capital Vientiane is now under construction. This will connect with another line that China is involved in, linking Nong Khai on the Thai side of the border with Bangkok.

It is hard to imagine Beijing will not jump to attention if Thailand and Malaysia seek help for the planned high-speed railway. Japan is also eager to export its shinkansen bullet train technology. The shinkansen is already up and running in Taiwan and there are deals signed in India and Thailand. In 2015, however, Japan lost out to China in the race for Indonesia's high-speed rail project.

Japan and China are also currently vying for the Singapore-Kuala Lumpur line, which will be the first cross-border high-speed railway project in Southeast Asia. The Singaporean and Malaysian governments have agreed for the 350km long railway to start operations by 2026. The proposed Kuala Lumpur-Bangkok route would extend the line all the way through the Malay Peninsula.

The route is currently served by low-speed trains that run on 1-meter gauge tracks. High-speed trains would require a new set of 1.4m standard-gauge tracks to be built, Arkhom said.

"But if we cannot put in much investment, we will just go on our existing 1-meter gauge," he added. As a primary action plan, Arkhom said that Thailand is looking to electrify the diesel trains that run between the southern Thai city of Hat Yai and Kuala Lumpur this year. "We only have limited resources," he said.

Shinkansen "very expensive"

Thailand currently has two other high speed railway projects in the pipeline, for which funding has been a constant headache.

Regarding the shinkansen project, Arkhom said that Thailand is planning to propose the Japanese side shoulder part of the investment through a joint venture.

Based on Japanese studies, the proposed cost for the entire 670km connecting Bangkok and Chiang Mai is estimated at around 500 billion baht ($14.2 billion), which Arkhom describes as "very expensive." The China-backed railway project linking the Laotian border and the Thai capital covers a longer distance of 873km but is set to cost just 379 billion baht.

"[The plan from] the Japanese team is based on Japanese standards but ... [the railway] will not be in Japan and we are not as rich as the Japanese," Arkhom said, arguing that Japan should compromise on standards other than safety, to "make it happen in this country."

A joint venture would be a "win-win solution," he suggested. The investment ratio would be further discussed. "In order to make sure that the [shinkansen] technology is with us forever, why don't you come in and run the project together?"

Construction is planned to take place in two phases. The first, linking Bangkok and Phitsanulok and covering 380km, will start in 2019. Work on the  latter half is scheduled to begin a year later. The entire route is planned for completion by 2023.

Meanwhile, the Sino-Thai project will call for the first round of bidding for construction in March. This, however, will cover merely the first 3.5km of the entire project. "If you want to see the project going, we have to start with the small part," Arkhom said.

Thailand last year said it would finance the project itself, focusing just on the 250km section between Bangkok and the northeastern city of Nakhon Ratchasima, after failing to agree loan interest rates with China.

Arkhom said that the remaining route covering 620km is still on the table. "We have to keep this project alive as promised, although there may be some delays."

Negotiations for Chinese loans are also continuing. The latest agreement is that China will lend money for the imported materials on the Bangkok-Nakhon Ratchasima section. The interest rate, however, is still higher than the rates provided by other financial organizations such as the Asian Development Bank, he said, with the last offer at 2.3% for loans in either yuan or U.S. dollars.

In addition, Arkhom said that China is asking for development rights for land along the railway as well as an agreement to let China take concession of other development projects in Thailand if the railway project fails. "We don't agree," Arkhom said. "The project is in Thailand and we have the sole rights for it. They cannot take the benefit of the project."

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