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China's high-speed railway ambitions hit snags

Outlook for creating pan-Asia railway network remain unclear

Officials attend the groundbreaking ceremony of the high-speed rail project linking Bangkok and the northeastern Thai province of Nakhon Ratchasima, on Dec. 21 in Nakhon Ratchasima (Photo by Yukako Ono).

NAKHON RATCHASIMA, Thailand-- Exports of high-speed railway systems by China to Southeast Asian nations are lagging behind schedule due to trouble with importers over the sharing of costs and delays in the procurement of land.

A China-led project in Thailand is finally about to get underway, two years after its groundbreaking ceremony. But the outlook for its connection with China's planned pan-Asian railway network is still dim.

The situation is a matter of concern to China as high-speed railway exports represent a core of the nation's Belt and Road Initiative to reinforce its relations with neighboring countries through infrastructure exports.

The Thai government on Thursday held a groundbreaking ceremony for a 250km, 179 billion baht ($5.47 billion) high-speed rail project linking Bangkok and the northeastern Thai province of Nakhon Ratchasima.

"The railway will support Thailand to become a transport and logistics hub of the region," Thai Prime Minister Prayuth Chan-ocha said at the groundbreaking ceremony. He added that the railroad cannot be completed without the help of Thailand's "friend," China. 

From China, Wang Xiaotao, vice chairman of China's National Development and Reform Commission, attended the ceremony. In his remarks he read out a message from Premier Li Keqiang saying that the railway project will be a "win-win" for both countries and that he hoped the railroad connection to Laos would start construction "as soon as possible."

The first high-speed train line in Thailand is planned to begin operations in 2021 at a maximum speed of 250km per hour, cutting travel time to one hour from the current three hours on the State Railway of Thailand.

Transport Minister Arkhom Termpittayapaisith said plans to build the missing link between the Laos border and Nakhon Ratchasima will be submitted to the Cabinet for approval early next year. "We aim to start operation of the full railway by 2023," he said, although it is not clear if this can be realized. 

Nakhon Ratchasima is Prayuth's home province, and the railway project is aimed at bringing the benefits of Thailand's economic development to its northeastern region, which primarily relies on agriculture.

The groundbreaking ceremony was the second for the project. Since the first was held in 2015, the work has not started because Thailand and China have failed to iron out differences such as how to share the costs of construction.

Drastic changes

Tangled negotiations between the two countries have resulted in drastic changes in the project, leaving only its name intact.

While the Thai government initially envisioned the two countries sharing the costs of construction, it now intends to only import technology from China and shoulder all of the costs.

Chinese Foreign Minister Wang Yi, left, shakes hands with Thai Prime Minister Prayuth Chan-O-Cha at Government House in Bangkok in July.   © Reuters

The original plan called for laying a train line over a distance of more than 600km between Bangkok and Nong Khai Province in northern Thailand, which forms the border with Laos.Another line that leads to Maptaput, a large port on the eastern seaboard, was also in plans. The total length of the tracks were to add up to 870 km but Thailand and China have newly agreed to cut the distance to less than one-third of the initial plan, shelving construction of the segment between Nong Khai and Nakhon Ratchasima.

The two governments decided on the changes for two reasons. First, the Thai government considered unacceptable some of China's demands, such as the rights to develop areas along the rail line, in return for sharing the cost of construction. In addition, Thailand rejected the high interest rates proposed by China for loans to finance its share of the costs.

Beijing considers the demands to be plausible because China sought to cover risks accompanying the use of its own funds. But the Thai government balked at what it considered China's self-righteous attitude, and actions such as submitting maps written in Chinese, contrary to Thailand's wishes, and this aroused distrust among the Thais.

Thailand thus decided not to rely on China but to take its own initiative in selecting the construction areas and raising funds.

Difficulties ahead

Although the project is about to get underway at last, difficulties lie ahead. For example, the initial work will cover only 3.5km, because the Thai military government asserted its authority just for the sake of launching the project, skipping bidding procedures and budget deliberations.

For the rest of the line, the government will solicit bids by stages. With less than a year to go before a general election Thailand will hold in November 2018 as pledged by Prayuth, it is unclear how far the project will advance under the junta's exercise of power.

A miniature model of China's high speed train (Photo by Marimi Kishimoto).

The launch date of construction between Nong Khai and Nakhon Ratchasima remains pending. China has a plan to build a 5,000km pan-Asian railway network linking Kunming, Yunnan Province, in its southern region, with Laos, Thailand, Malaysia, Singapore and Indochina. But the plan at present is missing the important link between Laos and Thailand.

Although China is expanding its influence in Southeast Asia, its railway construction work is advancing only in Laos. Though it outbid Japan for an Indonesian project to lay a high-speed railway between Jakarta and Bandung, the procurement of land for the work has been stalled. The project has made little headway, although its groundbreaking ceremony was held in 2016.

With fundraising for the Indonesia project hardly in sight, there are even talks about cutting Indonesia's stake to 10% from 60%. It is effectively impossible to complete the project by May 2019 as planned.

International bidding for a project to build a high-speed rail line to link Malaysia and Singapore started on Wednesday. Hoping to win the order, China has already started developing areas along the planned railway. It is expected to compete with Japanese, South Korean and European consortiums.

The Malaysian and Singapore governments are likely to take into account cost-based profitability and the interchangeability of parts and rolling stock among different makers in granting the order.

China's stumble is by no means someone else's problem for Japanese companies seeking to export railway infrastructures to Southeast Asia. The outlook for a plan to lay a 670km railway between Bangkok and Chiang Mai, using Japan's shinkansen bullet train technology, depends on whether Thailand will shoulder the cost of construction, estimated at 420 billion baht.

While Japan has proposed a set of support measures including long-term, low-interest yen loans, criticism about the project being too expensive remains among Thai officials. The project will fall through if the two sides fail to iron out their differences.

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