THE FUTURE OF THAI RAILWAYS: FIVE FUNDAMENTAL QUESTIONS
Good public transport can fundamentally improve people’s lives. It can give people more access to economic opportunities, increase productivity and boost growth. Every day, people in Thailand use public transport to go to work, send children to schools, or visit families and relatives in the provinces. Many of these trips happen by rail.
Although Thailand’s rail network is small compared with other modes of transport, almost 40 million people make trips on intercity railways and 200 million trips on urban railways each year.
How are Thailand’s railways doing? Recent analysis by the World Bank, in its Thailand Systematic Country Diagnostic report, identifies gaps in infrastructure, including railways, as an important factor undermining competitiveness, especially in the Greater Bangkok region, the heart of Thai manufacturing and exports.
Old, single tracks with locomotives from the 1960s, and some of the latest ones from the 1990s, have gone past their efficient life and may present safety issues. There are more than 100 derailments and more than 150 accidents involving rail cars and personal vehicles each year.
Still, Thailand remains an attractive investment destination, and good public infrastructure reforms are beginning to help improve logistics systems for businesses. One of these reforms calls for the improvement and modernisation of the railway sector to reduce freight and overall transport costs and increase levels of service. These investments have the potential to address key transport bottlenecks that currently impede investment and economic growth.
The experiences in many countries show that there is no one-size-fits-all solution to successful railway reform. International experience, including from countries such as India and Poland, suggests a common framework that can help identify customised solutions for a particular country. We found that asking five questions work all over the world when one thinks about railway reform.
The first question is always what or whom will the railway carry, and how will it add service to people and value to the economy? Trains could be carrying intercity passengers, tourists, minerals, agricultural products or other containers. Railways, with their high, initial fixed investment and low incremental cost for any one additional passenger or tonne of freight, can be highly efficient when there is a steady flow of passengers or goods, and when congestion costs are high.
A World Bank study in 2014 estimated that the cost of traffic congestion in Kuala Lumpur can be as high as 1.1% to 2.2% of GDP. For Thailand, improving urban transport can help save money and time for more productive activities.
Secondly, what needs to change for a railway to be competitive? It might mean improving services so that they are faster, more reliable, cleaner and comfortable. Maybe the price needs to be lower, which is only possible if the cost structure of the railway is reduced. Many of Thailand’s poor and elderly people, especially in rural areas, rely on mini-vans and cars to travel as they cover many more routes and are more reliable than trains, which don’t always run on time or often get delayed. Improving train services and speeds can help make travelling by rail the option of choice for Thailand.
The third question is what are the technical solutions that would make the railway market competitive and financially viable? Factors to consider could be changing a scheduled train operation to improve reliability, downsizing the labour force to reduce costs, focusing on urban and rural areas that need it most and reducing coverage areas if needed, or getting public or private investors to subsidise costs.
In Australia, a tourist overnight train was introduced to capture the tourism market. Similarly, the State Railway of Thailand might consider enhancing intercity lines with schedules to serve people better.
As railway reform programmes take shape, another question to ask is whether and how they will be financially sustainable. If they are not, how can they be made so? While some intercity rail routes in Thailand are sustainable, many are making losses. The intention to make transport affordable for people is laudable. Railways can only offer good services in the long run with clear agreements on routes, timetables, pricing and the level of subsidies. In Poland, while the railway sector has been privatised, a clear agreement has helped to clarify how much support from the government is needed to keep rates affordable.
The last question, and probably the most important one, is how to implement railway reform? Or asked a different way, what stands in the way of reform now, and how can that be changed? Some possible options for Thailand may include improving railway governance by clarifying the relationship between the government and the railway companies. Strengthening state-owned enterprises can also help as they account for 30-40% of total public investments in Thailand. Introducing competition and engaging the private sector more can mobilise long-term private capital needed for funding well-structured infrastructure projects.
Thailand is already taking promising initial steps in railway reforms and public infrastructure investments with double-tracking of the existing rail system and modernising the signalling systems. These public investments can help crowd in further private investment and lift Thailand’s potential growth. Continuing efforts to modernise the railway sector will be critical to improving people’s lives and connecting lagging regions to more and better opportunities.
Chanin Manopiniwes is an infrastructure economist and Ulrich Zachau is the director of regional partnerships for Thailand and Malaysia at the World Bank.