Should Thailand Speed Up Connectivity With China-Laos High Speed Railways?

Should Thailand Speed Up Connectivity With China-Laos High Speed Railways?

Should Thailand Speed Up Connectivity With China-Laos High Speed Railways?

The news of Laos launching their China-Laos high- speed rail lines has created a comparison between Laos railways development progress and Thailand’s.

A $6 billion high-speed rail line connecting China with its Southeast Asian neighbor Laos , which stretches from the southwestern Chinese city of Kunming to the Laotian capital Vientiane, opened on Friday.

Laos state news agency KPL said on Thursday, the project was part of the government’s strategy to convert Laos “from a landlocked country to a land-linked one”.

Analysts say the new railways has huge potential to stimulate Lao economy , taking advantage of its geographical position at the heart of Southeast Asia mainland and boosting tourism, freight and agriculture.

Optimists in Laos see the completion of the rail link as bringing prosperity to Laos, unlocking it from poverty and it’s a big jump for Laos to become part of the world’s supply chain logistics and freight. Laotian leaders hope the railway will breathe life into their isolated economy by linking it to China and markets as far away as Europe.

In Thailand, after the launch of the railways, PM Prayuth Chan-Ocha’s government progress on the country’s own railway project has come under scrutiny, by the Thai public.

The Bangkok-Nongkhai high speed railway or Northeastern high-speed rail line is under construction in Thailand and will bring connectivity to the China-Laos railways. As of September 2021, the first section from Bangkok to Nakhon Ratchasima, could be in service by 2026 and the section from Nakhon Ratchasima to Nongkhai is expected to be ready by 2028. 

At present, 2.73% of the project has been completed and when asked why it is so slow, PM Prayuth replied that foreign land ownership of the surrounding areas is a delicate issue and Thailand’s sovereignty is in focus.

The project is still in its contract signing stage.

For many anti PM Prayuth groups this may not sound right and 2.73% completion rate is absolutely dismal.

However, it looks like this time PM Prayuth’s statements may be right on the money.

Economists have warned that the China-Laos rail project could make it difficult for communist Laos, one of Asia’s poorest nations, to repay external debt, much of it owed to China, which holds a 70% stake in the joint venture project signed in 2015.

While Thailand’s pre-pandemic stronger economy means it would have likely avoided the “deb-trap” narrative that accompanied the Chinese rail project in Laos, the Thai economy has taken quite an economic hit resulting from the coronavirus pandemic.

The country’s loan ceiling has already been moved from 60% of GDP to 70% just to mitigate the effects of the pandemic and to stimulate the economy. 
It might already take decades to offset the country’s loan repayments, as it is.

Now might not be the right time to speed up the railways project as a 2019 United Nations Department of Economic and Social Affairs (UN-DESA) study estimated the line would have to carry 50,000-85,000 passengers daily for twenty years to pay back the 
initial costs.

Will the country be able to presently push ahead with the project and make sure it does not default in loan repayments and compromise Thailand’s sovereignty?
The focus of the government right now should be on the hardship of the people and  to bring SMEs and the public, most vulnerable to the economic effects of the pandemic back on their feet quickly.

Policy makers should only be looking at projects that are relatively quick turnarounds in terms of generating income for the country.

 Investing in infrastructure,which will take years to bring in benefits may be pointless if in the mean-time we slide from a middle-income country to a lower-income country.

Written By - TBB