Of AEC trucks, trains, and automobiles, part 3/3


Of AEC trucks, trains, and automobiles, part 3/3

Our last two AEC-centric articles have covered the concerns and comments made by the Southeast Asian specialist economist Santitarn Sathirathai from Credit Suisse. In the first article (November 2013) we noted the concerns about the viability of the Thai government’s proposed four-line high-speed rail network, while the second article (December 2013) continued the high-speed rail commentary and finished with the high level of logistics costs in Thailand (15 percent of GDP) compared with Malaysia (13 percent) and the United States (eight percent).

In this last piece covering the comments and concerns raised by Credit Suisse, we will note just how important it will be for the ASEAN Economic Community (AEC) land-based economies (that is, Thailand, Myanmar, Malaysia, Laos, Cambodia, and Vietnam) to improve their internal road and rail networks for the betterment of all.

In the opinion of Khun Santitarn, it would be better for Thailand and the knock-on effect within its near AEC neighbours if the high-speed rail plans were shelved in favour of ‘double-tracking rail lines, building more roads and even adding more truck terminals…’ The Credit Suisse economist believes this ‘would do more to boost trade with neighbouring countries and improve transportation logistics.’

Despite this, Khun Santitarn believes a high-speed rail should boost GDP by up to one percent and the knock-on effect could mean increased private investment. He expects the massive planned investment in infrastructure will pay off handsomely in the longer term, ‘believing that the government may be underestimating the degree to which industrial and real estate firms will step up their own investments in private projects as a result of the official plans.’

Even so, no matter how many highways and railways Thailand builds, its neighbours are going to have to make improvements of their own for Thai exports to increase significantly. Rail lines in Myanmar, Laos and Cambodia currently range from non-existent to practically obsolete. ‘Though goods from Thailand can make it to Laos and Cambodia on decent domestic roadways, they then have to travel on relatively primitive roads to get through Cambodia or Laos to Vietnam, which is a rapidly growing economy.

‘Laos is forging ahead with improvements that could connect Thailand and Vietnam, and it is possible there could be a good road link between Bangkok and Hanoi by 2015. Cambodia is not making any similar efforts.

Equally, there’s no ‘easy path by road or rail links Bangkok and Yangon, Myanmar’s largest city.

Khun Santitarn noted, ‘We suspect that it could take as long as five years for major gains to appear. In other words, in the absence of better ways to get from here to there, creating a single market for Southeast Asia may only be the beginning of a long slog to truly ramp up regional trade.’