Thailand's Railways: Wrong Track

Written by Philip Bowring

FRIDAY, 23 OCTOBER 2009

It isn't just rail that's a problem

Recent chaos on Thai railways is symptomatic of much bigger problems which are holding the whole country back. Just at a time when the nation needs strong, well-directed public sector investment to offset weak external demand and a cautious private sector, the woes of the railways are showing just how difficult this can be.

The recent rail chaos, which saw many delays and thousands of passengers temporarily stranded, was the doing of the disgruntled workers of the State Railway of Thailand (SRT). Actions by them in the south of the country were as near as possible to a strike, which would be illegal. All this followed recent incidents of derailments and other technical problems largely attributable to the poor condition of the system, its track, rolling stock and signaling despite being in receipt of massive annual government subsidies.

One hundred years ago the railway was the pride of the nation. But little has been invested in it since then as the SRT has become law unto itself and the government has followed the US pattern of massive investment in roads and car manufacturing at the expense of public transport which have produced waste and traffic jams. The SRT meanwhile has become an overstaffed enterprise noted for featherbedding and corruption. Although Thailand's size is well suited to railways, the SRT has lost passengers not just to the roads but even to flying relatively short distances which should be ideal for city center to city center railways.

The workers' leaders have been flexing their muscles partly to warn against any attempts to privatize any parts of the SRT. Their opposition may yet further delay the opening of the railway to connect the (relatively) new Suvarnabhumi airport with Bangkok. It is now supposed to start operation on the King's birthday in December, but who manages the operation of the line still seems shrouded in doubt.

Meanwhile some observers also see a political hand in recent events. The union leaders have been strong supporters of the anti-Thaksin PAD movement headed by Sondhi Limthongkul, now leader of the recently founded "Yellow Shirt" party, the New Politics Party. The rail problems could embarrass the Democrat party, which will soon face a by-election in its traditional stronghold in the south. For the first time it will probably find itself competing with Sondhi's party, which is close to the state enterprise unions. The NPP's first leader was Somsak Kosaisuuk who heads the Federation of Government Owned Enterprise employees and leads the opposition to electricity privatization. Now the unions' aim is to stop any rail privatization.

It also seems the new party was created to provide some ongoing vehicle for Sondhi who, like his union leader friends, is not much liked by their military and monarchist allies in the anti-Thaksin movement, though the NPP claims "royalism" as its ideology.

But if this is politics as usual it also illustrates how difficult the mix of corruption and politicization of public sector projects can be. Thailand has thrived as an open, small-enterprise economy helped along by large foreign investment. But growth is now much more difficult than in the past, a past when China and India were not global players, a past before Vietnam began to compete, and when the Thai workforce was young and fast growing.

Now it badly needs investment, public and private, to raise productivity and shift to higher value added industries. It needs a modern railways system to connect to its neighbors and eventually to China and relieve pressure on its often clogged road system and maintain the advantage of its central geographic position and deep water port to maintain its regional leadership. Likewise it needs to shake up an educational system little exposed to global competition and running on 100-year-old models.

But public investment faces several obstacles in addition to entrenched interests of bureaucrats, the military and others with deep roots in the established order. One is a deeply ingrained aversion to spending money. This may be creditable in many countries but partly accounts for the fact that much money allocated in budgets is never spent. Fears under Thaksin that "irresponsible" spending on health benefits and handouts to the poor would lead to debt and decline added to natural caution.

Secondly, endless political infighting over where projects should be located, and infighting over contract spoils induces further delays.

The net result of all this is that recurrent government expenditure has been continuing to grow, most recently enhanced by anti-recession measures introduced by the Democrat-led government. But the capital spendingneeded for the future remains weak. Among other things it is reflected in the sharp fall in imports, which have declined faster than exports and given Thailand a large, and un-needed, current account surplus. Nor is there much danger of excessive public sector debt which is now about 40 percent of GDP.

For sure, it is reasonable to worry if more and more government revenue goes on recurrent spending, leaving only a declining surplus for investment. But from a fiscal standpoint the government is in a position to invest more. A recent Asian Development Bank report says the public sector "bears a heavy responsibility in reviving investment" but notes that "the mediocre record of public investment in recent years underlines the risk of relying on it too much".

Unfortunately given the current state of the political and bureaucratic system it is neither able to do so quickly and effectively, nor to step aside and enable the private sector to do more. In the case of the SRT the net cost of modernization should not be too high. It owns vast tracts of land, much of which could be sold. It also owns land adjacent to it current single track, so double tracking the system, or even converting it to standard gauge, is not too big a task to contemplate.

Thailand does have examples of large-scale public sector projects which have been both well executed and well run after completion. But it badly needs more of them if it is to improve the quality as well as the size of the economy. Reform and revitalization of the SRT is crucial both for the sake of the nation's transport industry, and as signal that government is still capable of delivering sensible projects in the interests of the public rather than padded for politicians.

(www.asiasentinel.com/index.php?option=com_content&task=view&id=2113&Itemid=437)