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Thailand's Railways: Wrong Track |
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Written by Philip Bowring
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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 spending needed 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.
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Economics/Business 
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"One hundred years ago the railway was the pride of the nation. But little has been invested in it since then "
King Chulalongkorn introduced the railway system with a vision and purpose. Apparently nobody bothered to do anything more about it.