Agreement on Chinese rail project in Thailand worth $23bn off to a bumpy start

Slider, Thailand 03 Sep 2015
Agreement on Chinese rail project in Thailand worth $23bn off to a bumpy start

A cooperative rail project between China and Thailand has finally been tentatively agreed to after six rounds of negotiations.

Agreement on Chinese rail project in Thailand worth $23bn has been reached but is already off to a bumpy start.  Zhu Xijun, general manager of the Southeast Asia Company of China Railway Construction Corporation (CRCC), said on Aug. 26 that after six rounds of negotiation, both sides plans to sign the inter-governmental framework agreement on the China-Thailand Railway project in early September, and the commencement ceremony of the project is expected to be held in the end of October, Xinhua reported.

This year marks the 40th anniversary of China-Thailand diplomatic ties and the first year of implementation of the “One Belt and One Road”initiative proposed by China. The China-Thailand Railway, which has a historical significance, has attracted tremendous attention.

According to Zhu Xijun, the project, which will be completed in 3 years, will bring actual benefits to the socioeconomic development of Thailand. After the railway puts into use, people will enjoy a much more convenient and cheaper transportation between China and Thailand. The price of a railway passenger ticket between Kunming and Bangkok will be about 3600 Thai Baht or 700 yuan, which is about a half or a third of an airline ticket, and the railway freight cost is only one ninth of the air freight.

The railway is estimated to add 2 million more Chinese tourists to Thailand every year and will provide further convenience to its agricultural product export. With this railway, Thailand will be a new transportation hub of ASEAN countries.

Wu Zhiwu, Charge d’Affaires ad Interim of Chinese Embassy in Thailand, said that the cooperation on China-Thailand Railway will be a good example of the implementation of the “One Belt and One Road” initiative. On the basis of this railway, China and Thailand can further cooperate on the construction of ports, airports and other infrastructures.

But after a government meeting about the project yesterday, deputy transport minister Arkhom Termpittayapaisith told reporters that the terms of the agreement will have to be renegotiated.

He said the Chinese Export-Import Bank had offered a loan with an interest rate of between 2% and 4%, and a four-year interest-free period, with conditions.

Those conditions included a requirement to use Chinese technology and to give design and civil engineering work to China. China also wanted to manage the routes.

But Thailand wants to manage the lines itself, and it wants lower interest rates, more in line with what China’s rival for influence in the region, Japan, has offered Thailand in the past.

“The meeting agreed that the interest rate was too high compared with the loan from the Japan International Cooperation Agency for the construction of the Airport Rail Link, which was charged only at 1.5%,” the minister said, according to The Bangkok Post.

The planned China-Thailand Railway is 867 kilometers long, with an agreed operation speed of 180km/h, which is slower than the previous version of 250km/h due to cost control. The railway will connect northeast Thailand’s Nong Khai province, capital Bangkok and eastern Rayong province.

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