Southern Land Bridge is an economic proposal with massive potential for the Thai economy and Prime Minister Srettha Thavisin. However, it must be commercially viable, privately financed and overcome growing opposition from local groups.
The government plan for a Land Bridge linking Chumphon and Ranong ports or the Andaman Sea and Indian Ocean has emerged this week as a key policy objective of the government of Srettha Thavisin. Scorned by critics as a ‘pipedream’ but approved by the cabinet in principle on October 16th, the ฿1 trillion scheme, if the government can find a suitable foreign partner to take it on as a commercial proposition, would help to boost the kingdom’s GDP both in the short and long term if it can be launched by 2029.
As Prime Minister Srettha Thavisin finds himself under fire at home for his determination to pursue an expansionary economic policy in a recessional environment and his extended trips abroad, the PM this week seized on one particular project to promote while stateside at the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco, California.
Simultaneously, at the summit, Mr Srettha was pictured meeting US President Joe Biden and Canadian Prime Minister Justin Trudeau among other Asia-Pacific leaders as he played the part of Thailand’s chief salesperson, signing a Memorandum of Understanding with Microsoft and Google aiming to upgrade Thailand’s online infrastructure while continuing to canvas executives at Tesla to bring a manufacturing facility to Thailand.
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Significantly, last year, Tesla established a Thai subsidiary company.
Tesla (Thailand) Co., Ltd. was incorporated at the Department of Business Administration registration number 0105565069229 on April 25th.
It is being interpreted by analysts as an indication that the US electric car manufacturing company headed by Elon Musk is looking at Thailand which has ambitions to become an electric car manufacturing centre in Southeast Asia.
However, the key proposal being promoted by Prime Minister Sreetha this week on the US West Coast was the ฿1 trillion or $28 million Land Bridge project linking the Andaman Sea with the Indian Ocean while bypassing the Malacca Strait.
This investment project was the key emphasis of the Prime Minister’s sales mission on behalf of the Kingdom.
Ambitious Land Bridge project agreed in principle by the cabinet on October 16th but the real next test is organising a tender process for 2025
The ambitious project, which was only approved in principle by the Thai Cabinet on the 16th of October 2023, proposes an expanded and protected rail link and motorway connection between two developed ports on both sides of the Kingdom, one at Chumphon on the Andaman Sea and the other at Ranong on the rim of the Indian Ocean.
Thailand planning an infrastructural overhaul aimed at improving regional transport links to boost the economy
The project was pioneered by the last government and particularly by former Minister of Transport Saksayam Chidchob in 2021 as Thailand tried to emerge from the disastrous economic effects of the COVID-19 shutdown.
It is also a proposed public-private partnership, boosting private capital investment, a growth measure that is bound to be supported by the country’s more conservative central bank with the Bank of Thailand currently at loggerheads with the government over its policies to spend money on stimulus funded by borrowing.
New Land Bridge will be faster, cheaper and safer than current overcrowded shipping lines through the Malacca Straits used by 40% of the World’s trade
In any event, this week Prime Minister Srettha Thavisin highlighted to American investors in San Francisco the growing demands on the Malacca Strait for shipping, which is expected to exceed capacity by 2030, and in detail, emphasised the cost-effective nature of the proposed Land Bridge.
The project would link two developed seaports with a pipeline arterial network including a road rail link in a facility which would cut the travel time for the shipment of goods by four days and reduce costs by 15% compared to the use of the Malacca Strait shipment route.
The Malacca Strait currently sees 40% of the world’s shipping cargo being carried through its waters.
Ambitious Project is approximately twice the cost of government’s proposed once-off Digital Wallet scheme which is being funded by raised public debt
Markedly, the cost for the project includes the development of terminals at both extended seaports and a pipeline link from Chumphon to Ranong, the latter capable of handling 19.4 million 20 ft containers and the former 13.6 million, with both road and rail connections covering 100 km including a six-lane intercity highway.
In short, the price tag for the scheme comes in at ฿1 trillion or $28 billion, just twice what the controversial Digital Wallet scheme planned for May 2024, which is budgeted to cost ฿500 billion with no long-term benefit except a rise in public sector debt.
Sceptics of the plan which some in Thailand consider a pipe dream, have already begun to question its feasibility given the nature of past proposals with the idea for such a connection in the past associated with a canal, going back to the Isthmus of Kra Canal proposed over 300 years ago by Thai monarch, King Narai, in the 17th century.
Land Bridge budget has risen from ฿300 billion in 2021 when first mooted by the Minister of Transport to ฿1 trillion under the new higher spec plan
However, one point of concern is the escalating budget for this proposal which was costed by the Ministry of Transport in 2021 at ฿300 billion focusing on the costs of the rail link.
At length, this has now risen to ฿1 billion including extensive port development at both ends and the new advanced motorway.
However, in San Francisco this week, Mr Srettha was adamant that his government would pursue the plan with a mid-2024 deadline to have the cabinet approve detailed proposals so that a tender process may ensue.
Thereafter, the government plans to award the project to some consortium in a public-private partnership by 2025. The plan is to have the Land Bridge operational by 2029.
‘The Land Bridge will be an additional important route to support transport and an important option for resolving the problems of the Malacca Strait,’ Mr Srettha told an audience in San Francisco this week. ‘This will be a cheaper, faster and safer route.’
From the government’s point of view, the project has the potential to generate 280,000 jobs, 150,000 in Eastern Chumphon province and 130,000 jobs southwest of there, in Ranong province.
Six lane intercity highway together with extended rail connection from port to port at the heart of the Land Bridge proposal linking Chumphon and Ranong
Together, the ฿1 trillion budget for the massive project includes ฿140 billion for improved transportation within the ports and between them, as well as ฿220 billion for building a six-lane intercity highway, main rail connection and rail connecting the piers at the ports.
In addition to this, ฿300 billion will be spent on improving port facilities in Chumphon, with ฿330 billion being spent on Ranong where ships will pick up cargo to forward them on the Indian Ocean side of the Land Bridge.
‘The Land Bridge project will become a new shipping route in the world. It will solve problems that now exist through the Malacca Strait and will provide an alternative that is cheaper, faster and safer. Transporting goods through the Land Bridge will reduce overall travel time by four days and reduce the average cost by up to 15%. This project will in the future elevate Thailand as an important strategic centre for production and transportation to the global market,’ Prime Minister Srettha outlined.
Srettha eyes 5.5% GDP growth driven by plan
His government sees the Land Bridge as one possible solution to boosting Thailand’s growth rate to 5% or perhaps 5.5% over the coming decade which is intrinsic to the currently flailing Pheu Thai economic plan.
In contrast, this is coming in a year when economic growth will only reach 2.7%. We have already seen revised and lower projections for GDP growth in 2024 of only 3.2%.
This is leading to growing disquiet among the country’s business sector, which is challenging the government’s plans to significantly raise the minimum wage in Thailand by 2027 to ฿600 per day, and as early as next year to increase the minimum salary for degree holders to ฿25,000 per month.
In the short term, the Srettha Thavisin government, through the Ministry of Labour, is facing a challenge as the Pheu Thai Party has indirectly indicated that a minimum wage of ฿400 per day will be possible from the beginning of 2024.
Confidence boost as low growth rate in the economy caused by weaker demand and rising borrowing costs already stunting Pheu Thai’s pro-growth policies
However, the Ministry of Labour, controlled by the Bhumjaithai Party and Minister Phiphat Ratchakitprakarn has argued that this proposed rate may not be possible given the difficult economic circumstances in the Kingdom.
Already the higher cost of borrowing and weak international demand has undermined business optimism and is raising tensions between the government and employers.
The Prime Minister and the current government extensively marketed the Land Bridge project to overseas investors in China, Japan, and Saudi Arabia before the APEC summit in San Francisco as well as to investors in Europe where German business interests have expressed a preliminary interest.
The project would be a confidence booster to the economy and deliver significant GDP gain if construction were to begin.
However, even if the government finds an investor or a private consortium to take on the construction and operation of the Land Bridge, it will face several key problems, not least which will be opposition from China, which is already developing its Belt and Roads initiative, which may come into conflict with the hypothesis for the Land Bridge project.
Chinese Belt and Road project already foresees intersectional hi-speed rail link throughout Southeast Asia and extended into India and the Middle East
For one thing, the Belt and Road plan for extended rail networks across South East Asia and into Middle Middle Eastern countries would obviate the need for more shipping traffic.
Additionally, the capital investment project is already generating strong opposition within local community groups in the southern provinces.
One such group is the Rak Phato Network Group based in Chumphon, which has voiced its opposition to the extensive development required by the project which will be put in the hands of a company backed by large investment groups.
Local communities are arguing that the current livelihoods of fishermen and those who survive on ecotourism will be adversely impacted by the 100 km link between Chumphon and Ranong Port.
In any case, residents and environmental groups fear that the development will presage even greater industrialisation and commercial development of Chumphon and Ranong province if the project is ultimately successful.
This is easy to believe because it is precisely what the government has in mind as it has already designated the area as part of the Southern Special Economic Corridor to be linked with the Eastern Economic Corridor (EEC) in Eastern Thailand.
Local opposition is also building from environmentalists, fishermen and small tourism operators who see the project causing disruption
The government sees the project as an important stepping stone in forging Thailand’s position as a key trade and economic centre at the heart of the region.
The southern economic corridor currently covers Chumphon Province, Ranong Province, Surat Thani Province and Nakhon Si Thammarat.
Supporters of the Land Bridge proposal, including officials in Bangkok, point out that the successful commercial development of the four provinces will raise income levels and will provide a basis for raising the potential of tourism in the area, as well as offering farmers a new gateway to export products and leading to the development of advanced bio-industry and agricultural processing.
Moreover, for a new Prime Minister with a background in business and a pioneer in property development, a long-term project like this which could lay the basis for decades of future growth, is a feasible signature project which does not lack ambition and may yet capture the world’s imagination.
The key for the Thai government is to facilitate the development of the project by a private capital group pursuing profit and an economically sustainable venture without resorting to public debt.