Thailand has decided not to rely solely on Chinese loans to fund the two countries' joint railway projects because the interest rates are too high.
Transport Minister Prajin Juntong said Tuesday the lowest interest rate offered by China is 2%, but this is only for non-commercial work such as railway and system construction, and civil and structural work.
For commercial activities such as train operating systems, China has offered a 4% interest rate.
China said Thailand is not an underdeveloped country and therefore does not deserve a 2% interest rate.
As a result, investment in civil engineering and structures will be financed through other sources, such as domestic ones, said ACM Prajin. The matter has been discussed with the Finance Ministry, he added.
Domestic loans, bond issuances and raising capital through an infrastructure fund are all possible methods of financing the joint-railway projects.
Land expropriation costs will be covered by the national budget, he said.
A source said the ministry is unhappy with China's interest rate offer because Thailand can find much better ones from other sources in terms of interest rates and the grace period for payment.
Japanese financial agencies are an option, the source said.
Deputy Transport Minister Arkhom Termpittayapaisith said China had proposed Thailand apply for loans from its EximBank, which offers a minimum interest rate of 2%, a five-year grace period and a 15-year loan payment time frame.
He said further discussion about the details of the grace period and loan repayment period would be needed.
Mr Arkhom said Thailand will not borrow 100% from China.
As well as domestic sources, a loan from the Japan International Cooperation Agency is a possibility.
Thailand signed an agreement with China last year to build the 734km-long Nong Khai-Nakhon Ratchasima-Kaeng Khoi-Map Ta Phut railway line and a 133km-track from Kaeng Khoi to Bangkok.
The unofficial cost is estimated at 350-400 billion baht.
ACM Prajin said the China Railway Corporation will set up a consortium to operate the projects. The consortium will comprise manufacturers of construction materials and train control systems.
Thailand will be responsible for land expropriation costs and environmental impact studies, as well as infrastructure development.
China will oversee the rail and signal systems and construction of tunnels through mountains, ACM Prajin said.
According to the transport minister, the third round of talks on the joint dual-track rail development project will take place on March 10-11 in Bangkok and in the northeastern province of Nong Khai.
The talks will focus on the proposed investment options and sources of funding. Both countries are expected to sign a memorandum of cooperation (MoC) at the conclusion of the third round of discussions, he said.
China will send a team of experts to work with the Thai side on the study and the design later this month, ACM Prajin said.
Meanwhile, the minister revealed the outcome of talks between Prime Minister Prayut Chan-o-cha and his Japanese counterpart Shinzo Abe during Gen Prayut's state visit to Japan last week.
Gen Prayut assured the Japanese prime minister the Thai government is ready to co-invest with the Japanese government on a railway project.
The 1.435-metre-wide standard-gauge system would be used, ACM Prajin said.
The joint investment will be undertaken on a government-to-government basis, in a similar fashion to the Thai-Chinese joint rail project, he added.
The Japanese government will be allowed to choose only one from these rail routes: the Bangkok-Chiang Mai route, Tak's Mae Sot-Mukdahan route or the proposed East-West Economic Corridor railway projects which will cover the Bangkok-Kanchanaburi, Bangkok-Aranyaprathet and Bangkok-Laem Chabang routes.
The two sides will set up ministerial-level working groups to study the details and have to decide on a preferred route before the end of the year, ACM Prajin said.
"Originally, Japan was interested in the Bangkok-Chiang Mai route," ACM Prajin said.
"It is also interested in the Tak-Mukdahan route, as well as the Kanchanaburi-Bangkok-Rayong route, and the Sa Kaeo route, which will link up to the Dawei industrial zone in Myanmar," ACM Prajin said.
"But Japan must wait for the study's findings before making a decision. Afterwards, an agreement on joint cooperation will be signed by government leaders."
