National oil and gas conglomerate PTT Plc hopes to benefit from rail transport networks under the Belt and Road Initiative (BRI) by setting up a new subsidiary to diversify into the domestic and international logistics business.
Initiated by the Xi Jinping government, the BRI is meant to link China's economy with Southeast Asia, Africa and Eurasia by developing land and maritime infrastructure.
PTT's investment in logistics services is also in line with the 13th National Economic and Social Development Plan, which promotes modern logistics and infrastructure development, as well as the company's plan to venture into sectors that promise rapid growth, known as S-curve industries.
The new subsidiary is named Global Multimodal Logistics (GML), established with registered capital of 230 million baht.
GML aims to help develop Thailand into a regional logistics hub to connect the local logistics system with global logistics networks, said Chansak Chuenchom, PTT's senior executive vice-president for engineering and infrastructure and chairman of GML.
PTT operates GML through its wholly-owned Siam Management Holding Co.
GML offers a variety of services, including rail, land and air transportation, cold storage management and lease management.
According to Mr Chansak, the logistics sector represents 13-14% of GDP, or about 2.4 trillion baht.
Up to 85% of Thai logistics is reliant on road transport.
Mr Chansak said the country's logistics should be developed into a multimodal system, which focuses on the movement of goods through various modes of transportation.
GML aims to transport goods through the rail system under the BRI that connects China with Laos, Thailand, Malaysia and Singapore.
The company partners with Pan-Asia Silk Road, a logistics and cargo transport company, to transport goods via Laos to southern China.
GML wants to seek opportunities by transporting goods to Guangzhou, Zhengzhou, Kunming and Chengdu, said Mr Chanksak.
"Using a rail system for freight transport can save 20% of costs compared to road transport. Trains are also faster than ships, so they can ensure on-time delivery," said Mr Chansak.
GML started transporting 400 containers of agricultural products by rail to the Chinese city of Chengdu, Russia and the European Union last month.
The company expects to earn 1.5 billion baht, which amounts to the transportation of 5,000 containers, this year, said Mr Chansak.
The revenue should rise to 6 billion baht within five years, he said.