Lessons for Land Bridge advocates

Lessons for Land Bridge advocates

An artist's interpretation of a deep-sea port in the Land Bridge project.
An artist's interpretation of a deep-sea port in the Land Bridge project.

During the mobile cabinet meeting in Ranong last week, the Land Bridge project once again became a disputed topic as locals in the proposed area met Prime Minister Srettha Thavisin and voiced concerns over the possible impact on their way of life and environmental damage.

With stagnant GDP growth projected for this year, economists suggest Thailand needs large-scale foreign investment to leap forward, and the government sees the Land Bridge as the ultimate answer as it aims to secure funding from the private sector in the form of a public-private partnership (PPP).

Building a logistics shortcut via a megaproject, comprising infrastructure such as deep-sea ports, railways or a new economic zone is not a new proposal for Southeast Asia.

The suspended Dawei economic zone in Myanmar aimed to create a new logistics route connecting inland freight within Southeast Asia to a port in Dawei that could bypass the Malacca Strait.

However, the project was reliant on private investment and the contractor in Thailand faced financial problems, with this uncertainty influencing Japanese funding.

If the Thai government insists on pursuing the Land Bridge project, lessons from Dawei episode should be considered to understand the challenges it faces.

RISKS ABOUND

Chaichan Chareonsuk, chairman of the Thai National Shippers' Council, said the Land Bridge project is likely similar to the Dawei project in that it is supply-driven.

He said both projects carry the same risk: constant changes in the global supply chain over the project's duration, encompassing economic, political, social, legal, environmental, technological and innovative aspects.

"From a logistics perspective, the future of maritime transport remains uncertain. Many shipping routes may change, possibly switching to rely on the Belt and Road Initiative that utilises rail transport. In addition, the use of fuel for transport may decrease, shifting towards alternative energy sources such as electric vehicles," said Mr Chaichan.

"In terms of export markets, again it is unpredictable as Thailand's main markets may change. In the future, our key market may not be China. Everything is subject to rapid and unpredictable changes, and no one knows anything for certain."

He said if the government reduces the project size by considering global demand and develops a comprehensive development direction for the Southern Economic Corridor before building infrastructure, it would significantly reduce the investment required, increasing the chances of success for the project.

"Long-term investment stimulation is essential, but it must be in projects that align with the country's needs and direction. The government needs to identify the types of industries the country wants to support and potential buyers, as well as carefully evaluate the project's viability and worthiness," Mr Chaichan said.

"It is crucial that the business sector have confidence in the project's ability to generate profits or reduce its operational costs. Projects should also benefit surrounding communities, hiring and improving the skills of the local workforce to create long-term employment opportunities."

Most importantly, he said the project should be developed sustainably, promoting environmentally friendly industries, supporting health tourism, and adding value to agricultural products in the project areas.

ALTERNATIVE ROUTE

The Land Bridge project is considered the government's largest scheme to drive the country's economy.

An economic development strategist who requested anonymity said dating back to the Ayutthaya period, the old capital city was equidistant between India and China, becoming a regional trade centre and an important connecting point between the two.

Goods coming from Persia or India were routed via Dawei, then transported through Ranong and Ayutthaya.

In the colonial era, Myanmar and Singapore were colonised by the British, reshaping regional trade routes through the Malacca Strait, which has been an important maritime trade route between India and China since then.

The Land Bridge project proposes to connect the Andaman Sea to the Gulf of Thailand via Ranong and Chumphon provinces as a transit hub.

The project involves building two deep-sea ports and 90 kilometres of road and rail lines to facilitate cargo transport between Chumphon on the eastern coast along the Gulf of Thailand to Ranong on the western coast along the Andaman Sea.

The project would become a new logistics and transport hub, as well as a new route for shipping, serving as an alternative to the existing route between the Indian Ocean and the Pacific Ocean.

The main selling point of the scheme is it would cut travel time from nine days to five days, thus reducing shipping expenses.

The initial concept involves building a transport route for goods from the Eastern Economic Corridor (EEC) at Laem Chabang port to the Andaman Coast for around 8 million tonnes annually.

The project would also serve as a development model for the Southern Economic Corridor.

Economists predict China would benefit the most from this project.

The bulk of freight traffic from China to Europe goes through the congested Malacca Strait between Malaysia, Indonesia and Singapore.

Some strategists have proposed a second alternative of a cargo rail line that connects from Asia all the way to Europe.

The investment estimate for the project is 1 trillion baht, expected via a PPP where the private sector is the investor for the entire project.

This colossal undertaking would be executed in four phases, with the first estimated at 610 billion baht, the second 165 billion, the third 229 billion and the fourth 85.1 billion.

RAISING COMPETITIVENESS

Somjai Phagaphasvivat, an independent political and economic analyst, said in terms of economic rationality, the proposed 1-trillion-baht land bridge project is considered economically feasible and would help improve the country's competitiveness.

Mr Somjai said the project would allow other countries to use Thailand as a transport centre.

Thailand has lost competitiveness over the past two decades as the country's GDP expanded by only 2.6% on average, compared with 4.3% for Southeast Asia, he said.

The government needs to secure concrete investment to prevent a spike in public debt, said Mr Somjai.

Increasing income for the country through promoting tourism and soft power, stimulating exports, or attracting foreign direct investment will help strengthen the government's fiscal stability, he said.

However, the project's potential impact on fiscal stability, society and the environment must be weighed before implementation, said Mr Somjai.

The public debt-to-GDP ratio is 62% now and investment expenditure accounts for only 20% of the annual expenditure budget.

If the project is unsuccessful, it will have an impact on the government's fiscal burden, he said.

There are also several uncontrollable external factors to consider that could affect the economy, such another potential pandemic or a war on the scale of the Russian invasion of Ukraine, said Mr Somjai.

In addition, he said the Land Bridge project has the potential to become a geopolitical flashpoint as competing powers vie for influence in the region, though Mr Srettha appears keen to sidestep such tensions by welcoming all investors.

Prime Minister Srettha Thavisin at Laem Son National Park in tambon Muang Kluang of Ranong's Kapoe district on January 22, 2024 to inspect a construction site for the Land Bridge megaproject.

FACTORS FOR SUCCESS

Kevalin Wangpichayasuk, deputy managing director of Kasikorn Research Center, said the proposed Land Bridge is similar to the defunct Dawei project in that they are both massive in terms of investment and the host governments are trying to entice foreign financing.

She said the Dawei project failed for two reasons: political changes in Myanmar and the developer, which was a Thai company, had financial problems that hampered project development.

"I think the Thai government has greater capability than Myanmar to disburse budget and mobilise funding to support this project," Ms Kevalin told the Bangkok Post.

"It depends on finding the right investors and how much potential they see in this project."

Given the estimated cost of 1 trillion baht, the government should evaluate recent changes in geopolitics to ensure there is sufficient demand for shipments through this region to justify the Land Bridge, she said.

Conflicts between the US and China as well as Russia and Europe are leading to changes in global supply chain, said Ms Kevalin.

Global companies and foreign investors have started to shift their investments to destinations such as India, Mexico and eastern Europe.

"As a result, there might be less demand for goods shipment via the regions the Land Bridge aims to serve," she said.

"With this level of investment, we need to ensure the project is worthwhile."

In addition, Ms Kevalin said the opinions of residents in the project area should be considered, comprising the provinces of Ranong, Chumphon, Surat Thani and Nakhon Si Thammarat.

Locals should be consulted while drafting this project, and products and services from the region should be promoted, she said.

The Land Bridge should start as a special economic zone, similar to the Eastern Seaboard project before it expanded to the EEC, said Ms Kevalin.

Singapore and Malaysia both have ports and similar projects under development, she said.

"We should not view the neighbouring projects as competitors, but rather as complements, benefiting the Southeast Asian region," said Ms Kevalin.

NEW FACE OF THE SOUTH

If the government manages to develop the Land Bridge scheme, parts of the southern region will be moulded similarly to the Eastern Seaboard, becoming a new economic engine for the country, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).

He said he believes the Land Bridge will play an important role in boosting foreign direct investment in the long term.

Investors from the Middle East and China are rumoured to be interested in the project, according to media reports, which can lead to the development of many industries such as oil refining and petrochemical manufacturing, said Mr Kriengkrai.

Mr Srettha said earlier Dubai Ports World, a multinational logistics company, expressed interest in investing in the megaproject.

"The Land Bridge will pave the way for the South to develop like the Eastern Seaboard," said Mr Kriengkrai.

The Eastern Seaboard scheme, which covers parts of Chon Buri, Rayong and Chachoengsao provinces, started in 1982 when the government wanted to develop deep-sea ports, industrial estates and facilities to support gas discovery in the Gulf of Thailand.

With the birth of new industries based on high technology, authorities added infrastructure to the seaboard and developed it into the EEC, which is expected to become the country's high-tech industrial hub.

The Land Bridge is expected to serve as a gateway linking goods shipping from Laem Chabang port, located in Chon Buri, with countries in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, as well as other nations.

"The Land Bridge is similar to the EEC, but the former is a long-term investment project with higher investment value than the latter," said Mr Kriengkrai.

"This does not mean the government has to make the whole investment by itself. It needs to partner with groups of investors."

He said he is confident the Land Bridge project has the potential to draw foreign investment.

The Land Bridge project is intended to connect the Andaman Sea and the Gulf of Thailand via Ranong and Chumphon provinces as a transit hub.

Do you like the content of this article?
COMMENT (48)