New Market Study Published: Thailand Freight Transport Report Q4 2010

Nov. 7, 2010 - PRLog -- The Thai government was in early August said to be considering a joint venture (JV) with the Chinese government to build Thailand's first high-speed railway system, Thailand's Finance Minister Korn Chatikavanij said. According to government sources, the railway system is expected to cost around THB57bn (US$1.76bn), as cited by Thailand Travel News. BMI believes that the costs of the project together with doubts over the demand for such a project raises serious questions as to the economic viability and necessity of this venture. According to the Bangkok Post, Korn stated that the 240km highspeed railway line will include four stops and connect from Makkasan in central Bangkok to Rayong City. The railway system is expected to reduce the total travel time between the cities from an original three hours drive to about one hour. The entire project is estimated to be completed within three years. This target appears ambitious to say the least, and with Thailand's deputy prime minster cited by Thailand Travel News as stating that environmental impact assessments are expected to take one to two years to complete, the three-year timeline appears doubtful.

In BMI's view, four factors raise questions over the project's viability and necessity; First and foremost, the potential demand for the high-speed railway system is limited. Second, the level of human traffic between Bangkok and Rayong is uncertain. Unless the Chinese government is financing the whole project, Thailand will find it difficult to raise funds in an environment where many investors are still cautious about providing lending for major projects. Finally, the State Railway of Thailand (SRT) has a poor track record in investment and has only managed to spend half of its annual investment budget per year over the past decade. BMI notes that having a high-speed railway line could attract more tourists and spur further economic development within the connecting regions, thereby increasing the number of people using the railway. However, given the four factors listed above, the necessity and therefore economic viability of the project is uncertain.

Thailand continued to suffer from an ongoing and intermittently explosive political crisis, but as the country progressed through H210, it was enjoying a period of political respite and strong economic growth, to the benefit of the ports and shipping sector. The economy was driven by inventory restocking in the early part of the year, and this was followed by signs of a reasonably well-based recovery in private consumption, supported by low unemployment and rising consumer confidence levels. A package of tax incentives introduced in May seemed to be doing its job to attract more foreign businesses to invest in the country. BMI therefore reaffirmed its relatively conservative projection of 3.6% GDP growth in 2010, followed by 3.7% in 2011. On economic grounds alone, there is upside risk to this projection; but the possibility of a resumption of the political crisis ahead of planned elections in early 2011 points in the other direction.

Thailand's air freight sector is forecast to post a year on year (y-o-y) increase in 2010, with BMI predicting a growth of 7.2% as the country's air freight sector recovers from the downturn in 2009, which saw cargo volumes carried by air fall by an estimated 10.8%. If these projections play out, the air freight sector will carry approximately 1.25mn tonnes, just under Thailand's 2007 air freight volumes and considerably lower than the 2008 air freight boom, where cargo volumes reached an estimated 1.31mn tonnes.

According to BMI estimates the port of Laem Chabang managed to defy the downturn in 2009, posting a volume increase of 4.1% y-o-y and handling 46.2mn tonnes of cargo. This year, the port is seeing further volume growth, with a gain of 11.5% to 51.47mn tonnes. The port of Bangkok, according to data from the port authorities, posted a decrease of 12.4% y-o-y in 2009, with the facility handling just 15.6mn tonnes of cargo. However, in 2010 we see a recovery with 6.6% volume growth to 16.60mn tonnes. In 2010, we predict year-on-year (y-o-y) growth in container throughput for both ports. Laem Chabang's box traffic is estimated to increase by 10.0% to 5.08mn TEU, with throughput at Bangkok forecast to grow by 7.3% to 1.41mn TEUs.

Rail freight looks likely to demonstrate a y-o-y increase in 2010, with BMI predicting a growth of 11.1%, after an estimated annual increase of 4.3% in 2008 and a fall of 15.7% in 2009. In 2010, we forecast that Thailand's rail freight sector will transport 15.78mn tonnes. Thailand's total trade fell by an estimated 16.1% in 2009, on the back of a global trade decline. Imports were worst affected, falling by 20.2% y-o-y. Trade is picking up in 2010, with BMI's Country Risk team forecasting a growth of 10.5%. Over the rest of the medium term (2011-14), we estimate that Thailand's total trade will increase by a yearly average of 6.2%.

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