Asia to Roll as Rail Networking Connects

News and Commentary From Emerging Asia

Oct. 25 – Southeast Asian nations, wary of a downturn in exports to the West, are developing greater interconnectivity and are spending some US$2.2 billion in regional rail track.

The long mooted project to ultimately link Beijing with Singapore – and all stops in between – began on Friday with the completion of Cambodia’s refurbished railway, now capable of handling freight trains a kilometer long. Vietnam is starting work on upgrading its 1,700 kilometer line from Hanoi to Ho Chi Minh City, while China is already underway with breaking ground on a spur from Yunnan Province to Laos, and has also agreed on a joint venture with Thailand to upgrade some of its rail track. Talks are also underway to provide a route from Bangkok to the Myanmar port of Tavoy on the Indian Ocean.

Southeast Asia, a region of some 600 million people and a combined GDP of US$1.8 trillion, recognized its over-reliance on exports to the West during the financial crisis and now wants to expand internal trade. ASEAN, the regional trade bloc that combines many of these nations, has already signed significant free trade agreements with China and India, and trade with these markets is expanding rapidly.ASEAN-China trade rose by nearly 50 percent in the first eight months of this year alone, and increased capabilities in rail will further enhance these and other regional trade.

Missing parts of the regional interconnectivity include what would be a major artery between Ho Chi Minh City, in South Vietnam, and Phnom Penh, the capital of Cambodia, where there has never been a link. That, plus upgrading existing tracks, would costs about US$2.2 billion, according toAsian Development Bankestimates, and with work about to start, could be completed as soon as 2015. The Cambodian section of the rail is being operated by Toll, a Cambodian-Australian joint venture with a 30-year contract to refurbish and operate it. Toll received a US$84 million loan from the Asian Development Bank and others. Earlier this month, after US$5 million in investments in new rails, signs, locomotive repairs and workforce training, the freight service to Touk Meas began operations. The entire railroad, including new spurs directly to Cambodia’s ports, is to be fully operational by 2013.

The rest of the region is working to connect with this strategic link which, apart from the potential to travel from Singapore to Beijing by train, will also have the practical effect of considerably reducing freight times. Bangkok to Hanoi, for example, will take just three days as opposed to the current 14 via ship. Intra-Asian trade is set to boom.