Thailand demands better terms in historic Chinese rail deal

A Chinese scheme to fund, build and operate two new rail lines in Thailand has run into difficulties.

The Thai government wants lower interest rates on the 20-year loan and is refusing to let Chinese firms manage the new lines.

In December Thailand’s National Legislative Assembly approved a draft memorandum of understanding (MoU) with China to jointly build the $10.64bn rail project, part of a long-term scheme to develop the country’s transport infrastructure.

The deal is one of historic significance to Thailand, as its infrastructure needs modernising.

"We have not seen any major development in Thailand’s railway operation for 120 years," said one official when the MoU was signed in December. "This is the first such development."

But after a government meeting about the project yesterday, deputy transport minister Arkhom Termpittayapaisith told reporters that the terms of the agreement will have to be renegotiated.

He said the Chinese Export-Import Bank had offered a loan with an interest rate of between 2% and 4%, and a four-year interest-free period, with conditions. 

Those conditions included a requirement to use Chinese technology and to give design and civil engineering work to China. China also wanted to manage the routes.

But Thailand wants to manage the lines itself, and it wants lower interest rates, more in line with what China’s rival for influence in the region, Japan, has offered Thailand in the past.

"The meeting agreed that the interest rate was too high compared with the loan from the Japan International Cooperation Agency for the construction of the Airport Rail Link, which was charged only at 1.5%," the minister said, according to The Bangkok Post.

He said the government has asked China to lower the interest rate on offer.

The project would see a 737km rail line from the northeastern province of Nong Khai to Map Ta Phut industrial estate in Rayong province. The second is a 133km spur to Bangkok.

According to the December MoU, both sides would try their best to start the construction within 2016.

Photograph: A rural railway stop in Thailand, 2009. (Tanakorn Jantanong/Wikimedia Commons)

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