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From Competition to Coercion:

China-led High-Speed Railway Initiative in Thailand


during Yingluck and Prayuth Governments
Trin Aiyara
National Graduate Institute for Policy Studies
23-03-2018
Outline

1. Capitalist expansion and high-speed railway

2. First step of China’s high-speed initiative in Thailand

3. High-speed railway development in the period of the Yingluck government

4. High-speed railway development in the period of the Prayuth government

5. Comparison and framework


Background information
Capitalist expansion and high-speed railway
• Prior to China’s initiative, the Thai state has had a plan to construct high-speed
railway since 1991.
• Bureaucrats’ idea – Railway to the new industrial park in the East
• Provincial politicians’ idea – Three pronged railway route

• Parliament volatility

• The Asian financial crisis in 1997-8

• The return of the high-speed railway projects in Thailand has been consequences
of economic and political considerations.
• Economic side – Engine of growth and dispersion of economic activities
• Political side – How rents and benefits from railway project are shared among social groups
Thailand’s first high-speed railway plan, 1991
Rents from high-speed railway project
Types of rents Actors Conditions
Monopolistic rents Chinese state-owned Bilateral negotiation;
- Construction contracts enterprises; Exclusive conditions in
- System works Local contractors bidding, for example, local
content

Rents based on transfers Chinese state-owned Types of negotiation,


- Right to control over enterprises; host construction plan, and
railway-related assets governments; local private financing method
companies
Learning rents Host governments or local Negotiation on
- Technological transfer private companies technological transfer
Increase in land rents Landowners, both private Proposed construction
and state plans
First step of China’s high-speed initiative in Thailand
• China’s ‘first-wave’ of high-speed railway export

• Abhisit government (2008-11) and high-speed railway


• 50-50 joint venture
• Connecting Laos, Thailand, and Malaysia
• Deputy Prime Minister, Suthep Thaugsuban as a key negotiator

• Failed attempt
• Intra-government conflicts, especially between coalition parties
• Deputy Prime Minister and Transport minister, Sophon Saram
• End of government terms
• Coalition government and instability – Common narrative of Thai politics in the 1990s

• Reform of China’s Ministry of Railway


Suthep and Sophon
Yingluck government and the high-speed politics
I. International competition
• Japan-China rivalry
• In the similar fashion with the Abhisit government, China approached the Yingluck
government in 2012.
• Meanwhile, Japan also offered proposal to create high-speed railway networks

• Both of them paid visits to the ministerial personnel.


• Free-of-charge feasibility studies
• Promise of cheap loans and technical assistance

• Despite favorable conditions from both China and Japan, the Yingluck
government decided to announce the international bidding.
• Nation-wide networks
• Unified operation and signaling system
• Flexibility in offers, for example, barter between railway equipment and primary products
Ⅱ. Electoral competition
• Political bases of the Yingluck government were voters, especially from the North
and Northeast, local politicians, and some factions of capitalists.
• Maximized votes and bargaining with politicians, who acted as intermediates of the party

• The choice of the opening international bid was not only a result of the
international politics, but also the contestation among domestic social forces.

• The proclamation to open a bid implied the Yingluck government had a certain
masterplan, which served the interests of the supporters.
• Nation-wide construction plan – Voters, local politicians, and real estate capitalists
• Loan bill – Voters, local politicians, and real estate capitalists
• Bidding used as leverage to preserve other rents – Voters and local politicians

• During the Yingluck government period, the high-speed railway changed from the
bureaucratic idea to the political agenda to win the popularity.
The Yingluck government’s high-speed railway policy (2011-2014)
Share of modes of transportation in the loan bills
Overload rice stock – Challenge of the Yingluck government
Ⅲ. Competition between electoral and conservative alliances
• Although the high-speed railway development was a key policy of the Yingluck
government, it could not achieve this policy.

• Dealing with bureaucrats – international bidding


• Following procedures and regulations on public projects
• The bidding shielded bureaucrats from being accused of corruption

• Electoral winning does not mean political domination in the Thai society.
• Majority government and votes in the parliament

• In spite of the compromise with the bureaucrats, the railway proposal was
dismissed by the conservative coalition, led by the judiciary and the army.
• Against the constitution – Loan bill
• Coup on May 22, 2014 – End of the Yingluck government
The judiciary and the executive in dispute on the high-speed railway project
NCPO – National Council for Peace and Order
Prayuth government and the high-speed politics
Internal coercion and external compromise
• As a military regime, the Prayuth government’s relationship with the Western
nations has deteriorated.

• However, Japan and China have still maintained their relation with Thailand.

• Rather than opening the international bidding, the Prayuth government


‘allocated’ high-speed railway routes for Japan and China.
• China – Northeastern route that can connect with Laos
• Japan – Northern route
• Bilateral negotiation

• Thailand and China have negotiated around 20 times to reach an agreement.


• 50-50 joint venture
• China’s 100% of investment capitals in exchange of monopoly in asset management
The Prayuth government’s high-speed railway plan
Prayuth and Chinese railway agencies
Coercion over bureaucratic procedure
• Sino-Thai high-speed railway (the first phase: Bangkok-Korat)
• Using Thailand’s capital and resource, entirely
• Financing via domestic loans as China ones are too expensive
• Thai firm will be responsible for construction works
• Chinese agencies will be responsible for signaling and operating systems as well as designs
• Thai government had denied the proposal of China that had offered the entire capitals for
the project in exchange of right to control over the lands along the railway

• Procedures and delay in the construction


• Professional certificates of Chinese engineers and architects – Labor regulation
• Bidding and reference prices – Collusion
• Reluctance to implement the project of the bureaucrats

• Enactment of the Article 44, “Excalibur” of the junta, to overcome the regulations
on labor and bidding to ‘rectify’ the project
Opening ceremony of Sino-Thai high-speed railway, December 21, 2017
Land clearance on the construction site, January 2018
Political bases of coercion
• In particular, the Article 44, which gives the legal absolute power, enables the
Prayuth government to bypass the regulations.

• The Prayuth regime has based on three groups of the conservative alliance.
• Military, bureaucrats (or technocrats), and big businesses
• Force, knowledge, and money

• Allocation of railway routes


• For the Eastern and the Southern routes, the big businesses will gain the right to control
and extract revenue from the state’s railway-related land and asset. (rent based on transfer)
• For the Northeast route, the technocrats will gain rent from lands and the Chinese agencies
will receive rents from monopoly over advanced railway equipment.
• For the military, the provision of rents to the supporting coalition, especially state managers
and conglomerates, and China will strengthen its position.
Marriage ceremony as political manifestation
Conclusion
Comparison
Issues Yingluck government Prayuth government
Pattern of power Dispersion from the executive Concentration in the executive
concentration
Supporting coalitions Voters, politicians, some Military, bureaucrats, and big
capitalists businesses
Negotiation with China International bidding Bilateral agreement
Construction plan Unified plan with the consistent Customized plans for each
announcement of the nation- routes
wide network
Financing methods Loan bill Combination of loan and PPP
(Public-Private Partnership)

Outcomes Nullified by the 2014 Coup Slowly progress, due to


political negotiations and
bureaucratic procedures
Summary (1)
Policy Formulation Policy Implementation

Supporting coalitions The ruling government’s


And state managers policy actions

Early stage of policies State capacity and


on high-speed railway,
including negotiation preexisting institutions

Foreign agencies Successful or failed


involvement implementation

Policy proposal Actual rent distribution


Summary (2)
• The characteristics of China-led high-speed railway initiative in Thailand depend
on domestic political conditions, which ‘interpret’ and ‘translate’ the initiative.

• The constellation of the interests groups, which form the supporting coalition of
the ruling government, and the state managers can shed some light on the
formulation of the policy proposal.

• The success or failure of the policy implementation is a result of the interaction of


the ruling government’s proposal, state capacity, and preexisting procedures.

• Rent distribution is the key to understand the characteristics of the high-speed


railway policy of both Yingluck and Prayuth government.
Variation of high-speed railway projects (Proposal)
Thailand Malaysia
- Bilateral negotiations (Japan and China) - International open bidding in several
and bidding for PPP contracts aspects (asset company or consultancy)
- Thailand as sole investor that use - Several entities for each tasks, such
domestic loan as a source of capital operation or train maintenance
- China will play a role of designer and - Expected to commence in 2017 and
producers of ‘advanced’ technology operation by 2017.
- Thai privates for construction works - Estimated cost is 14 billion US dollar,
financed by probably external loans
Indonesia Laos
- Bidding between Japan and China - Bilateral negotiation since 2012
- No government guarantee - Electrified standard-gauge single-track
- Joint-venture of Chinese and Indonesian - Joint-venture of Chinese (70%) and Laos
SOEs (25 percent of project cost) government (30%) for the initial cost
- Loans from CDB (remaining 75 percent) (30% of total investment)
- 6 billion US dollars. - Chinese banks will finance another 60%
Variation of high-speed railway projects (Implementation)
Thailand Malaysia
- Usage of Article 44 to pave a way for Chinese - Starting a bidding process in some tasks
engineers and architects - Rejection of Chinese firm’s assistance in
- Starting a construction of the first phase Bundar Malaysia (asset for HSR)
- No international bidding for construction - High-speed railway exhibition of
works Japanese, Chinese and Korean
- 5.5 billion US dollars for the first phrase consortium.
- Proposal of The Cross-Border Railways
Bill by Singaporean parliament

Indonesia Laos
- Consortium got permission documents. - BOT [build, operate and transfer]
- Signed a loan with CDB in May 2017, but CDB - Starting the construction process in
refused to release the loan, due to land December 2016
acquisition problem. - Continuity in construction processes
- Plan to start the construction in early 2018 - Hiring local Lao workers
- Land acquisition has forestalled the project
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