Published on January 29, 2006

Denis de Baecque, chairman of the Franco-Thai Chamber of Commerce’s committee on infrastructure, transport, energy and construction, told me the other day that Thailand should consider adopting Hong Kong’s model for mass-transit development.

Regarded as one of the world’s best models to date, the Hong Kong government inaugurated its mass-transit program nearly three decades ago. Today the HK MTR carries an average of 2.4 million commuters per weekday, and some of its shares are traded on the stock exchange.

The success of the Hong Kong model can be attributed to two important factors: the availability of cheap credit and sizeable real-estate development.

From the outset, the Hong Kong government provided loan guarantees to the state agency responsible for MTR development.

This allowed the state-owned MTR authority to acquire credit at low interest rates, which was suitable for a large and long-running investment in the infrastructure of its system.

As for Thailand, part of this model was used by the MRTA about a decade ago when it invested in the infrastructure for the first 20 kilometres of the subway line.

Unfortunately, the additional cost of some Bt20 billion to purchase rolling stock and related equipment was later shouldered by private firm BMCL, which was in return granted a concession to run the subway.

According to de Baecque, private investors are not suitable for this kind of long-term investment. He cited the BTS company as an example. When BTS first invested more than Bt50 billion in the 23-kilometre Skytrain, the project was hailed as the first 100-per-cent private-investment scheme of its kind in the world.

In the wake of the 1997 Asian financial crisis, BTS technically went bankrupt due to huge foreign loans and exchange losses.

Today the company is still struggling with its unfinished debt-restructuring programme. Hence 100 per cent private investment in mass transit does not work in the long run.

De Baecque suggested that the private sector’s role in mass transit be restricted to system management and maintenance so as to ensure maximum operational efficiency.

In terms of a return on investment, the Hong Kong model shows that transporting people accounts for just over half of the system’s total revenue, even though 2.4 million commuters use the system every day, compared to only 500,000 using the combined 42 kilometres of the BTS and MRTA lines.

The other half of Hong Kong MTR revenue comes from real-estate development, advertisements and other sources.

To achieve sizeable real-estate income, land expropriation for construction of train stations must be planned to reap maximum commercial benefits.

In Bangkok’s case, the MRTA did not do it the Hong Kong way, so its source of income is limited while its private concessionaire also struggles to generate profit due to the relatively low figure of about 100,000 passengers per day.

As for the BTS system, which carries about 400,000 passengers per day, private investors also have no other sizeable source of income but fares.

Overall, the existing combined 42-kilometre system was founded on a weak commercial platform that does not hold the prospect of strong growth.

On the other hand, Hong Kong’s MTR has proved to be a more sustainable and profitable model which is also attractive to private investors, who currently own part of it via an initial public offering of shares.

It would seem then that the Thai government should rethink its ambitious mass-transit programme if it is really serious about solving Bangkok’s traffic congestion via the construction of additional mass-transit lines.

Hopefully last Thursday’s invitation to foreign and Thai investors to submit bids to invest in the proposed 10

mass-transit lines is a sincere attempt to address Bangkok’s commuting problem, not just a political smokescreen to shore up the government’s declining popularity, especially in the capital city.

Nophakhun Limsamarnphun

nop1122@yahoo.com

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