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Published on December 28, 2007

Thailand's railway system was established in the reign of King Rama V and became a state enterprise in 1953, about the same time as the establishment of the first railway agency in Japan.

However, as Japan has developed one of the world's most efficient railway systems, the State Railway of Thailand (SRT) has barely progressed over the past half-decade. It is like a dying patient due to non-transparent operations, lack of effectiveness and its workers' resistance to change.

Japan's railway covers 27,666 kilometres, with 11,007km or almost 40 per cent consisting of double-track. Electric trains run on 17,470km, or 63 per cent, of the network. There are 192 railway companies.

On the other hand, the SRT network covers only 4,000km, with 93 per cent single-track, 4 per cent double-track and 3 per cent triple-track. Over the past 50 years, only 666km of new track have been laid, of which only 234km were double-track. Therefore, Thailand has higher transport costs and energy consumption.

The SRT has many problems, notably financial. The agency has debts of Bt51.2 billion requiring annual interest payments of Bt1.85 billion. It has a pension burden of Bt160 billion. Last year, it had a net loss of Bt6.57 billion. The agency is expected to lose more than Bt10 billion annually over the next three years if it cannot solve its problems.

Secondly, the SRT has performed sluggishly in terms of implementing government policy. Its projects have been delayed and there were corruption allegations surrounding several projects. Its number of customers fell from 56 million in 2001 to 52 million last year, or 2 per cent a year. Meanwhile, there are about 500 railway-related accidents a year.

Thirdly, the organisation suffers from inefficiency. Its overheads are increased by ineffective management, duplication of work and a lack of accountability. The SRT has 18,000 staff, 10,000 of whom are part of its central administration. It needs 2,000 drivers, 1,872 traffic staff and 3,500 maintenance and repair staff.

Fourth, the law that requires the government to compensate the agency's annual loss has discouraged management and staff from excelling in their work and improving their performance. Such an attitude has affected service and made the SRT less popular among consumers. It has recorded consecutive losses since 1974 and it is estimated that the government has spent Bt58 billion subsidising those losses, excluding the budget allocated for other SRT projects.

Fifth, the SRT has an inefficient structure. It has land totalling 233,858 rai, but the 38,604 rai not related to the rail network generates income of only Bt900 million, considered very low.

Goods transportation generates low income because the agency cannot directly control the process. Therefore, most private companies shifted to road transport, even though it is nine times more expensive than rail transport. Consequently, Thailand's transport sector accounts for 38 per cent of energy imports.

The Finance Ministry, which is responsible for the SRT's debt burden and interest, hoped that Prime Minister Surayud Chulanont's government would have done more to tackle the problem. It was originally expected that Deputy Transport Minister Sansern Wongcha-um, former secretary-general of the National Economic and Social Development Board, would have had the courage to fix the chronic problem.

However, about one year has passed and the government has so far failed to implement a strategy drafted early this year to rehabilitate the SRT's financial status.

Sansern succumbed to resistance from the labour union, especially after a strike that shut down the network nationwide on October 31.

The rehabilitation strategy is aimed at tackling problems systematically.

It should help to solve the agency's financial and management problems, support the country's logistics system, reduce energy consumption and improve service and efficiency.

Under the plan, the government would help the SRT to repay debts of Bt39 billion, comprising Bt15 billion for investment in infrastructure, Bt20 billion of outstanding debt and Bt4 billion for costs relating to land leases.

Regarding the operational turnaround, the SRT aims to promote efficient transport by investing in basic infrastructure and locomotives in the next 10 years with an investment of Bt285 billion. An aggressive marketing strategy was planned to promote rail transport by focusing on door-to-door service.

As for the strategic turnaround, the SRT would have to separate its social-oriented service from the business-oriented part so that the government would be able to set aside a budget to support the social service.

The SRT's operation would have to be restructured into infrastructure and rolling-stock units. Under the plan, five smaller units would be set up to take responsibility for goods transport, passenger transport, locomotive maintenance, electric train management and asset management.

A plan to develop human resources accordingly was also worked out.

A clear organisational structure would enable the SRT to generate more income because it would be able to increase its fees in line with other transport systems and increase income from land management over the next 10 years. The SRT has 1,100 rai of land with business potential, including plots at Chatuchak, Bang Sue, Makkasan, Chong Nonsi oil depot and RCA.

"Regardless of the SRT problems, the government has been unable to abolish the SRT like any other loss-making state enterprise because the rail system is considered as part of the nation's logistics and transport," said a Finance Ministry source.

Bancha Kongnakorn, the SRT's deputy governor who is tipped to become one of the candidates to be the next governor, said that if SRT were a private company, it should have gone bankrupt.

"It's time for the SRT to seriously restructure its organisation, otherwise management will have to borrow some Bt5 billion to pay for the debt. Everyone has to accept the fact. We should not hide the problem under the carpet any longer because the SRT needs the government's assistance and needs someone who understands the problem to fix it," he said.

The SRT problem is a worrisome issue for both the Finance Ministry and taxpayers. If the new government fails to understand the issue and fails to implement the rehabilitation plan, the agency's troubles will continue and the ministry will have to use taxpayers' money to subsidise the failing enterprise.

Watcharapong Thongrung

 The Nation