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Aerial photo of the port of Songkhla (Photo by the port of Songkhla)
Thai ports bemoan competitive decline as Srettha pushes 'land bridge'
Shipping industry questions potential demand for $28bn megaproject
FRANCESCA REGALADO, Nikkei staff writer
March 22, 2024
NIKKEI Asia
SONGKHLA, Thailand -- On a hot February afternoon, a 170-meter container ship pulled into the port of Songkhla. It was hardly full, as southern Thailand's largest port is not deep enough to support fully loaded vessels.
That adds to costs for exporters, whose cargo must be transferred to larger vessels in Malaysia or Singapore, and less income for the port, which charges handling fees per container and berthing fees by the day. To cut costs, some southern industries avoid Songkhla altogether, sending rubber and lumber by truck across the border to the Malaysian port of Penang.
In an effort to grab some of this container traffic and turn Thailand into a logistics hub, Prime Minister Srettha Thavisin has touted a "land bridge" connecting the Gulf of Thailand to the Andaman Sea. By 2030, two new deep-water ports in Ranong on the west coast and Chumphon on the east coast would displace Songkhla as the south's busiest port, connected by roads and railways stretching 90 kilometers, as well as an oil and gas pipeline.
Roadshows in China and Japan last year and this month in Europe, are seeking to raise 1 trillion baht ($28 billion) from investors for the project, which the Thai government says offers an alternative to the busy Malacca Strait.
But industry experts, opposition politicians and feasibility studies since the 1990s have questioned the land bridge's financial and technical viability. Shippers and port operators say urgently needed upgrades to Thai seaports would deliver more realistic and immediate returns.
"The first question should be, 'Where is the demand, and who is the customer?' Not, 'What do investors want?'" said Chaichan Charoensuk, chairman of the Thai National Shippers Council.
Ships sailing between the Indian and Pacific Oceans, particularly on the high-traffic Far East to Europe route, would reach the land bridge two days earlier than the Malacca Strait, according to the Thai government's proposal. But a 2022 feasibility study by Chulalongkorn University found that processing cargo at both ends of the land bridge would add at least seven days to the journey.
Compared with the toll-free passage of the Malacca Strait, handling fees across the land bridge would cost 4,640 baht per container, or 23.3 million baht ($653,000) for a large mother vessel.
"It will shorten the sailing distance, but it will use up more time for docking, loading and discharging across the land bridge," said Sompong Sirisoponslip, a professor at Chulalongkorn University and author of the feasibility study.
Government consultants estimate the land bridge will attract 25 million TEUs of transshipments, or cargo transferred between vessels, an exponential rise from Ranong's present throughput of just over 1,600 TEUs. There is currently no container port in Chumphon.
Import and export forecasts of 6 million TEUs hinge on the development of a southern economic zone, as Thailand's key automotive and electronics supply chains are concentrated in the east, close to Laem Chabang, the country's main deep-water port. Ongoing improvements at Laem Chabang would relieve congestion and double throughput by an additional 10 million to 11 million TEUs per year to support the Eastern Economic Corridor.
Dredging and reinforcing existing ports to support gantry cranes, each weighing 700 tonnes, would be more cost effective than the land bridge, said TNSC's Chaichan. "We have to learn from the failure of previous investments why Ranong and Songkhla are underutilized," he said.
A spokesperson for Mitsui OSK Lines, a Japanese transport company, told Nikkei Asia that automation of loading and unloading, and deepening ports to accommodate larger ships, could be considered to ease shipping and logistics congestion in the region.
Dredging Songkhla port's depth to nine meters would cost the government just 100 million baht each year, according to its director, Wathanachai Raunglertpanyakul.
Sompong, the Chulalongkorn University professor, said the government's forecasts do not take into account port upgrades in neighboring countries like Malaysia, Vietnam and Singapore, the region's transshipment hub. When Singapore's new Tuas Port is completed in the 2040s, it will be the world's largest automated container port, with an annual capacity of 65 million TEUs.
Customers for the land bridge may be limited to Thailand's neighbors that share a land border with it, industry stakeholders in Thailand, Singapore, Malaysia and Vietnam told Nikkei Asia. "It is possible that the gate port options for shippers located in these areas, such as Thailand, Myanmar, Laos, Cambodia, and Vietnam, will increase," said a spokesperson for Ocean Network Express, a Japanese shipping company headquartered in Tokyo and Singapore.
The government is set to take the land bridge proposal on a roadshow to China this month, after Chinese Foreign Minister Wang Yi said Beijing was interested, according to Thai Transport Minister Suriya Jungroongreangkit. Government spokesperson Chai Wacharonke said in January that Dubai Port World and 19 other potential investors were considering the project.
Sompong, author of the Chulalongkorn study, and Sirikanya Tansakun, deputy leader of the main opposition Move Forward Party, resigned from a parliamentary study committee on the land bridge after the government declined to answer technical questions.
Attempts by previous Thai governments to construct a southern land bridge were defeated by technical difficulties and environmental protests. These days, signs opposing the land bridge line roads in Chumphon, which is rich with coral reefs and mangrove forests. But the province's chamber of commerce and tourism council support the land bridge, saying it would promote southern industries and boost tourism.
Infrastructure aside, regulatory hurdles will have to be cleared to persuade shippers to use the land bridge. Vessel-to-vessel transfers are subject to reams of red tape in Thailand.
"I would not neglect to modernize and streamline customs," said Marcello Piazza, Vietnam managing director at logistics company JAS. It is an issue "if you have infrastructure but you have hiccups in customs," he added.
Operators said Southeast Asia could maximize its logistics potential by consolidating cargo, harmonizing customs clearance systems and improving road and rail connections between existing ports, rather than competing for investment in new megaprojects.
"They can utilize their infrastructure as if it were one country," said Piazza.
Additional reporting by Tsubasa Suruga and Dylan Loh in Singapore, Lien Hoang in Ho Chi Minh City, Norman Goh in Kuala Lumpur and Niyakarn Atiyudhakul in Bangkok.
https://asia.nikkei.com/Business/Business-Spotlight/Thai-ports-bemoan-competitive-decline-as-Srettha-pushes-land-bridge
SONGKHLA, Thailand -- On a hot February afternoon, a 170-meter container ship pulled into the port of Songkhla. It was hardly full, as southern Thailand's largest port is not deep enough to support fully loaded vessels.
That adds to costs for exporters, whose cargo must be transferred to larger vessels in Malaysia or Singapore, and less income for the port, which charges handling fees per container and berthing fees by the day. To cut costs, some southern industries avoid Songkhla altogether, sending rubber and lumber by truck across the border to the Malaysian port of Penang.
In an effort to grab some of this container traffic and turn Thailand into a logistics hub, Prime Minister Srettha Thavisin has touted a "land bridge" connecting the Gulf of Thailand to the Andaman Sea. By 2030, two new deep-water ports in Ranong on the west coast and Chumphon on the east coast would displace Songkhla as the south's busiest port, connected by roads and railways stretching 90 kilometers, as well as an oil and gas pipeline.
Roadshows in China and Japan last year and this month in Europe, are seeking to raise 1 trillion baht ($28 billion) from investors for the project, which the Thai government says offers an alternative to the busy Malacca Strait.
But industry experts, opposition politicians and feasibility studies since the 1990s have questioned the land bridge's financial and technical viability. Shippers and port operators say urgently needed upgrades to Thai seaports would deliver more realistic and immediate returns.
"The first question should be, 'Where is the demand, and who is the customer?' Not, 'What do investors want?'" said Chaichan Charoensuk, chairman of the Thai National Shippers Council.
Ships sailing between the Indian and Pacific Oceans, particularly on the high-traffic Far East to Europe route, would reach the land bridge two days earlier than the Malacca Strait, according to the Thai government's proposal. But a 2022 feasibility study by Chulalongkorn University found that processing cargo at both ends of the land bridge would add at least seven days to the journey.
Compared with the toll-free passage of the Malacca Strait, handling fees across the land bridge would cost 4,640 baht per container, or 23.3 million baht ($653,000) for a large mother vessel.
"It will shorten the sailing distance, but it will use up more time for docking, loading and discharging across the land bridge," said Sompong Sirisoponslip, a professor at Chulalongkorn University and author of the feasibility study.
Government consultants estimate the land bridge will attract 25 million TEUs of transshipments, or cargo transferred between vessels, an exponential rise from Ranong's present throughput of just over 1,600 TEUs. There is currently no container port in Chumphon.
Import and export forecasts of 6 million TEUs hinge on the development of a southern economic zone, as Thailand's key automotive and electronics supply chains are concentrated in the east, close to Laem Chabang, the country's main deep-water port. Ongoing improvements at Laem Chabang would relieve congestion and double throughput by an additional 10 million to 11 million TEUs per year to support the Eastern Economic Corridor.
Dredging and reinforcing existing ports to support gantry cranes, each weighing 700 tonnes, would be more cost effective than the land bridge, said TNSC's Chaichan. "We have to learn from the failure of previous investments why Ranong and Songkhla are underutilized," he said.
A spokesperson for Mitsui OSK Lines, a Japanese transport company, told Nikkei Asia that automation of loading and unloading, and deepening ports to accommodate larger ships, could be considered to ease shipping and logistics congestion in the region.
Dredging Songkhla port's depth to nine meters would cost the government just 100 million baht each year, according to its director, Wathanachai Raunglertpanyakul.
Sompong, the Chulalongkorn University professor, said the government's forecasts do not take into account port upgrades in neighboring countries like Malaysia, Vietnam and Singapore, the region's transshipment hub. When Singapore's new Tuas Port is completed in the 2040s, it will be the world's largest automated container port, with an annual capacity of 65 million TEUs.
Customers for the land bridge may be limited to Thailand's neighbors that share a land border with it, industry stakeholders in Thailand, Singapore, Malaysia and Vietnam told Nikkei Asia. "It is possible that the gate port options for shippers located in these areas, such as Thailand, Myanmar, Laos, Cambodia, and Vietnam, will increase," said a spokesperson for Ocean Network Express, a Japanese shipping company headquartered in Tokyo and Singapore.
The government is set to take the land bridge proposal on a roadshow to China this month, after Chinese Foreign Minister Wang Yi said Beijing was interested, according to Thai Transport Minister Suriya Jungroongreangkit. Government spokesperson Chai Wacharonke said in January that Dubai Port World and 19 other potential investors were considering the project.
Sompong, author of the Chulalongkorn study, and Sirikanya Tansakun, deputy leader of the main opposition Move Forward Party, resigned from a parliamentary study committee on the land bridge after the government declined to answer technical questions.
Attempts by previous Thai governments to construct a southern land bridge were defeated by technical difficulties and environmental protests. These days, signs opposing the land bridge line roads in Chumphon, which is rich with coral reefs and mangrove forests. But the province's chamber of commerce and tourism council support the land bridge, saying it would promote southern industries and boost tourism.
Infrastructure aside, regulatory hurdles will have to be cleared to persuade shippers to use the land bridge. Vessel-to-vessel transfers are subject to reams of red tape in Thailand.
"I would not neglect to modernize and streamline customs," said Marcello Piazza, Vietnam managing director at logistics company JAS. It is an issue "if you have infrastructure but you have hiccups in customs," he added.
Operators said Southeast Asia could maximize its logistics potential by consolidating cargo, harmonizing customs clearance systems and improving road and rail connections between existing ports, rather than competing for investment in new megaprojects.
"They can utilize their infrastructure as if it were one country," said Piazza.
Additional reporting by Tsubasa Suruga and Dylan Loh in Singapore, Lien Hoang in Ho Chi Minh City, Norman Goh in Kuala Lumpur and Niyakarn Atiyudhakul in Bangkok.
https://asia.nikkei.com/Business/Business-Spotlight/Thai-ports-bemoan-competitive-decline-as-Srettha-pushes-land-bridge
