Bangkok Airports Rail Link Construction Hits Problems

24th Sep 2019

Train Platform

The Thai government warns CP consortium, the contractor of Thailand’s new rail line project to sign a contract for the railway line project on 15 October. Any failure in this signing will leave the construction company with a hefty fine for violating they bidding terms. 

Charoen Pokphand (CP), a leading Thai conglomerate, with its global partners, won the bid to construct the 224-billion-baht, 220-km railway that will link three airports-Don Mueang, Suvarnabhumi, and U-Tapao. 

CP won the auction with the lowest bid of 117 billion baht against a consortium led by BTS Group in November 2018. With this project, the government aimed to reduce traffic problems in Thailand. The government has scheduled to open this high-speed railway network in 2024. 

However, CP has not yet started the constructional works. The company had not even signed the project contract till now. 

In the last meeting of the bidding committee, they have decided to sort the contract by 15 October. The committee has also sent an official notice to inform the CP-led group about their decision.

Is the Thailand railway link train contract in danger?

The profitability of CP's airport link project was a big question from the very beginning. The company offered to construct the railway line at a considerably low cost. There are rumors that CP’s Japanese partner Itochu even closed their ties with the company due to this contract. All these incidents raised a question on how the company plans to develop the project.

Apart from the budget, CP consortium also has some concerns related to the construction land. The state government was supposed to hand over 10,000 rai of land for the project. However, they are providing only 80% of the total area. The remaining 20% of the land is either under leasing agreements with the private sector, stuck in mud, or has eviction problems.

The Thailand government is worried because the bidding prices are valid only till 2 November. If CP doesn't sign the contract by the date,  it will delay the rail line project.

What exactly are the terms of the railway link contract?

The Thai government came up with the railway contract under their railway development scheme. It stated that the contractor who wins the bid would develop a high-speed rail system that will connect Thailand’s three airports - Don Mueang, Suvarnabhumi, and U-Tapao. 

The contractor will also take care of smooth running the railway line for the next 50 years. The company will also be responsible for developing 150 rai of land in the Makkasan area and a 100 rai plot in Chon Buri’s Si Racha.

What are the consequences of not signing the contract?

According to the deputy Prime minister, Anutin Charnvirakul, the new railway line is the key element for the government's flagship Eastern Economic Corridor (EEC)  high-tech investment hub scheme. He said that the contractor had reached a point of no return.

He also stated that the government had given sufficient time for negotiations, but no further delay is tolerable. CP has to sign the contract by 15 October and get started with the constructional work. 

In case they plan to opt-out or don’t sign the contract, their bid bond worth 2 billion baht will be seized.  The companies under the CP consortium will get blacklisted and banned from any future state project contract.