China Eximbank pledges 38.2 billion baht loan for Phase 1 of the Nong Khai High-Speed Railway (Bangkok to Nakhon Ratchasima) Project (Linked to Project ID#64462)

On May 1, 2019, the Minister of Transportation of Thailand confirmed that the Government of Thailand would seek a loan from China Eximbank worth 38.2 billion baht to cover 85% of the cost of Phase 1 of the Nong Khai High-Speed Railway (Bangkok to Nakhon Ratchasima) Project. China Eximbank reportedly offered this loan with an interest rate of 3% but the Government of Thailand requested that the lender reduce the interest rate to 2.5%. Then, on October 28, 2020, the China Eximbank signed an agreement with the Government of Thailand for the construction of a 253 km high speed railway (HSR) that would connect Bangkok to Nakhon Ratchasima. On the same day, Mr. Prayuth Chan-ocha, the Prime Minster of Thailand, and Mr. Yang Xin, the Minister Counsellor of the Embassy of the People’s Republic of China in The Kingdom of Thailand, witnessed the signing of a 50.63 billion Baht contract — known as known as ‘Contract 2.3’ — for Phase 1 of the Nong Khai High-Speed Railway (Bangkok to Nakhon Ratchasima) Project between State Railway of Thailand (STR), China Railway International Co., Ltd and China Railway Design Corporation Co., Ltd. The contract signing ceremony took place at Government House. On March 25, 2021, the CAN Joint Venture was established by Nawarat Patanakarn Public Company Limited (30% equity stake), A.S. Associated Engineering (1994) Co., Ltd. (30% equity stake), and China State Construction Engineering Corporation Limited (40% equity stake) for the purpose of participating in one component of the Phase 1 of the Nong Khai High-Speed Railway (Bangkok to Nakhon Ratchasima) Project known as 4-3 Section. The total expected cost of the 4-3 Section was 10,771.36 Million Baht. Then, on March 29, 2021, Thailand's Transport Minister Saksayam Chidchob presided over the signing ceremony for three contracts between the State Railway of Thailand (SRT) and various contractors, including China State Construction Engineering Corporation and four other companies. The 3 contracts were among a total of 14 contracts for Phase 1, which at the time was expected to carry a combined cost of 179.41 billion baht ($5.75 billion). However, on December 3, 2021, the Government of Thailand reportedly decided not to accept ‘high interest loans’ to finance Phase 1, but instead fund the project on its own. Contract 2.3 reportedly encompasses 14 contracts covering the cost of purchasing the tracks, electricity system, machinery and train carriages, as well as staff training, caused by the construction of Thai-Chinese high-speed rail project linking Bangkok and Nakhon Ratchasima. The Bangkok-Nongkhai HSR is part of Thailand’s portion of the Trans-Asian Railway Central Line, from Nongkhai, the northern part of Thailand, to the capital city of Bangkok. The first phase of the project is 253 kilometers long and seeks to connect Bangkok to Nakhon Ratchasima in the northeastern part of Thailand. In the future, it is envisaged that the line will be connected by the China-Laos railway to form a railway corridor from Kunming to Bangkok. A groundbreaking ceremony for the project took place on December 21, 2017, and the CAN Joint Venture commenced work on the 4-3 Section on August 30, 2021. However, the project has faced various implementation delays and obstacles. According to a January 2022 Nikkei Asia report, ‘Bangkok felt it had reasons to be cautious about embracing China's vision. This was because of what Bangkok considered to be unreasonable demands from Beijing, including the terms of its loans and the requirement that Chinese materials and workers be used for the construction. China also wanted the right to develop areas along the railway line. Those demands ruffled Bangkok's feathers and the project was cut by about 60% to become a 253 km railway line between Bangkok and Nakhon Ratchasima Province. It was also redesigned as a high-speed line only for passengers at a maximum speed of 250 kph. The plan to set up a Chinese-Thai joint venture was also scrapped as it was decided that Thailand will bear entirely the total construction cost of 170 billion baht ($5 billion). These changes sharply reduced China's role in the project. Under the new blueprint, Thailand will finance, build and operate the railway line on its own, while designs and systems for the high-speed train services will be provided by China. Since then, the project has been proceeding at a glacial pace. Four years later, only 4% of the work to build the Bangkok-Nakhon Ratchasima section, which the Thai government considers as the first phase, has been completed. Ground leveling has been done only for 3.5 km of the railway tracks near Nakhon Ratchasima.’ As of July 6, 2022, Phase 1 had achieved a 12% completion rate. The project was originally expected to reach its commercial operations date (COD) by the end of 2026.

Additional details

1. According to Source ID#166380, Thailand was unwilling to take on high interest loans to finance the project, and decided to fund it 100% by themselves. 2. This project is also known as the Bangkok-Nongkhai HSR Project. The Chinese project title is 区域互联互通曼谷至廊开段高速铁路（一期曼谷-呵叻) or 中泰铁路合作项目一期工. 3. Kudun and Partners provided legal advice to Export-Import Bank of China, Tianjin Branch on the transaction. This advisory work was led by the Head of China Practice, Mayuree Sapsutthiporn, Senior Associate, Peerasanti Somritutai and Associate, Chavisa Jinanarong. 4. Bank of China (Thai) PCL also reportedly issued a bank guarantee for the project. This issue warrants further investigation.

Number of official sources

16

Number of total sources

46