Rail is key to getting the economy back on the right track

via Khmer NZ

Friday, 20 August 2010 15:01 Steve Finch

WHEN commerce ministers representing the Mekong Subregion meet today in Hanoi to discuss transport and trade links in the region, most will likely be frustrated with Cambodia over its lack of progress on the inter-Asia rail project. And with good reason.

Cambodia remains the only section of the planned Nanning-Singapore line that has not been completed. In a meeting on the project last week in Kunming, China, experts again cited financial and administrative problems as the main obstacle, a disappointing assessment from Cambodia’s point of view, given that the issue of sharing financial risk has plagued plans for years.

The Kingdom clearly has a much more difficult task in rehabilitating its rail lines than other countries on the network after tracks deteriorated during the civil war and its aftermath. But the government has to address this problem as soon as possible – expecting the likes of the Asian

Development Bank and the private sector to pick up the bill is causing intolerable delays. In this case, Cambodia very much needs to overcome its donor mentality.

The economic advantages associated with speeding up this painfully slow process are numerous. The project is expected to help solve key structural problems associated with the Cambodian economy, including logistics and energy efficiency, and will benefit key sectors such as tourism.

With the Kingdom still unable to produce its own fuel, a new international rail link provides clear advantages – rail uses significantly less fuel than road transport, meaning freight costs could be reduced substantially. Trains require roughly 40 percent less fuel than lorries, a saving that climbs even higher when considering old, less efficient road vehicles such as those commonly used in Cambodia.

In terms of trade the benefits are obvious. The new network would provide links to some of the Kingdom’s most important trade partners – China, Vietnam and Thailand. With Cambodia beginning to see large increases in its exports in recent years from a small base, this rail project could provide added impetus to the development of these industries. Furthermore, a new rail connection provides an additional transport link to key deepwater ports in Singapore and Cai Mep in southern Vietnam. Economic opportunities associated with completion of the project, therefore, also benefit industries like the garment sector, as most exports flow to these ports and on to Cambodia’s primary export markets in North America.

Given these clear benefits to the economy, why is the government not making this project an absolute priority? Instead of resorting to the type of mentality that expects others to front the capital, Cambodia needs to consider ways it could help finance the project.

Although the government has created strong GDP growth in recent years, the rail project is a reminder that key development initiatives still haven’t progressed since the end of the country’s recent turmoil. Were the CPP to address such persistent problems more efficiently, it could legitimately claim to be pushing the economy and the country in the right direction.