Rail Opportunities In South East Asia

The market for rail in South East Asia is opening up, with many ambitious projects on the market and strong support for public private partnerships (PPPs) and private finance.

Indonesia, Philippines, Malaysia, Thailand, Vietnam and Myanmar, in particular, have some of the strongest rail pipelines in the region. The most active being Indonesia (13 rail projects proposed and in procurement), Philippines (five projects) and Malaysia (four projects), where rapid urbanisation has put pressure on existing infrastructure and the improvement of the transport sector is a priority. In the case of Indonesia, private and PPP-based finance is expected to finance up to 70 per cent of the cost of such improvements over the next five years.

The most common projects in the region - both in terms of PPPs and normal procurement - are freight railways and commuter rail systems such as light rail and high-speed lines. The most expensive projects are in Indonesia: the Jakarta to Bandung airport rail link (US$6.1 billion) and the Bukit Asam Transpacific Railway connecting various coal mines to Lampung port (US$4.8 billion) to name two. High-speed rail links are also planned between Thailand and China through Laos, and Malaysia and Singapore. The former could cost up to US$25 billion.

A short summary on each of the countries is below.

Indonesia: Infrastructure development is high on the government's agenda and a number of large PPP projects have come to market, but none so far have reached financial close. Intra-governmental disputes and land acquisition problems have also been known to delay or stall projects. There is a relatively strong legal framework for PPPs and a dedicated PPP unit (Bappenas) which selects and oversees projects. As of April 2012, there were 12 tendered projects, 26 potential priority projects and 29 potential projects overall - most of these are in the transport and utilities sectors. Notable rail projects include the Kalimantan coal railway project (US$2 billion), Soekarno Hatta Airport rail link (US$1.1 billion), Jakarta-Bandung railway (US$6.1 billion), PT MRT Jakarta and Jakarta Monorail.

Philippines: This is one of the most active countries for deals in the Asia Pacific region. The overall legal framework is good, as PPPs have been used in the water sector (in some form) since the late 1980s. Transport PPPs rank highly on the current government's strategy, as rapid urbanisation has put pressure on existing infrastructure. There is a...