High-speed rail (HSR) developments in Southeast Asia have been gaining momentum, offering a promising future for the region’s transportation landscape. With more than 6,660 km of high-speed lines in various stages of development, the region is a front-runner in the large-scale rail market.
In October 2023, the region’s first HSR line, the 142-km-long Jakarta–Bandung line, commenced passenger service in Indonesia. However, the construction of the line overshot initial cost estimates by USD2 billion and project delivery was delayed by four years. This highlights the challenges faced by countries in the region in implementing and completing such massive and ambitious transport projects. Additionally, the cost-benefit tradeoff is much higher in the shorter run, as seen in the case of Indonesia’s new HSR line, which is projected to turn profitable after four decades.
Many planned projects in Southeast Asia have been cancelled due to rising costs and long completion times. However, the recent revival of the Kuala Lumpur–Singapore HSR line, which previously had been shelved due to its high price tag, spells good news for the region. Projects lacking government support can benefit from private participation, as in the case of Ho Chi Minh City’s HSR line.
However, the increasing dependence on aid from the Government of China for funding HSR projects in Southeast Asia is leading to mounting concerns. Governments in the region can take certain steps to safeguard their interests. For instance, while Indonesia’s new HSR line was largely funded through official development assistance (ODA) from the Government of China, the government mitigated the effect on the nation’s sovereignty and economic independence by ensuring that the state budget was not used as collateral for the project.
With most upcoming HSR projects still in the early stages, the region provides ample opportunities for interested investors and suppliers.
Projects in the pipeline
Southeast Asian countries have been actively pursuing HSR projects to increase connectivity, stimulate economic growth, and reduce traffic congestion. Some notable projects are the Kuala Lumpur–Singapore HSR, Thailand’s Bangkok–Nong Khai HSR, and Indonesia’s Jakarta–Bandung HSR. The upcoming cross-border HSR line between Singapore and Malaysia presents opportunities for increased integration within the region.
Figure 1 shows the length of HSR projects in the pipeline across Southeast Asia.
Figure 1: Length of upcoming HSR lines in the Southeast Asia region
*Length to be finalised after completion of a feasibility study
Table 1 lists some of the HSR projects in the pipeline in Southeast Asian countries.
Philippines
The Philippines is prioritising the development of its conventional railway network. This includes projects like the North-South Commuter Railway (NSCR) (also known as the Clark–Calamba Railway), Metro Rail Transit Line 7 (MRT 7), running from Bulacan to Quezon City, and the Metro Manila Subway. These projects are aimed at improving mass transit capacity and efficiency within Metro Manila and at connecting major cities in Luzon with slower but more affordable train services.
Role of China
The Government of China has emerged as a key player in the HSR sector in Southeast Asia, offering technological know-how, financing, and expertise. China-based companies have been involved in various HSR projects across the region, providing rolling stock, construction services, and operational expertise. For instance, the recently completed Jakarta–Bandung HSR line was backed by the Government of China under its Belt and Road Initiative (BRI).
China’s influence is expected to deepen because many countries in the region stand to benefit through the BRI. However, China’s growing involvement has raised concerns among stakeholders regarding debt sustainability, project transparency, and geopolitical influence. There are worries that despite the favourable lending conditions offered by China, heavy borrowing can lead to debt traps, limiting the financial flexibility and independence of recipient nations.
Moreover, lending rates offered by China might not always be favourable. For example, the loan for Indonesia’s HSR line carried a 3.7 to 3.8 per cent interest rate, higher than the 0.1 per cent offered by the Government of Japan.
Balancing the benefits of ODA from the Government of China with the need to safeguard national interests poses a complex dilemma for Southeast Asian governments.
While the region is also dependent on financial and technical support from the Government of Japan and Japan-based companies, Japan’s involvement in HSR projects has been relatively limited.
Going forward, better financing terms as well as a more proactive approach to securing contracts and forming partnerships will be key in diversifying Southeast Asia’s HSR market.
Challenges
Despite promising prospects, HSR projects in Southeast Asia face various challenges. These include securing funding for large-scale infrastructure investments, addressing land acquisition issues, navigating complex regulatory frameworks, and ensuring that projects remain economically viable in the long term. Additionally, geopolitical tensions and environmental concerns pose significant hurdles to project implementation.
Over the years, many planned HSR projects have been cancelled due to financial constraints. Considering the long gestation period of these projects coupled with their high costs, securing reliable funding is a roadblock. Recently, the Government of Malaysia announced that the Kuala Lumpur–Singapore HSR will be built using solely private funding. However, many have questioned the private sector’s ability to raise the required funds.
The projected low passenger volume will also make loan repayment a challenge for the project.
Moreover, once operational, farebox revenue will not be enough to cover operating costs, and therefore the operator will require a subsidy from the government.
Many ongoing projects are also facing problems with land acquisition, which has caused significant delays in the implementation of the Jakarta–Bandung and the Bangkok–Nong Khai HSR lines.
Overcoming these challenges requires the governments of the concerned countries to explore innovative financing mechanisms such as public-private partnerships (PPPs) and multilateral development bank funding and to streamline their regulatory processes.
Looking forward
The future of HSR in Southeast Asia hinges on addressing these challenges promptly and effectively. Governments need to foster collaboration among stakeholders, streamline regulatory processes, and ensure transparent project management to mitigate risks and facilitate project implementation and success. Exploring and adopting innovative financing mechanisms such as PPPs and multilateral development bank funding are key in addressing funding issues affecting these projects.
In addition, diversifying partnerships and embracing innovative financing mechanisms can help reduce dependency on any single country or source of funding.
Conclusion
Southeast Asia’s HSR market is poised for growth, driven by increasing demand for cheap, efficient, accessible, and reliable transportation. While challenges abound, strategic planning, collaboration, and innovation can pave the way for successful project implementation. As the region moves forward, balancing economic development with environmental sustainability and geopolitical considerations will be essential in realising the full potential of HSR.
