The Kingdom of Thailand has made quite an investment into efforts to reduce traffic congestion on the country's roadways and increase the flow of intermodal traffic on its rail system. We were hired by The State Railroad of Thailand (SRT) in 1997 to conduct a study of its rail and port network. SRT believed that its freight handling and movement operations could be improved significantly through improvement of its rail system and consolidation and containerization of domestic freight at strategically located loading/ distribution centers (rail-based inland container depots).

For SRT, development of these terminals would foster greater efficiency, productivity and competitiveness. The objectives of this study were for us to:

• Survey Thailand's market potential for containerized rail freight
  
  
• Examine existing rail network in terms of capacity and facilities
  
  
• Recommend improvements and investments that will accommodate anticipated cargo handling and rail traffic in order of priority.

In addition to these tasks, we developed the desk study for the sponsoring agency, the U.S. Trade and Development Agency, which had stated that "...the focus needs to be on customers, competition, costs and profitability."

Scope of Our Work

The study scope consisted of the four major efforts described below.

Market Analysis. We performed a review of existing studies and then conducted a survey of the potential intermodal market through interviews with a significant number of shippers, freight forwarders, trucking firms and other governmental departments. When these were completed, we conducted an analysis of freight movements and prepared estimates of the amount of freight likely to be containerized and the amount of those containers likely to be transported by the SRT. Next, we developed market projections for both the international (port-related) and domestic container traffic. Our final task in this effort was to prepare a market development plan.

Terminal Location and Conceptual Design. Next, we conducted a survey of existing stations, yards and other potential sites. Our aim was to select the most suitable sites for container terminals and then rank the proposed sites in terms of potential for generating traffic, proximity to highway connections, and capital costs. Our next step was to develop conceptual designs for the proposed terminals and prepare equipment requirements for each.

It is important to note that two very different types of terminals were contemplated in the study inland container depots and container terminals. In general, an inland container depot was a major terminal that would act as an extension of the main port of Laem Chanbang for the Bangkok area. A container terminal was a smaller facility that would be located in a province and would serve as a collection and distribution terminal for container traffic in that region.

Railroad Operational Analysis. Our third major issue was to prepare an SRT operating plan. We included recommendations of service lanes and rolling stock requirements, estimation of capital and operating costs, and recommendations of options for participation by the private sector.

Economic and Financial Analysis. This issue included a recommendation for a rail tariff structure, a comparison of socio-economic costs and benefits and an assessment of financial viability of the new inland container depots and container terminals. We also prepared pro forma financial statements for each of the new terminals.

PB was the prime consultant for the assignment. Our team included Booz Allen & Hamilton for the financial analyses, and Jordan Woodman Dobson for the conceptual designs of the intermodal terminals. Frank Teifeld from PB performed the railroad operational analysis and Ira Hirschman developed the economic analysis.

Summary and Recommendations

Major Issues. Despite the fact that the SRT does not enjoy the geographic advantages of other rail systems (transportation distances in Thailand are relatively short), we concluded that there were considerable opportunities for SRT to increase its intermodal market share. We recommended, however, that the following issues be addressed:

• Historical Investment. Investment by the government of Thailand in the transportation infrastructure has been and continues to be focused overwhelmingly on the highway network.
  
  
• Infrastructure. The SRT system has a hub-and-spoke design that reaches most major areas of the country but does not provide adequate coverage into many of the newly industrialized areas, such as the eastern seaboard. The overall capacity of the railroad is low, given that most of the system consists of single-track rail lines with outdated signal systems. In addition, the railroad presently serves its customers only through sidings at its stations and does not have any direct access into industrial estates or the manufacturing plants.
  
  
• Competitors. The dominant carrier of freight in Thailand is the trucking industry, with most of the trucks being ten wheelers. The trucking firms provide generally reliable service at relatively low cost, with next day delivery being the norm throughout the country.
  
  
• Perceptions of Shippers and Receivers. In general, the shippers we interviewed did not view the railroad as a serious competitor for transporting manufactured goods, probably the largest market for intermodal service.

Market Projections. In addition to the factors above needing to be addressed, we recommended that SRT take aggressive and focused actions in order to take advantage of the opportunities to increase its intermodal market share. Findings from our market analysis resulted in the following conclusions:

• The largest rail intermodal facility in Thailand, Lat Krabang, will reach capacity by 2006. A doubling of its capacity will be required before that time, and there will be the need to construct a second similar facility in the Bangkok area (Ongkharak) by 2010. Demand after 2010 would be shared between these two facilities.
  
  
• Traffic demand at the smaller container terminals outside of the Bangkok area will be low in the early years but will grow as the use of containers in the provinces increases. The projected market share for the new container terminals will be highly dependent on the implementation of reliable next-day service by SRT from each of these facilities.

Market Development Plan. Our team wrote a market development plan that summarized the actions needed to be taken by the SRT in order to develop a significant intermodal market share. The plan made recommendations in the four following major areas:

• Infrastructure. Development of the required infrastructure is of highest importance to serving the intermodal market adequately. We recommended improvements to the existing Lat Krabang inland container depot and provided conceptual plans for expanding it, for a second inland container depot at Ongkharak, and for container terminals at seven locations in the provinces. The market development plan also included information regarding the limitations of the existing rail capacity, primarily for the LC Port to Lat Krabang inland container depot corridor.
  
  
• Reliable Service. Establishing reliable service to the new container terminals is critical if SRT is to change perceptions and gain market share. Once competitive prices are established by SRT, no consideration is more important to potential shippers than reliable service.
  
  
• Competitive Pricing. SRT's pricing structure would have to be set by the market rates. These rates have been established by the truckers through their existing market share and their position as the most competitive transportation mode in Thailand.
  
  
• Customer Base. Steps to expand its customer base are among the most important actions to be taken by the SRT, given the current perceptions of shippers. Customer forums were recommended as an important method for the SRT to develop a better understanding of the needs of each particular industry and to gather the background information needed to develop a marketing strategy for each industry or firm.

The market projections for both international and domestic traffic show a significant increase over the next 20 years, but this potential increase depends on the SRT implementing a market development plan that entails serious changes, as discussed above.

A presentation was made to the senior managers of the SRT at the conclusion of the study, and the results were well received. The economic downturn in Asia, which started in 1997, impacted on the results of the analysis, but the SRT did proceed with some of the recommended actions.

This project illustrated the importance of having a high quality team and disciplined project manager. We had limited funding on this international project and limited time in the country, so we had no time for the learning curve.