Why railways are Southeast Asia’s answer to decarbonisation and growth

Shifting more freight traffic from road to rail is a major decarbonisation pathway for Southeast Asia, but major hurdles stand in the way
Harmonising standards, securing investment, collective bargaining with suppliers, acquiring land and navigating geopolitical tensions must all be addressed

Yuen Yoong LeongandWing Thye Woo

Published: 9:30am, 11 Nov 2023

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Greenhouse gas emissions from transport have more than doubled since 1970 and are now the second-largest contributors to climate change. Countries must find a way to decouple demand for transport with carbon dioxide emissions.

Rail transports about 7 per cent of global passengers and 6 per cent of global freight but accounts for only around 1 per cent of transport emissions – despite diesel providing 53 per cent of the energy that powers the global rail industry.

Road freight is the biggest source of transport-related carbon emissions. Thus, pushing more freight to rail should be a major decarbonisation pathway, especially in Southeast Asia, one of the world’s fastest-growing regions.

Rail transport’s full potential emerges when networks in different countries harmonise interoperability and standards. However, rail networks in Southeast Asia are fragmented and operate under different standards, making it difficult and time-consuming to transport goods across borders.

The region’s geography also makes building railways difficult and expensive. This is one reason Southeast Asian countries have prioritised infrastructure spending on projects such as roads that are cheaper and have a faster return on investment.

Despite this, the new China-Laos railway, which links Vientiane and Kunming, has opened the door to catalysing Southeast Asia’s rail connectivity. This railway cuts the cost of transport through Laos by 30 to 40 per cent compared to truck transport. Transforming Laos from landlocked to “land-linked” is expected to boost freight transport, agriculture trade and tourism.

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There is also potential for the Belt and Road Initiative to link China’s Yunnan province to Singapore via high speed trains through Laos, Thailand and Malaysia. It is natural that Southeast Asia’s rail technology is influenced by the improvements seen in neighbouring China. This is beneficial for regional rail integration because track gauges and other railway standards need to be harmonised.

If Southeast Asian countries were to collectively purchase Chinese rail technology, it would increase their bargaining power for better prices, terms and ability to require the adaptation of Chinese rail technology to better suit the conditions of the region. This would also help harmonise business operations, operational services and information processes.

Beyond the technical and institutional capabilities required for Southeast Asian countries to expand and interconnect their rail networks, increased financing is needed. Most rail projects are cash-hungry and revenue-poor. Investment in the rail industry can struggle to get good returns as rail assets are expensive to procure, build, maintain and overhaul.

Issues around land acquisition can also cause significant delays to rail projects. Liberalising land acquisition is key to encouraging private investment in railways so land can be purchased or leased directly from landowners without going through government bureaucracy.

The right to use the land over or under railways is a valuable asset which can be used to finance rail projects. Additionally, land value capture in railway investment requires sophisticated taxation so the windfall gain of landowners from a railway investment can be used to offset the investment cost and fund other important public services.

Being able to capture the economic value of improved access and reduced pollution, and redistribute those benefits, can make the rail sector more attractive to investors. Private sector investment, particularly from multilateral development banks, is key for accelerating and expanding rail development and connectivity.

Geopolitical tensions could affect rail connectivity in Southeast Asia. Leaders would be wise to think collectively and strategise for high-quality, sustainable transport infrastructure and services to reduce greenhouse gas emissions, boost economic growth and improve connectivity between cities and rural areas. This is a far more attractive future than being divided by superpowers that seek political allegiance in return for foreign aid and investment.

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The UN climate change conference (COP28) in Dubai, which begins later this month, offers an opportunity to increase political will and financing for rail freight as a solution to climate change and economic development.

Potential approaches include raising awareness of the benefits of rail freight, highlighting successful examples of rail freight in other regions such as Europe and China, securing commitments from government and businesses to invest in rail freight and establishing a Southeast Asia rail freight fund.

In addition to more investment, greater international support is needed in policies, organisations and capacities for sustainable transport. Dialogue is key to ensure that investment and capacity-building support future policies rather than past priorities.

Yuen Yoong Leong is director of sustainability studies at the UN Sustainable Development Solutions Network and a professor at Sunway University

Wing Thye Woo is vice-president for Asia at the UN Sustainable Development Solutions Network, a research professor at Sunway University and visiting professor at the University of Malaya

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