Improvements to Southeast Asia’s road and rail networks are increasing the reliability of international ground shipping services in the region. In addition, supply chains have had to be reexamined amid lasting maritime shipping disruptions during the pandemic.
Covid-19 outbreaks in Southeast Asia have meant that factory workers were unable to come to work and parts could not be delivered, causing halts to production lines.
About 70km north of Bangkok at Nippon Express Holdings Inc’s local subsidiary, workers were busy transshipping cargo bound for countries including Cambodia, Laos and Vietnam.
Each day at the facility, 30-40 trucks come and go. The major logistics company has conducted cross-border ground shipping since the 1990s. Many of the cargo owners are Japanese manufacturers.
“Recently, we have received an increasing number of requests to transport vibration-averse precision equipment,” said a Nippon Express employee in charge.
Roads on the Malay Peninsula connecting Thailand to Malaysia and Singapore have long been maintained well. However, traffic conditions in Indochina had been poor, with even some of major roads having collapsed up to a decade or so ago.
In recent years, however, support including from Japan’s Official Development Assistance (ODA) has helped to rapidly develop roads, including the East-West Economic Corridor linking Vietnam and Myanmar, the North-South Economic Corridor linking China and Thailand and the Southern Economic Corridor connecting Cambodia, Thailand and Vietnam.
In 2020, the first expressway in Laos opened. “The road network has improved dramatically,” said a member of a ground transport association in Thailand. “Domestic and international ground shipping times have gotten surprisingly short.”
Although Thailand’s exports and imports are still mainly transported by sea, exports via land routes are growing significantly.
Despite the resumption of economic activities overseas, an increase in novel coronavirus infections in the US has caused a shortage of dockworkers there. Soaring maritime shipping rates for containers, including those for Asia, and delivery delays have prompted shippers to review their supply chains.
“We have tried to send goods from Singapore to Thailand, but are having difficulty in making bookings for ocean shipping, so we began considering ground transportation via Malaysia,” said a Japanese expatriate of a trade company in Southeast Asia.
Taro Hiyakawa, chief of Mekong 5 Division at Mizuho Bank Ltd’s Bangkok Branch, said: “In the manufacturing industry, failure to deliver a single component can be fatal to continued production. Many companies are looking for ‘reliable delivery’.”
Meanwhile, the opening of new railroads has helped boost the use of freight trains. In early December last year, a high-speed railway started operations connecting Kunming in China’s south and Vientiane.
The state-run news agency of Laos reported in late January that more than 100,000 tonnes of freight crossed the China-Laos border using this railway. The high-speed train line was built as part of China’s Belt and Road Initiative (BRI) to create a huge economic zone.
There are precedents, however, for the increasing use of China’s rail freight transport, such as the China-Europe Rail Service that has connected China and Europe since 2011, attracting many users including multinational companies.
As for the Kunming-Vientiane railway, a series of freight trains depart from various parts of China to Laos, and Thailand seeks to use the railway to export its agricultural products to the huge market of China.
“Concerns aside, the potential of this railway from a business perspective is huge and could change regional logistics.” said a logistics industry expert.
Regarding rail freight in Thailand, there is also a project to double-track existing railway lines to serve logistics companies.
The Regional Comprehensive Economic Partnership (RCEP) came into effect in January as a framework for large-scale economic partnerships among 15 countries: the 10 ASEAN nations, Japan, China, South Korea, Australia and New Zealand.
RCEP includes provisions on the promotion of investment and protection of intellectual property, as well as the reduction and elimination of tariffs.
ASEAN members Singapore and Vietnam are also part of the Trans-Pacific Partnership trade deal, which includes Japan. Against this backdrop, a relocation of factories is expected.
In Southeast Asia, the economic size of e-commerce has been expanding rapidly and demand for cargo transportation is expected to rise further. Under the circumstances, the local logistics industry has introduced high-quality Japanese-style transport services.
One of them is cold chain logistics whereby goods are kept at low temperatures during the entire shipping process. When transporting fresh food and medical supplies, it is necessary to have a distribution network that maintains low temperatures, including during transshipment.
Many cargo shipments in Southeast Asia used to be handled under poor temperature control. The Japanese government has developed guidelines and human resources to improve transportation technology in Southeast Asia.
The selling point for an increasing number of local logistics companies is their high transportation quality.
Konoike Transport Co offers cold chain logistics in countries like Thailand and Vietnam, transporting ice cream and processed foods that are made by local or Japanese companies. To differentiate itself from rivals, Konoike has acquired high standards required for transportation of pharmaceuticals.
Expectations are also growing for Japan’s transportation know-how on railways. In September, Japan Freight Railway Co opened its first overseas office in Bangkok, hoping for high demand in railway transportation of hazardous materials. The firm plans to conduct field surveys with a view toward starting business there.
THE YOMIURI SHIMBUN/ASIA NEWS NETWORK
