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Australia’s Toll Holdings finalising rail agreement to refurbish lines as part of regional network, says broker

Photo by: Tracey Shelton

The agreement with Toll Holdings would see Cambodia’s rail network upgraded.

THE Cambodian government and Toll Holdings of Australia are close to signing an agreement on outsourcing the management of the state railway, said an official close to the negotiations on Wednesday.

"By the end of the [Khmer] New Year, we should have an agreement," said Paul Power, team leader at the Railway Restructuring Project for Canarail, who is brokering the deal.

Under the US$73 million proposal, 594 kilometres of Cambodia's neglected rail system would be repaired and refurbished with new sleepers and railcars and 48 kilometres of destroyed track would be replaced. The project is seen as a major step in upgrading the country's ailing freight and logistics system.

Toll Holdings would be given the concession to manage the system and collect revenues for 30 years, with payments to the government commencing in the sixth year of operation. The Cambodian government would retain ownership of the tracks after the upgrade.

Sources close to the discussions say the parties are still finalising details of risk and cost sharing.

"This deal is extremely important to this country because, until now, there has been only one mode of land transport and that's road. I think everyone appreciates the problems with congestion on Cambodia's roads," said Power.

This is part of a wider project to link Cambodia to the region.

Cambodia's rail network was built in 1929 and saw its last upgrade in the 1960s. Protracted war and conflict destroyed or damaged parts of the system from the 1970s until the 1990s.

Of the $73 million budget, $12 million would come from a 32-year Asian Development Bank (ADB) loan at 1 percent interest for the first eight years and 1.5 percent for the remainder. The Organisation of Petroleum Exporting Countries (OPEC) would provide $13 million, and the Malaysian government would supply $2.8 million in used rails. The Cambodian government would pitch in $15.2 million, according to the ADB.

Renovations are planned for the Sihanoukville-Phnom Penh stretch, which would be capable of carrying 20 tonnes of freight at a top speed of 40-50 kph, up from 15 tonnes currently. The Phnom Penh-Battambang line would also be refurbished and would carry 15 tonnes, followed by the Sisophan-Poipet stretch, which needs to be completely rebuilt.

A line would also run to the Sihanoukville Port, which businesses said would reduce cargo transport costs.

Crews started replacing the sleepers in March 2008, and the system upgrade is set to be completed in early 2011.

The ADB's external relations coordinator Chantha Kim said the railway upgrade will benefit Cambodia's rural economy and link the country to a regional rail network.

"It will allow better transport and allow products to be transported from rural areas to the cities at a much cheaper price," he said. "This is part of a wider project to link Cambodia to the region through the Singapore to Kunming rail project," he said.

The Singapore-Kunming network will link up Asia's railways in a system stretching from Singapore to southern China, the ADB said.