A company with ties to one of China’s top state-owned firms will look to
push Toll Royal Railways and its local partner Royal Group of Companies out of
a 30-year railroad concession with pledge to invest nearly US$850 million to
revamp existing lines and build an additional one.
The company, Rail Services
(Cambodia) Ltd, pitched its plan for what it calls “Kampuchea Rail” to
government officials on August 3, Chairman and Chief Executive Daryl Dealehr
said a company statement obtained by the Post.
With backing from Sino-Pacific
Construction Consultancy Co, Ltd, Rail Services, along with Hikmat Asia Sdn Bdh
of Malaysia, claimed that they were prepared to invest nearly $850 million in
Cambodia’s existing rail lines that run between Sihanoukville, Phnom Penh and
the Thai border, and build a link from the capital to Ho Chi Minh City,
Vietnam.
The Cambodian government watched
as Toll Royal cargo trains on its southern line rolled to a halt on May 1,
weeks after the Post reported that the Australian company would suspend
operations in the Kingdom.
Neither Toll or the government
have commented publicly on the matter, although local media reported that cargo
shipments would resume this month.
Rail Services yesterday in a
statement hammered on that fact, listing the numerous issues that have plagued
Toll Royal through the rehabilitation, including Toll’s failure to restart the
cargo shipments, lack of investment, and seeking concessional fee waivers.
The statement failed to mention
that the delays may have been caused by the resettlement of over 1,000
households, an issue that proved problematic for the project and garnered
international condemnation due to the government’s handling of the issue.
The statement said, “Toll Royal:
ceased existing rail services and operations in February 2012; retrenched the
majority of its workforce; has not invested in rolling stock and equipment; has
not undertaken rail infrastructure improvements supplementing the existing rail
network; advised the [Royal Cambodian Government] it was unlikely to recommence
rail operations before March 2013; and demanded that the RGC forgo concession
fees for years five through eight and half of year nine, amounting to a waiver
of revenues estimated in excess of $9.5 million.”
Rail Services’ pitch should sound
tempting to Cambodian officials, as it offers up to $850 million in foreign
direct investment after years of concessional loans from regional donors. Rail
Services said it would “at no cost to the RGC [. . .] fully finance [the
project]”.
In return, Rail Services would
operate the railway concession between Phnom Penh and Ho Chi Minh City for at
least 60 years and seek to list on the Cambodian Stock Exchange upon completion
of the Kingdom’s current rail network.
The current concession for the
northern and southern lines would be extended from 30 to 40 years for Rail
Services.
To work, either Toll Royal would
need to give up its 30-year concession or the government would need to declare
Toll in violation of its contract and push the company out.
Meanwhile, a Chinese consulting
firm has surveyed the 280-kilometre link with Vietnam; previously no company
has publicly shown interest in its development, let alone pledged up to $750 million
needed to finance it.
Rail Services’ interest in
connecting the network to Vietnam is part of its plan to “postion Cambodia as a
true-subregional transport hub”, which would require further investment on the
company’s part to create additional rail spurs, intermodal rail and freight
terminals and connections to the Special Economic Zones that can be found along
the line.
The offering includes the $90
million to shore up the northern line shortfall and complete the rail
rehabilitation; construction of a railway mechanical and technical trade school
as well as a repair facility in Bat Doeng; and investment in Sihanoukville
port, Poipet, Sisophon, Battambang, Pursat, Bat Doeng, Kampot and other
locations.
“The government is considering
the proposal. There was some interest in it. They were very polite and are
considering its elements,” said Rail Services spokesman Dealehr.
Gregory Pellechi and Don Weinland
Business & Investment Opportunities
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