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SRT keen to rake in Chatuchak market's billions

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A feud with City Hall will not slow down the State Railway of Thailand's drive to take over Chatuchak Weekend Market, as the debt-ridden state enterprise seeks to bolster its financial position.

The Chatuchak Weekend Market occupies a 68-rai plot of land belonging to the SRT. From Jan 1, 2012, the railway agency will take over the market’s management operations from the BMA.

The Bangkok Metropolitan Administration is at odds with the SRT over control of the lucrative market, which City Hall signed a lease with the railway agency to manage the 68-rai plot of land 25 years ago. With the contract set to expire at the end of this year, Transport Minister Sukumpol Suwanatat and his deputy, Pol Lt Gen Chatt Kuldiloke who oversees the SRT, have made clear their intention to run the market, starting next month.

The SRT fully realises the benefits of managing the market, whose present value is estimated at 10.5 billion baht. But a consultant firm commissioned by the railway agency projects that the SRT will bag a net income of 39 billion baht in the next 20 years. Revenue over the next two decades will rise to 54.5 billion baht, while expenses will only reach 10.5 billion baht. This plot sits in one of the prime locations of the SRT's assets and its accessibility by the BTS and MRT is the value-added factor now and even more in the future.

The railway agency officially informed the BMA in 2006 that it has no plans to give City Hall another go at operating Chatuchak market. This move was in line with the contract, which states that City Hall must be informed about any decision by the SRT regarding the contract five years before its expiration date. Since then both sides have entered several rounds of negotiation but have gone nowhere due to conditions deemed unacceptable for the SRT.

The railway agency demands a rental fee for the plot at 420 million baht a year, far higher than the BMA's offer of 79 million baht.

The BMA now pays the SRT 288 million baht a year, according to the contract which says that the rent has to progressively increase over the years.

The talks are now over, having passed the SRT-imposed deadline of Oct 31 this year, when the two agencies refused to back down from their own positions.

The conflict between the SRT and the BMA over the issue has dragged on for years, ever since the end of the contract drew near. When Abhisit Vejjajiva was in power, the prime minister sent a signal to the Transport Ministry that he wanted the BMA to continue managing Chatuchak Weekend Market, citing the readiness and experience of City Hall.

But then-transport minister Sopohn Zarum disagreed, because he was unhappy with the unusually low rental fee and the handsome profits the BMA was making from it.

One of the BMA's tactics in fighting the case is to claim that a cabinet resolution in 1979 allows City Hall to manage the market. What is intentionally missing from this argument is that the land belongs to the SRT and the BMA only "leases" it.

The contract clearly states that it has an expiration date, meaning City Hall has to return control over the plot to the owner once the contract ends.

A reason for the SRT to decide to take over the place from the BMA is that Pol Lt Gen Chatt wanted to crack down on "rogue benefits" accruing to owners from re-leasing the stalls. His information from red shirt members at the market shows that the people involved in this business, including some SRT staffs, enjoyed benefits from re-leasing stalls to the traders. The SRT has initially offered to charge rent for stalls at 3,500-4,000 baht a month once the takeover is complete. But traders are bargaining and have until Dec 20 for the issue to be finalised. The market now houses about 10,000 traders. They have to pay rent up to five figures, with a top-up fee of 2 or 3 million baht for the original contract owners.

With no sign of a compromise with the BMA, the SRT is moving another step by planning to set up Chatuchak Market Co, a subsidiary, to run the market. Its plan includes improvements to Chatuchak Weekend Market. Pol Lt Gen Chatt is even contemplating an idea to extend the business hours from weekends to seven days, with backing from ACM Sukumpol.

The SRT's decision to take the market back from the BMA should be an indicator that the railway agency will use the same strategy with other plots of land that have been leased out to other operators at low rental fees.

The SRT still has many prime assets in many locations and now the agency should seriously think about reaping full benefits from them, in order to lessen its massive debt from its core railway business.

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Guest Wednesday, 23 April 2014

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