Malaysia eyes trade boost with China and Thailand via new inland port and rail links

When completed by the third quarter of 2025, the Perlis Inland Port (PIP) is expected to handle up to 300,000 twenty-foot equivalent units (TEUs) of cargo annually, shoring up the 150,000 TEU capacity of the existing terminal at Padang Besar, a township that sits on the border with southern Thailand and has both road and rail checkpoints.

The plan is to align the new inland port with two rail lines, one of them the existing Padang Besar-to-Penang Port link.

The other is a potential new route via the upcoming East Coast Rail Link (ECRL) in Kelantan state capital Kota Bharu via Sungai Golok.

Both these routes could link Malaysia to China’s Pan-Asian Railway network. 

These rail routes, which Malaysia hopes will eventually connect to Kunming, China, are expected to strengthen Kuala Lumpur’s role in facilitating trade across the region. The cargo transported from Thailand includes timber, sawn wood, rubber and latex.

The ECRL project, costing RM50.27 billion, is being built by a Chinese firm with loans from China’s Exim Bank. Slated to be completed by 2028, the 665km line will connect Malaysia’s Port Klang in Selangor to the east coast states of Pahang, Terengganu and Kelantan.

“PIP will play an important role in the connectivity of the country’s main rail network with international rail services such as the Pan-Asian Railway and Asian Express, which will open new opportunities for trade and economic cooperation between Malaysia, Thailand, Laos and China,” said Transport Minister Anthony Loke on March 24.

He was in Padang Besar to witness the signing of an operations and maintenance agreement between state rail company Keretapi Tanah Melayu Berhad and PIP.

An inland port is a transport hub located inland where cargo is transferred between different transport modes, linking seaports with regional areas.

The Pan-Asian Railway is a proposed network connecting multiple Asian countries across Southeast Asia, East Asia and South Asia. The Asean Express is a freight rail route connecting Malaysia, Thailand, Laos and China.

The new inland port is also aimed at easing congestion at Malaysia’s Padang Besar cargo terminal, which has almost reached its capacity, Mr Loke said. The number of containers handled at Padang Besar rose by 21 per cent in 2024 against the previous year, reaching almost 80 per cent of its 150,000-TEU capacity.

“Today’s event is an important step in our efforts to strengthen the transport infrastructure, particularly the rail and logistics sectors. This agreement also shows the government’s commitment to developing Perlis as a transport hub in northern Peninsular Malaysia,” Loke said. 

The port is being developed by Mutiara Perlis, a joint venture between the private company Mutiara Infra and the state government of Perlis.

Malaysia’s federal government is contributing RM327.45 million for the development of key infrastructure, including a railway spur line and flyovers. The PIP is expected to create over 500 local jobs.

Padang Besar is one of several land crossings between Malaysia and Thailand and handles containers from southern Thailand heading to the Penang and Klang ports using cargo trains.

Lam Choong Wah, a senior lecturer at the Department of International and Strategic Studies, University of Malaya, who joined the minister’s trip to Padang Besar, told The Straits Times that while Malaysia is keen to implement the Pan-Asian Railway linkage, the plan has to take into account under-investment, and security challenges in southern Thailand, where its predominantly Malay-Muslim population has been fighting for independence for decades.

He noted that Bangkok has been reluctant to invest in deep-south Thailand due to security challenges. “However, the continued poverty and instability in southern Thailand will make long-term security and stability difficult to achieve without investment.”

Malaysia is hoping to achieve its target of US$30 billion (S$40.2 billion) in bilateral trade with Thailand by 2027, compared with US$24.8 billion in 2023.

China has been Malaysia’s top trading partner for the past 16 years, with 2024’s total trade valued at RM484.12 billion.

Loke on June 10, 2024 said his ministry was exploring the possibility of extending the ECRL to join Thailand’s rail network, “paving the way for the ECRL to be part of the Pan-Asian rail network that can link Malaysia with China”.

On June 19, Chinese Premier Li Qiang said China is willing to study a plan to connect the rail link to other China-backed railway projects in Laos and Thailand. He said the proposal would make the central line of a proposed Pan-Asia Railway, running from Kunming in China to Singapore, a reality.

Additional reporting by Lu Wei Hoong.

Hazlin Hassan is a Malaysia correspondent at The Straits Times.