Toll Group has informed the Cambodian government that it will suspend all railway operations and lay off half of its Cambodian staff at the end of the month, according to a source familiar with the situation.

{jathumbnail}

The Australian logistics firm, which in partnership with Royal Group of Companies holds a 30-year lease to operate the Kingdom’s national railway, reportedly told the government of its plan last Friday, Paul Power, a consultant to the Ministry of Public Works and Transportation (MPWT), told the Post yesterday.

“The major reason is the rehabilitation [of the railway] is well behind schedule. And Toll believes, rightly or wrongly, the schedule of rehabilitation doesn’t meet with their business objectives,” he said by phone, adding that discussions between Toll and the Cambodian government had been ongoing since last summer.

Power presently works as project coordinator for MPWT, upgrading the ministry’s Railway Department.

The department is tasked with, among other duties, the implementation of the concession agreement between the government and Toll Royal Railway, the Toll Group-Royal Group joint venture.

“Suspension of service and employees takes effect March 31,” Power said in a follow-up email yesterday.

Sixty Cambodians out of a total staff of 120 will be laid off on a re-call basis, he said, “with only one expat out of four remaining as far as I know”.

Insiders have said recently that Toll Group had grown frustrated with the often-delayed rehabilitation of the Cambodian national railway, especially the southern line that connects Phnom Penh with Sihanoukville port, and planned to withdraw from the project.

Toll Group officials in Australia declined to comment on a report in the Australian press last week to that effect, but Toll officials in Cambodia said a statement on the status of the project was now being drafted for release.

Toll Group has not yet issued that statement.

When asked yesterday about its reported suspension notice to the government, Toll Group spokesman Andrew Ethell in Melbourne and Toll Royal CEO David Kerr again declined to comment.

The Post reached Touch Chankosal, the MPWT secretary of state in charge of the rail project, multiple times yesterday evening by phone, but he said he was in a meeting and declined to comment.

Two spokesmen at the Council of Ministers claimed they still had no knowledge of Toll’s announcement that it would suspend operations.

Depite Toll’s complaints, the rehabilitation process has seen “marked improvements” of late, Philip Bulmer, deputy project manager for the southern line with Nippon Koei, said.

Nippon Koei is a railway engineering firm also working on the project.

Sinopacific Construction Corp, which is registered in Vietnam but has roots in Taiwan and mainland China, has “recently mobilised significant resources” to jump-start the rebuilding, he said.

SPCC is in a joint venture with France’s TSO to restore the railway.

“Everybody’s working hard now to attain limited commercial operation by October of this year,” Bulmer said of the southern line.

The southern line was originally projected for completion in late 2010, but was later pushed back to May 2011.

Full completion is now expected in January next year, Bulmer said.

He blamed the rehabilitation delays on “contractual issues”, but declined to comment further.

If Toll Group aimed to prompt faster rehabilitation by suspending operations, the company may have made a mistake, MPWT consultant Power said.

Toll is presently leasing its trains to TSO to carry construction material and equipment to work sites.

But with operations now coming to a halt, the rebuilding will most likely move even more slowly, Power said.

“I don’t think it’s a good strategy, but I’m not an investor,” he said of Toll’s decision.

“We don’t have the trains to complete the rehab.”

Power called the status of the rail project an “uncertain situation”, saying “the government needs to measure the impact of Toll’s suspension of service and consider its options”.