Malaysia’s New Inland Port Aims to Boost Regional Trade with China and Thailand

KUALA LUMPUR – Malaysia has embarked on an ambitious project to construct a new inland port in northern Perlis state, with a price tag of 492 million Malaysian Ringgit (US$104 million as of May 24, 2025), aiming to enhance trade links with China and Thailand. Announced as part of a broader strategy to strengthen regional connectivity through railway networks, the Perlis Inland Port (PIP) is set to transform Malaysia’s logistics landscape by the third quarter of 2025, potentially positioning the country as a pivotal hub in Southeast Asia’s trade corridors.

A Strategic Push for Connectivity

The Perlis Inland Port, located near Padang Besar—a border township with Thailand—is designed to handle up to 300,000 twenty-foot equivalent units (TEUs) of cargo annually. This capacity will significantly bolster the existing terminal at Padang Besar, which is currently nearing its limit of 150,000 TEUs per year. According to official figures, container traffic at Padang Besar surged by 21 percent in 2024, highlighting the urgent need for expanded infrastructure.

Transport Minister Anthony Loke, who witnessed the signing of an operations and maintenance agreement between state rail company Keretapi Tanah Melayu Berhad (KTMB) and PIP on March 24, 2025, emphasized the project’s importance. “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 Asean Express, which will open new opportunities for trade and economic cooperation between Malaysia, Thailand, Laos, and China” he stated during the event in Padang Besar.

The inland port will integrate with two key rail lines: the existing Padang Besar-to-Penang Port link and a proposed route connecting to the East Coast Rail Link (ECRL) in Kelantan state via Sungai Golok. These connections are envisioned as critical arteries linking Malaysia to the ambitious Pan-Asian Railway network, a proposed system spanning Southeast Asia, East Asia, and South Asia, with an ultimate goal of connecting Kunming in China to Singapore.

Economic Ambitions and Regional Trade Goals

Malaysia’s investment in PIP reflects its broader economic aspirations to deepen trade ties with major partners. China has been Malaysia’s top trading partner for 16 consecutive years, with bilateral trade valued at 484.12 billion Malaysian Ringgit (US$102 billion) in 2024. Meanwhile, Kuala Lumpur aims to achieve a bilateral trade target of US$30 billion with Thailand by 2027, up from US$24.8 billion in 2023. The cargo expected to flow through PIP includes key Thai exports such as timber, sawn wood, rubber, and latex, underscoring the port’s role in facilitating cross-border commerce.

The development of PIP is also tied to the 665-kilometer East Coast Rail Link, a 50.27 billion Malaysian Ringgit (US$10.6 billion) project funded by loans from China’s Exim Bank and constructed by a Chinese firm. Slated for completion by 2028, the ECRL will connect Port Klang in Selangor to Malaysia’s east coast states of Pahang, Terengganu, and Kelantan. In June 2024, Transport Minister Loke indicated that his ministry was exploring options to extend the ECRL into Thailand’s rail network, a move that could further integrate Malaysia into the Pan-Asian rail framework. Chinese Premier Li Qiang, during a visit on June 19, 2024, expressed Beijing’s willingness to explore connecting the ECRL with other China-backed railway projects in Laos and Thailand, potentially realizing the central line of the Pan-Asian Railway.

Local Impact and Infrastructure Development

The Perlis Inland Port is a collaborative effort involving Mutiara Perlis, a joint venture between private firm Mutiara Infra and the Perlis state government. The federal government is contributing 327.45 million Malaysian Ringgit (US$69 million) to develop critical infrastructure, including a railway spur line and flyovers. Beyond its economic implications, the project is expected to create over 500 local jobs, providing a significant boost to the northern region of Peninsular Malaysia.

Padang Besar, one of several land crossings between Malaysia and Thailand, already serves as a conduit for containers from southern Thailand destined for Penang and Klang ports via cargo trains. The new inland port aims to alleviate congestion at the existing Padang Besar terminal, which is operating at nearly 80 percent capacity. As Mr. Loke noted during the signing ceremony, “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.”

Challenges and Regional Complexities

While the vision for PIP and its integration into the Pan-Asian Railway is promising, experts caution that significant hurdles remain. Dr. Lam Choong Wah, a senior lecturer at the Department of International and Strategic Studies, University of Malaya, highlighted potential obstacles during a visit to Padang Besar alongside the transport minister. He pointed to under-investment and security challenges in southern Thailand, where a predominantly Malay-Muslim population has been engaged in a decades-long struggle for independence. “Bangkok has been reluctant to invest in deep-south Thailand due to security challenges” Dr. Lam told local media. He added that persistent poverty and instability in the region could undermine long-term security and stability without substantial investment.

These concerns raise questions about the feasibility of seamless rail connectivity through southern Thailand, a critical segment of the proposed route linking Malaysia to China via the Pan-Asian network. If security or political issues delay infrastructure development on the Thai side, Malaysia’s ambitions for PIP could face setbacks, even if the port itself is completed on schedule. Analysts suggest that diplomatic efforts and regional cooperation will be essential to address these challenges, particularly in fostering joint investment and stability along border areas.

Broader Implications for Southeast Asia

The Perlis Inland Port project is emblematic of Malaysia’s strategic positioning within Southeast Asia’s evolving economic landscape. By aligning its infrastructure with regional initiatives like the Pan-Asian Railway and Asean Express, Kuala Lumpur seeks to enhance its role as a logistics and trade facilitator. The integration of rail networks could reduce transportation costs and transit times for goods moving between China, Thailand, Laos, and Malaysia, potentially reshaping supply chains across the region.

Moreover, the project underscores the growing influence of Chinese investment in Southeast Asian infrastructure. The ECRL, funded and built by Chinese entities, is a flagship project under Beijing’s Belt and Road Initiative, which aims to enhance global trade routes. While this partnership offers Malaysia access to capital and expertise, it also raises questions about debt sustainability and geopolitical implications. Some observers note that heavy reliance on Chinese loans, as seen with the ECRL’s financing, could pose long-term financial risks if economic returns fall short of expectations.

At the same time, Malaysia’s outreach to Thailand through projects like PIP signals a commitment to strengthening Asean cooperation. The push to increase bilateral trade with Bangkok aligns with broader regional goals of economic integration, even as political and security dynamics in southern Thailand complicate the path forward. Balancing these relationships—between China’s economic might, Thailand’s strategic proximity, and Malaysia’s own national interests—will be critical to the success of PIP and related initiatives.

Looking Ahead

As the Perlis Inland Port nears completion in late 2025, its impact on Malaysia’s economy and regional trade networks will come under scrutiny. Will it deliver the promised boost to cargo capacity and connectivity, or will regional challenges temper its potential? For now, the project stands as a bold statement of Kuala Lumpur’s intent to carve out a larger role in Southeast Asia’s trade corridors, with ripple effects that could reshape economic ties from Kunming to Singapore. In Perlis, a quiet northern state, the hum of construction signals a future where rail lines and cargo containers may redefine Malaysia’s place on the global stage.