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Thailand’s Kra Canal: Game-Changer Waiting to Happen

Posted by PortVision on Sep 20, 2017 6:07:00 AM

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Building a canal across Thailand’s Kra Isthmus to connect the Andaman Sea in the Indian Ocean to the South China Sea isn’t a new idea. In fact, it’s been around since the 17th century, when a king in the region requested a report on the feasibility of the project. The notion resurfaced two centuries later, when Ferdinand de Lesseps—the “Father of the Suez Canal”—expressed support for such a project.

It’s easy to see why the notion has been popular. Viewed as the Asian equivalent to the Suez or Panama canals, the Kra Canal would offer shippers an alternative to the narrow Malacca Strait and allow them to avoid that route’s growing congestion and piracy problems. By providing a more direct path to the South China Sea, the Kra Canal would significantly reduce voyage distances and time, and save shippers money. Bunker savings for a 100,000 dwt (deadweight) oil tanker, for instance, could be as much as $350,000 per trip, according to some estimates.

But in spite of influential people through the ages saying, “Let’s do this,” the would-be canal has encountered an assortment of economic, environmental, and political stumbling blocks, and has yet to be built.

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Making it happen

There is, however, talk today among key players that indicates the Kra Canal could finally become a reality. In Thailand, a coalition of military, political, academic, and business leaders has sided with Chinese interests to lobby Prime Minister Prayuth Chan-ocha’s government to make it happen. Strong arguments are being made about the benefits this gigantic infrastructure project would bring to the region in general.

Thailand, in particular, stands to benefit from the resulting:

  • Toll fees
  • Jobs
  • Port charges
  • Development of the surrounding area

China’s role in the Kra Canal

China also has a lot to gain from a completed Kra Canal. In addition to shaving off nearly three days of travel time for ships journeying between the Pacific and Indian oceans, the Kra Canal would also serve to lessen the Chinese economy’s current dependence on Indonesian sea routes.

Because of such advantages, China is said to be seriously considering underwriting the 10-year project, estimated to employ as many as 5,000 people and cost as much as $28-30 billion. That deal has yet to be officially confirmed, but insiders say, off the record, it’s a definite possibility. China appears to be moving on this with diplomatic caution so as not to alienate Singapore—well-aware that the Kra Canal could cause that island city-state to lose some 30 percent of its business among shippers.

Convincing Prayuth Chan-ocha

So, if China would be willing to pick up the tab for the Kra Canal, why is Thailand’s leader still opposed to the project? The answer, in a word, is political. The prime minister, who seized power in a 2014 military coup, has said he believes the canal would slice the country in two and embolden Muslim-Malay separatists, who have participated in an often-violent insurgency against the Thai state for more than a decade.

Yet, the pro-canal forces in Thailand, in league with China, can point to the study in the Journal of Shipping and Trade that sums up the big-picture benefits of the proposed project. According to that document, the Kra Canal will:

  • Reduce transportation costs
  • Reduce oil consumption which leads to a reduction in global warming
  • Reduce vessel accidents in the Malacca Strait
  • Act as an alternative route, in the event the Malacca Strait is closed or has heavy traffic
  • Be a new attraction pole for direct investment that would benefit South East Asia

In an article in the Nikkei Asian Review, Nicholas Farrelly, a regional expert at the Australian National University, came to this conclusion about the Kra Canal after taking everything into account: “At some stage, I think it is likely to happen.”

Topics: News, Shipping