Guest Column

Despite China’s Wishes, a Canal Across Southern Thailand Is Still a Distant Prospect

By Yan Naing 11 September 2020

China’s dream of finding an alternative to the Malacca Strait continues to prove elusive after Thailand announced it would shelve the Kra Canal project. Beijing has long pinned its hopes on the proposed canal as a way of reducing its reliance on the congested Strait.

The project, a proposed 120-km canal cutting through the Isthmus of Kra in southern Thailand, would have been a crucial strategic asset for China, allowing the Chinese navy to move freely and quickly between its newly constructed bases in the South China Sea and the Indian Ocean.

The project was supposed to allow China to bypass the Strait of Malacca, a narrow chokepoint between the Malay Peninsula and the Indonesian island of Sumatra that divides the Indian and Pacific Oceans. Up to 40 per cent of the world’s trade passes through the Strait.

The route would reduce shipping distances for vessels entering the Gulf Of Thailand from the west by 1,200 km, bypassing Singapore entirely.

China has described the project as part of the country’s proposed Maritime Silk Road trade route from China through Southeast Asia and the Indian Ocean to Europe.

Nevertheless, there were concerns that the canal would undermine the independence of poor Southeast Asian countries like Myanmar and Cambodia, which have comparatively weak civil societies and are highly vulnerable to Chinese interference.

Canal daydream 

The canal has been mooted since 1677 to take advantage of the relatively narrow strip of land between the Gulf of Thailand and the Andaman Sea. The idea has always been to construct a sea-level canal without the use of sea-locks. The length on land of the proposed canal has been estimated at 50-100 km depending on the route. At its narrowest point the isthmus is only 44 km wide, but a mountain chain at that point makes a 120-km stretch through the sparsely populated provinces of Krabi, Phatthalung, Nakon Si Thammarat, Songkhla and Trang more viable.

The canal would cut costs and reduce transportation time by two to three days, shortening shipping distances by 1,200 nautical miles around peninsular Malaysia and Singapore. Assuming a one-way distance saved 600 km and volumes of crude oil at 2011 levels, the latest study concluded that if the entire traffic of the Strait of Malacca were diverted through this canal, it would reduce total annual oil shipping costs of Southeast and Far East Asian countries by around US$500 million (about 663.5 billion kyats).

Courting Thailand 

Chinese interest in the project was first revealed in 2005 in an internal report prepared for the US Defense Department. It said China had offered to underwrite the construction of the canal along with Chinese port facilities and refineries, as part of its “string of pearls” strategy of forward bases and energy security. The Chinese plan envisaged construction of the canal over 10 years employing roughly 30,000 workers at a cost of $20-25 billion.

In 2014, a military government seized power in Thailand and initiated major infrastructure projects to stimulate the economy. The latest plans for the proposed canal zone call for the development of industrial zones in the vicinity for heavy industry, including dry-dock and shipbuilding facilities, and deep seaports at the canal entrances.

After the coup, Beijing was quick to take advantage of souring ties between Thailand and the West and cemented its friendship with the country. China began to invest in a high-speed railway system in Thailand and has a deep interest in greater economic connectivity in Asia, a core rationale behind its Maritime Silk Road concept. A canal across Thailand would improve not only access to the Indian Ocean, but also connectivity with southern China.

The Thai-Chinese Culture and Economic Association of Thailand, which works closely with the Chinese Embassy in Bangkok, has sent a proposal to conduct a feasibility study for the canal, touting it as a way to end Thailand’s economic slump and make it a “global shipping and economic hub, rivaling the Panama Canal”.

Politically very sensitive, the proposal was discreetly discussed and heavily lobbied for by influential groups both in and outside the Thai government.

Prime Minister Prayut Chan-ocha has been cautious about the Chinese proposal, as he must consider complex domestic, economic and geopolitical factors.

With the Malacca Strait growing congested and the risks of piracy, maritime terrorism and accidents also increasing—along with insurance fees—the case for an alternative shipping route is deemed more viable now than in the past. Its advocates also underline the potential benefits to neighboring countries, particularly Laos, Cambodia and Vietnam.

However, the emotive side of the debate is yet to be settled. Influential sections of the Thai security establishment view any partition of the “Golden Axe” (Khwan Thong)—referring to the shape of Thailand—as unacceptable. They stress the implications of the canal plan for longstanding demands for autonomy in Yala, Pattani and Narathiwat, suggesting it would increase the threat of separatism.

To pursue its new maritime doctrine, China is aggressively lobby Thailand to buy new weapons systems including frigates and submarines to increase its maritime defense capacity in the Andaman Sea and Gulf of Thailand. Growing accounts also suggest China has offered to provide soft loans of around $5 billion to upgrade the main Thai naval base at Sattahip.

However, the Thai government, under intense pressure from the political opposition and the public, recently delayed until the fiscal year 2022 plans to purchase two Chinese-made Yuan-class S26T submarines for 22.5 billion baht (about 950 billion kyats) over seven years. The decision was a major blow to China.

An infographic showing the location of the proposed Kra Canal, as well as old and new maritime routes. / The Thaiger

For Malaysia and Singapore, diverting traffic and activity away from the tip of the Malaysian peninsula is detrimental to both their interests. The Malacca Strait will, nevertheless, always remain strategically salient for trade between the Persian Gulf and Indonesia or Australia.

Myanmar’s shoreline remains isolated from the South China Sea nexus of the other Southeast Asian states, making trade between it and sea-based Southeast Asian partners reliant on the Malacca passage.

Vietnam, which receives 90 percent of all its consumable goods and commodities via the sea, could find itself on track to rival Singapore as a major Asia-Pacific trading hub.

The project would significantly alter the geopolitical and strategic landscape of Southeast Asia. Coupled with other Chinese activities in the region, including the Kyaukpyu Deep Seaport in Rakhine and the China-Myanmar Economic Corridor, China’s deployment timelines would be significantly reduced in the Indian Ocean Region (IOR). The project would also legitimize the Chinese presence in the IOR, as China’s intent is to project naval power there.

Though Thailand may witness some economic benefits, the strategic costs are likely to outweigh the benefits. The existing divide between Thai Buddhists and ethnic Malay Muslims would be further aggravated, undermining the stability of the country. The primary worry remains the fragile security situation in Thailand’s four southern provinces, with fears that a water divide across the Thai landmass would result in Bangkok losing control over the southern provinces bordering Malaysia. Moreover, Thailand’s economy could fall into a debt trap, as China would be keen to employ its funds, labor and material. The project is also expected to pose immense environment and geological challenges, which might need extensive study.

Additionally, the economic viability of the project is doubtful, as the estimated cost of construction is $28 billion plus another $30 billion for related infrastructure, which may not be recoverable through toll fees in a reasonable time period.

Since the canal would shorten distances only up to 1,200 km (unlike the Suez Canal, which saves 7,000 km and the Panama Canal, which saves 13,000 km), the slower speed, queuing up and toll payment may encourage ship owners to continue to use the Malacca Strait.

The pros and cons of constructing a canal across the Isthmus of Kra have been debated for centuries: proponents stress economic and strategic benefits, while critics argue that it is too costly and commercially unviable. Due to political uncertainties in Thailand, lack of support and the global economic slowdown, the construction of a Kra canal remains a distant prospect.

Yan Naing is the pseudonym of a regular observer on Myanmar affairs.

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