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Thailand's Kra Canal : A Game Changer
ECONOMY Beyond

Thailand's Kra Canal : A Game Changer

The idea of developing Kra Canal, otherwise known as the Thai Canal or the Kra Isthmus Canal, through the narrow southern end of Thailand was actually proposed over 200 years ago

However, due to uncertain reasons of economic, political, investment or capital during those years, this proposed project was rejected and any further discussion or action terminated.

Now, it is reported recently that China and Thailand are planning to continue with this project for more practical reasons that cover economic, safety and trade.

Although this canal issue has widely been discussed by maritime players, such as policy makers, regulators, and shipping and port operators, it seems that the idea of developing the Kra Canal is most welcome due to the great savings in costs, higher levels of safety and shortened distance compared to the journey via the Strait of Malacca.

Seasia looks forward to the construction of this new development that is believed to certainly change the landscape of maritime transportation in the region, if not the world, herewith are information that we gathered for the readers.

Kra Canal to have huge security and social implications | http://www.asiaone.com
Kra Canal to have huge security and social implications | http://www.asiaone.com

According to the latest study conducted by the Journal of Shipping and Trade, following are the 10 global implications resultant of the proposed Kra Canal:

1. The canal will provide an alternative route in lieu of the congested Strait of Malacca.

2. Voyage distances can be reduced by 1,200 km and voyage time by 2 to 5 days, thus allowing for higher vessel utilisation.

3. The estimated bunker savings for a 100,000 dwt oil tanker is $350,000 per trip.

4. Bulk shipments (e.g. oil tankers) that are chartered for direct shore to shore voyages will benefit the most.

5. Large container ships that must make frequent stops may not benefit as much - vessel capacity may not be sufficiently utilised when skipping ports in Southeast Asia.

6. Thailand may greatly benefit from the canal toll fees, port facility charges and development in the surrounding area.

7. Eighty percent of China’s oil goes through the Strait of Malacca; the Kra Canal may reduce shipping costs and reliance on the Strait and also minimise the threat of the blockade of the strait.

8. Singapore’s status as a maritime transhipment hub may be negatively affected with vessels bypassing the Malacca Strait altogether.

9. The ports in Hong Kong and China stand to gain from the traffic diverted from Singapore.The cost of using the canal will be a key factor.

10. The cost of using the canal will be a key factor.

The rail canal idea would see ships carried by rail across Thailand’s south.
The rail canal idea would see ships carried by rail across Thailand’s south.

Although many concerns raised among the shipping players and the environmentalists which include the issue of the capacity of the Strait of Malacca in that it is unable to accommodate more than 122,600 vessels per year, security (piracy) at the Strait of Malacca and the dredging and development activities in the surrounding area of the canal, there are still many other factors that motivate support for the development of the Kra Canal.

The realization of this gigantic infrastructure project is somehow also known as soon-to-be the Chinese Panama Canal.

As listed by ShippingExchange, herewith are the reasons why:

1. Kra Canal is being developed since 1677!

Similar to Panama Canal, history of the Kra Canal is vast and holds a lot of value to Importers and Exporters located in the region of South China Sea and beyond.

The first time this idea cropped was as far back as 1677 when Thai King Narai asked the French engineer de Lamar to survey the possibility of building a channel to connect Songkhla with Marid aka Myanmar to cut short the time for traders.

2. Geography-wise, it is one of the toughest terrains to build a Canal

More fondly known as Kra Isthmus, the land bridge is shared by the countries of Thailand on the East and Myanmar on the West. Lying to the west of the Isthmus is the Andaman Sea, while the Gulf of Thailand falls on the East Side of the river.

The Isthmus of Panama also is also located very strategically, connecting the continents of North and South America.

3. A Game Changer for Southeast Asia

A canal located in the vicinity of Thailand could enable Larger Transport carriers to transport cargo via India, China and Japan instead of using the Strait of Malacca, thereby boosting the Thailand and Chinese Economy.

Currently, 94000 vessels pass each year through the Strait of Malacca, which is roughly equivalent to one-fourth of the World’s Traded Goods.

An estimated 15.2 million barrels of oil was passed through the Strait in 2011, which is largely controlled by western Countries.

The Panama Canal is currently of far greater strategic value to the United States with an estimated 15000 vessels passing through the canal every year. And up till 2009, 333.7 million tonnes had been transported via the Canal.

4. It could be one of the Greatest Engineering Feats of the 21st Century

The stakes are very high and while the infrastructure is well backed by the bulging Chinese Economy, there are many technological, environmental and political issues which have to be addressed.

The estimated cost is a whopping US$28-30 billion and will take 10-12 years to complete the entire project. An estimated 5000 people during the initial stages will have to be employed as well.

The Panama Canal also had to go through a tremendous amount of obstacles before it could be built. Ranging from French Ownership to the development of the Canal undertaken by the US, and Volatile Political Climates.

Kra Canal, the Panama Canal of China | shippingexchange.com
Kra Canal, the Panama Canal of China | shippingexchange.com

From the above points, the development of Kra Canal is as much as an economic decision, as it is a strategic one. It may also tip the balance of power in the hands of countries like India and China.

However, with ever mounting pressure on Thailand from other vested interests, the building of the canal may still take some time.

Currently, there is no estimation as to when can the project be completed.

Source : Journal of Shipping Trade | ShippingExchange | Kra Canal official website

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