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Nov 17, 2017 | 15:35 GMT

8 mins read

Avoiding Dire Straits in Southeast Asia

Booming trade in the Strait of Malacca is breathing life once again into the idea of building a canal through Thailand's Kra Isthmus.
(SAEED KHAN/AFP/Getty Images)
  • As booming trade further increases traffic through the Strait of Malacca in the coming decades, regional powers will revisit the idea of building a canal through Thailand's Kra Isthmus, despite lingering questions over the project's commercial viability and technological feasibility.
  • Any meaningful development on the proposed canal will depend on whether Thailand can manage the separatist groups in the southern part of the country and the competing interests of foreign powers vying for influence on its territory.
  • Though China has the financial means and technical know-how to bring the proposed Kra Canal to fruition, Beijing will be hesitant to pursue the project at the risk of jeopardizing its relationships with the other states along the Malacca Straits.

The notion of carving a canal across Thailand's Kra Isthmus has periodically enticed seafaring states around the world since it first surfaced in the 17th century. Today, the idea is gaining traction once again as traffic steadily increases and the threat of piracy looms large in the Strait of Malacca. The prospective waterway would bypass the choke point, joining the Andaman Sea in the Indian Ocean to the Gulf of Thailand in the Pacific and saving ships up to 1,200 kilometers (750 miles) in transit. Considering the unprecedented access to overseas export markets and oil supplies that the shortcut would afford them, regional powers such as China, Japan and South Korea are all keen to build the canal. Thailand is interested, too, since the project would fulfill an age-old ambition to establish the country as Southeast Asia's main trade hub and, by extension, to cement its strategic importance in the region.

For all the enthusiasm surrounding the project, however, the centuries-old dream of the Kra Canal is no closer to becoming a reality. The technical difficulty and prohibitive cost of excavating the canal will continue to outweigh the possible advantages it would offer over the Malacca Straits. And these challenges pale when compared with the geopolitical problems the project would encounter.

In Search for Trading Routes

Long before the Strait of Malacca emerged as the region's main supply route, major overland trade paths crisscrossed the Kra Isthmus. The narrow strip of land in the central Malay Peninsula gave rise to multiple ports, such as Songkhla, Takuapa and Dawei, at the nexus of the region's main maritime trade routes. As more and more European traders arrived on Southeast Asia's shores in the 17th century, the Kingdom of Siam began entertaining the idea of creating a waterway across the isthmus to secure its status as the region's trade capital. The French traders who first proposed the solution, meanwhile, hoped the canal would give them an edge over their competitors elsewhere in Europe who controlled the Strait of Malacca. Yet technological and financial obstacles stalled this early initiative and every subsequent iteration for the next few centuries. And so, the Malacca Straits became the default conduit for trade between East and West.

Over the past decade, the mythical Kra Canal has come back into the international spotlight once more. The Malacca Strait is now the world's second-busiest waterway, handling 15-20 percent of global trade and one-third of the world's oil shipments. But as the economies of the Indo-Pacific region continue to grow in the coming decade, estimates suggest the strait may not be able to accommodate the accompanying increase in freight traffic. The corridor is just 2.7 kilometers wide at its narrowest point, making it a natural bottleneck for ships passing through. Its size, coupled with its modest minimum depth of 25 meters (82 feet), forces larger ships to reroute around the Indonesian archipelago — an extra distance of between 1,600 kilometers and 2,960 kilometers. By far the greatest concern for international trade in the Strait of Malacca, however, is security. Piracy is a common problem in the area, and one that poses a serious threat to supply chain continuity. The risk — and the prospect of a U.S. naval blockade through the Strait of Malacca — has driven China to try to cultivate alternative supply routes to the Indian Ocean, including the Sino-Myanmar pipeline and the Kra Canal.

In September, Japanese newspaper Nikkei reported that a Chinese consortium, along with Thai and European business leaders, had called on the Thai government to approve a feasibility study for a roughly $28 billion plan to construct the canal. (The consortium reportedly conducted an initial survey of the routes in 2016.) The Thai and Chinese governments were as quick as ever to refute the rumors that the project was at last coming to fruition. Bangkok even went so far as to state that the plan wasn't on its agenda. Still, that hasn't put a stop to the speculation. China, after all, may be the only stakeholder with the financial and technological strength necessary to put the canal proposal into action.

A span, a plan, a canal: Thailand

Economic Viability

Several different plans for the Kra Canal have been floating around for the past 20 years. One often-cited version that China proposed involves a two-way canal measuring 102 kilometers long, 400 meters wide and 25 meters deep and running between the city of Satun, on Thailand's west coast, and Songkhla Lake on the east. Relative to some of the other proposed routes, the Satun-Songkhla plan covers a longer distance, but its construction reportedly would be less labor-intensive. Even so, digging a canal through the granite ridge of the Tenasserim Hills would be a formidable undertaking, from an engineering as well as an environmental and a financial point of view. Completing the project would require the removal of an estimated 1.3 billion cubic yards of earth, around three times the amount excavated for the Suez or Panama canals.

Compared with the Suez and Panama canals, though, the Kra project promises more modest gains over existing trade routes. The new canal would cut about 1,200 kilometers in distance on average, or about three to five days' transit time. The Suez and Panama waterways, by contrast, saved ships weeks of travel. The Kra Canal envisioned in the latest proposal would be too narrow and shallow to accommodate the large ships that have to go around the Strait of Malacca. Furthermore, Singapore already offers an efficient port of call close by with capacity to spare. The additional route could give smaller ships shorter course to their destination, but it would do little for the economies of scale that drive today's shipping industry. And considering that the Thai government's recent proposal to revive a long-delayed railway project to link the Gulf of Thailand with the Andaman Sea at a much lower price, the costs of the Kra Canal probably will continue to outweigh the possible benefits.

Beyond the economic and logistical considerations, the Thai government also has political factors to keep in mind as it weighs whether to pursue its goal of becoming a center for regional trade and strategy. Any channel across the Kra Isthmus would impose an artificial barrier between Bangkok and the restive territories of southern Thailand. For decades, recurring insurgencies, organized crime and clashes between local warlords have plagued the area — and have given successive Thai governments pause when considering the canal project.

Big Power at Play

Thailand isn't the only country with a stake in the project, though. Like Europe's competing powers before them, the economic juggernauts of Northeast Asia have come out in strong support of the Kra Canal. China, in particular, has high hopes for the endeavor, which would dovetail with its expansive Belt and Road Initiative in Southeast Asia. But much as the Kingdom of Siam had to weigh the interests of France and the United Kingdom to avoid getting embroiled in their rivalry, Thailand today must try to avoid becoming overly reliant on China. Bangkok has so far managed to play Beijing and Tokyo off each other to its benefit as the two vie to finance and build railways in Thailand. By deferring a commitment to a proposed canal — and by even refusing China's offer to fund the waterway's construction — the Thai government is trying to protect the strategic project from getting caught up in a geopolitical contest.

In light of the potential ramifications for regional maritime trade and logistics, moreover, Thailand is treading lightly in its approach to the prospective canal. Much like the proposed Nicaraguan Canal, the new trade route wouldn't transform global shipping. Instead, it would redistribute the traffic, and, by extension, the revenue, passing through the region. The thought of losing business to the Kra Canal is troubling for the states along the Strait of Malacca — Malaysia, Indonesia and Singapore. Bangkok's relations with these countries will figure prominently in its decision over whether to follow through with the project.

The same goes for Beijing. China likely stands to gain the most from the Kra Canal and is perhaps the only investor that could make the project a reality. Nevertheless, it has kept its interest in the new waterway as quiet as possible to avoid jeopardizing its ties with other countries in the region. As Beijing expands its influence in the region and around the world while pursuing better connectivity in the Asia-Pacific, its quest for an alternative route from the Indian Ocean to the Pacific may have to take a back seat.

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