Thailand's Kra Canal project is China's masterplan to secure Beijing's interests, assert influence in ASEAN, Indian Ocean Region

China's economic ambitions are once again giving rise to fears in India. The cause this time is the over 200-year-old plan to build the Thai Kra Canal cutting Thailand into two, which is seeing a resurgence in Thailand.

According to reports, a national committee has been proposed by the Thail Canal Association to examine the feasibility of the $30 billion project. Led by former Thai army chief General Pongthep Thesprateep, the proposal is said to have been backed by several former military figures influential in the country's ruling junta.

Thai Kra Canal. Image courtesy: kracanal-maritimesilkroad.com

A visualisation of the proposed Thai Kra Canal. Image courtesy: kracanal-maritimesilkroad.com

Noticeably, the project would cut the travel distance for ships moving between the Andaman Sea (India) and the South China Sea by some 1,200 kilometres. This should be a welcome news for not just India but every other economy whose ships currently ply through the crowded Strait of Malacca. This begs the question then: why are global economies worried about the Thai Kra Canal becoming a reality?

The answer has everything to do with China's involvement in the Kra Canal.

History of Kra Canal

The first mention of the canal comes from during the reign of the Ayutthaya Period when Thailand was known as Siam, with proposals to link the two coasts in the south of Thailand. But the Kara Canal name comes from the Ratanakosin period (in the second half of the 19th century) when Britain asked Thailand's King Rama I for permission to construct the Kra Isthmus Canal at Ranog — Lung Suan, which is the narrowest part of Thailand.

After initial surveys, English engineers gave up the idea. But it was brought back to public memory when the French asked Thai King Rama IV for permission to build the canal. The king, however, did not give permission for fear of losing the area on the Malay Peninsula side.

In 1872, Britain conducted another survey during King Rama V’s reign and concluded that construction is possible. The project, however, didn't move beyond that. In 1882, the French asked for permission once again but were denied again.

Why the new interest in Kra Canal

The Kra Canal is an important part of China's Maritime Silk Road, a constituent element of its ambitious One Belt One Road (OBOR) initiative which aims to connect China with markets in the West Asia, Africa, and Europe via both road and sea route. Though China has been presenting it as a boon for the global economy, its selfish reasons can't be overlooked.

For centuries, the Malacca Straits, which sees over 84,000 ships pass through it every year and accounts for 30 percent of global sea trade, have served as a gateway between the Pacific Ocean and the Indian Ocean and as a route for economies to move goods between the two.

Once built, the Kra Canal would not only cut both the distance as well as time for ships to move between the two seas, but also the dependency on Straits of Malacca and Straits. If constructed, the Kra Canal would eat a major chunk of the traffic currently flowing through the Strait of Malacca.

While trade and reduced travel time are being portrayed as major reasons to push the Kra Canal, that it would help Chinese ships move without fearing any blockade from US allies that surround the Straits of Malacca, is hardly a coincidence.

File image of Xi Jinping. Reuters

File image of Xi Jinping. Reuters

Thailand believes the Kra Canal would bring new economic opportunities to its shore, which includes more jobs during and after the construction as well as revenue from the movement of ships. But according to Indian diplomats, the Chinese stand to benefit the most, not just because it will be building but also controlling it.

As a Business Standard article pointed out, Longhao, a Chinese construction company which is among several firms lobbying the Thai government to move forward on the Kra Canal is planning to bring over 30,000 Chinese workers to build the canal. That could impact Thailand's hopes for creating new jobs through the canal. Lognhao is the same company involved in the Chinese government’s controversial island-building work in the South China Sea.

Though Longhao has proposed to build two offshore islands to serve as berths for ships, warehouses, and even entertainment hubs, China's personal gains from the project are too vital to be ignored, especially since it will also be financing the project through OBOR. Everyone knows how China's financial help turned out to be for Sri Lanka when mounting debts forced the country to hand over the Hambantota port to China.

Thus that the project not only endangers Thailand's sovereignty — a worry that the Thai Canal Association has been underplaying — but also risks Bangkok's relations with Malaysia, Singapore, and Indonesia, who stands to lose the most from it. As Stratfor argues, the canal is more likely to divide the revenue rather than bring additional revenue.

Besides, a cost-benefit of the Kra Canal may not be as high as the Chinese and the Thai Canal Association has made it out to be.

Analyst Gary Norman argued in this article that the "canal would require to generate $4.57 million in revenue per day to pay for itself within 20 years. This equates to an estimated price of $115,000 per passage, assuming a throughput of 40 ships per day." Considering passing through the Straits of Malacca costs nearly $1,20,000 (at the highest level) per ship, the saving doesn't appear very enticing for ships to take a China-controlled route.

Thailand should also consider the environmental impact of the project and to its tourism industry, which generates around 3 trillion Thai Baht for the country annually and is ranked number three in the world, according to a report of the World Tourism Organisation.

The proposed route will pass some tourist attractions in the South, including Phuket and Krabi, says Thailand's news portal, The Nation.

China has been seeking support from other ASEAN countries in order to push for the construction of the plan. In fact, the project claims that it would open a new shorter route for them (ASEAN) to connect with markets in West Asia, Europe and Africa. But seeing how Malaysia, Indonesia and Singapore stand to lose via this project, and reiterating the previous point, the Kra Canal is more of China safeguarding its interests than that of Thailand's or ASEAN.

In the meanwhile, the Kra Canal also poses a security threat for India. When looked along with the other infrastructural projects that China has been developing in the Indian Ocean Region, the Kra Canal project translates to nothing but an assertive China whose reach to the Indian Ocean has been cut short by 1,100 kilometres.


Updated Date: Apr 06, 2018 18:40 PM

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