The vision of an alternative to the Malacca Strait – a stretch of water running between the Malay Peninsula and the Indonesian island of Sumatra – cutting through Thailand’s Kra Isthmus (a narrow part of the Thailand/Myanmar peninsula) has fascinated generations of Thai businessmen, but never gathered enough momentum to become a reality. The huge costs, alongside the uncertain economic, social and environmental consequences of such a project, have always prevented it from moving beyond the planning stage.
However, interest from Chinese investors – along the lines of Chinese telecom tycoon Wang Jing's plans to develop a $40bn alternative to the Panama Canal in Nicaragua – is now breathing new life into this ambitious endeavour, which will entail digging a navigable 102-kilometres-long canal that is 400 metres wide and 25 metres deep. The timing of such a project may also be right, as the Thai government is struggling to move the country's economy in a positive direction. Pakdee Tanapura, the international director of the International Executive Committee for the Study of the Kra Canal Project, tells fDi Magazine about the myriad benefits the canal would offer.
Q: What are the advantages of developing an alternative to the Malacca Strait that cuts through Thailand’s Kra Isthmus peninsula?
A: The Kra Canal will save cargo ships currently sailing through the Malacca Strait about 1200 kilometres of navigation, which translates into a time saving of 28 hours to 40 hours. That’s less than other inter-oceanic canals. The Panama Canal saves about 8000 kilometres of navigation, and the Suez Canal some 10,000 kilometres. On the other hand, if we shift the focus on economic development, the Kiel Canal in Germany saves only 700 kilometres, but generates toll revenues as high as those of the Panama Canal thanks to its free-trade zones and the industrialisation drive in northern Germany. We think the Kra Canal will generate $3bn to $5bn in toll revenues.
Q: What are the overall investment costs and your business development plan?
A: The digging of the canal itself will cost some $30bn, and another $20bn is needed to start developing port infrastructure and free economic zones [FEZs] along the canal – not simple FEZs, but a one country-two system model where FEZs have special administrative bodies, laws and city planning. These FEZs will accommodate companies belonging to 10 different industries to cater to the needs of Association of South-east Asian Nations countries, China, Japan, India and Africa, which combined make up a market of 5 billion consumers.
Q: How does the Kra Canal fit the Beijing-backed vision of a maritime Silk Road in south-east Asia?
A: The Kra Canal will work as a link between sea and land Silk Road. Thailand has just signed a memorandum of understanding with China to lay down a high-speed railway connection between Kunming and Bangkok, from which cargo ships can set sail to the Indian Ocean through the Kra Canal. We estimate that containers will take only 48 hours to travel between Shanghai and Mumbai.
Q: What is missing for the Kra Canal to be developed?
A: Decision making in Thailand is very slow. The present government, led by prime minister Prayut Chan-o-cha, is aware of the project, but it’s such an ambitious endeavour that the government is still hesitant because of its consequences for the whole country. On the other hand, the government is having troubles in promoting economic development and it hasn’t got many options left. It has to go for the Kra Canal, we will hear about that soon.
Q: The required investment to build the Kra Canal is substantial. Who are the investors backing the project?
A: We are pretty much supported by a group of Chinese private companies pushing hard to develop the canal, and now we are working with Thailand’s military government to make it happen.
Q: Is the Kra Canal starting off on a wrong foot given geopolitical tensions in the South China Sea?
A: I don’t believe that. In fact, the Kra Canal development would ease tensions in the South China Sea because of the enormous investment it requires, and nobody wants a war when that much money is at stake.