26 October 2016
A Thai canal project, if it goes through, will help cargo ships bypass the congested Malacca Straits and provide faster trade links for the Asian region. Photo: Bloomberg
A Thai canal project, if it goes through, will help cargo ships bypass the congested Malacca Straits and provide faster trade links for the Asian region. Photo: Bloomberg

Big infrastructure projects could alter Asia trade dynamics

After the China-Pakistan Railway– the first huge infrastructure proposal in “One Belt, One Road”, the Kra Canal program in Thailand is the next major potential project that is drawing huge attention.

If the Kra Isthmus can be turned into a canal, it will be the pathway that joins the Andaman Sea in the Indian Ocean to the South China Sea and the Pacific Ocean. 

More than a hundred years ago, Thai King Chulalongkorn had envisioned the canal as a means for his nation to compete for the position of prime trade center in the region. But because of the lack of funding and technical support, the project never materialized.

With the rise of the Asian Tigers in the 1970s, the plan was again brought up, but due to financial problems and political factors like the Muslims living in southern Thailand, the project was no more than an idea on the drawing board.

After the rise of China, China and the ASEAN had a formal consultation on the canal in 2006. This time the idea seems more feasible, as some large Chinese companies have already formed a team to work on the canal last year. The project also fits in nicely with the “One Belt, One Road” initiative.

Once the canal is completed, it will become Asia’s largest. Ships will be able to directly travel between the Indian Ocean and the Pacific Ocean via Thailand, without the need to pass through the Straits of Malacca in Singapore.

Some Chinese scholars suggest that the canal will provide China with a more stable supply of oil, because oil tankers do not have to go through Singapore where there is a US military base. But the importance of the canal is not just about energy.

What is even more important is how the canal can change the trade pattern in the region. The 100-kilometer-long Kra Canal will shorten the existing route that goes through Malacca by 1,000 kilometers, considerably cutting the shipping time and costs. Many companies thus feel this is a worthwhile project.

On April 10, Guo Yi, the director of China-Thailand Kra Infrastructure Investment & Development Company, and Prawit Wongsuwan, the former Deputy Prime Minister of Thailand, hosted a press conference to announce plans to build airports, exhibition halls, etc.

Guo Yi described Thailand as a part of “One Belt, One Road”, and declared that that investing in Thailand’s infrastructure would be fully consistent with the overall plan of the One Belt.

At the same time, China wants to the open up the ASEAN route of the “Trans-Asian Railway” in order to link up Southeast Asian countries such as Thailand, Burma, Vietnam, Malaysia and Singapore.

According to many Chinese scholars, the Kra Canal and the Tran-Asian Railway together will allow rapid flow of goods among the ASEAN countries.

After the opening of the entire Trans-Asian Railway, goods can be sent in both directions: east to Kazakhstan, Mongolia, Russia and other places; west to reach Central Asia, Iran and Finland. The two projects can thus bridge “One Belt” and “One Road”, and integrate the region.

Once construction works of the Kra Canal starts, there will be a large number of infrastructure opportunities, as neighboring countries will also introduce related projects.

Thus, massive construction projects will start throughout Southeast Asia. And some Western countries, which have just joined the Asian Infrastructure Investment Bank, will also participate in the projects.

Overall, the next decade could set the stage for dramatic changes in Asia’s trade landscape.

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Associate professor and director of Global Studies Programme, Faculty of Social Science, at the Chinese University of Hong Kong; Lead Writer (Global) at the Hong Kong Economic Journal

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