THAILAND: Asia’s Suez Canal Project Fires Recovery Hopes

By IPS Correspondents Reprint | | Print |

Satya Sivaraman

BANGKOK, Sep 6 1998 (IPS) - For its proponents, a proposed canal project that could rival the Suez and Panama waterways in its international impact on sea-borne trade could very well rescue Thailand’s sinking economy.

For its critics, the planned canal across southern Thailand’s Kra Isthmus to link the Indian and Pacific oceans, costing an estimated 20 billion U.S. dollars and certain to take many years to complete, is little more than a pipe dream.

Debate over the pros and cons of the Kra Canal project, which has been going on for the past half century or more, resurfaced in Thailand in July when some Thai intellectuals promoted it as a large project that could attract foreign investors and revive the economy in a big way.

At a recent conference here entitled ‘Can Thailand be Saved’, several Thai economists and bankers rooted for the revival of the project as a way of beating the ‘Great Depression’ looming over Thailand.

“We need a big project like the Kra Canal to attract world attention,” said Somphop Manarangsan, an economist at Bangkok’s Chulalongkorn University.

Other speakers at the conference said Thailand needs new and bold projects to propel the economy and to replace old ones which are all either stagant or have collapsed due to mounting debts.

Since the beginning of the Thai economy’s downturn last year dozens of financial institutions have gone bankrupt, many industries shut down and several hundred thousand people thrown out of jobs. In 1998, the Thai economy is expected to contract by as much as 8 percent and its currency has depreciated by 60 percent against the U.S. dollar.

If built, the Kra Canal would bypass the congested Straits of Malacca and other, longer shipping channels used by oil tankers, container vessels and bulk carriers travelling from Europe, the Middle East and India to South-east Asia, China and Japan.

According to past feasibility studies, the project would reduce the sea voyage between West and East Asia by up to 3,000 km, or three days’ sailing time each way.

Proponents add that the narrow Strait of Malacca, which handles more than 3,000 ships a day, is reaching its full capacity and that any increase in traffic could result in serious accidents.

According to supporters of the Kra Canal idea, the project would replace Singapore as the hub of all shipping activity in the region and virtually create a mini-Singapore inside Thailand.

Singapore, which handles as much as 70 percent of the shipping traffic passing through the Straits of Malacca, is known to be strongly opposed to the Kra Canal and other projects that seek to take business away from it.

Other projects, smaller in scope but with similar objectives as the Kra Canal, are two proposed ‘land bridges’ linking the western and eastern coasts in southern Thailand and northern Malaysia as part of a growth triangle among Indonesia, Malaysia and Thailand.

The land bridges — consisting of oil pipelines and highways — would be used to transport oil, containers and other goods carried by ships and save them time taken to travel around the straits.

But critics have argued that the project, costing several billion dollars, will not make any returns on investments for several decades.

They have also warned of possible environmental damage due to spillages from oil tankers in an area teeming with touristy islands such as Phuket and Koh Samui in Thailand and Langkawi in Malaysia.

The Kra Canal project too has controversial on both the financial and environmental fronts.

A 1973 study by a U.S. think tank estimated construction costs of the canal — which at around 102 km would be 20 km longer than the Panama Canal — at 5.6 billion dollars. In a bizarre twist, the report suggested the cost could be cut to 3.5 billion dollars if nuclear explosives were used for the construction — a suggestion that drew howls of protest from environmentalists.

Another study in the early eighties put the cost at 15 billion dollars. Current estimates stand at more than 20 billion dollars, a vast sum to raise for a country whose credit rating has plummeted to near junk bond status in international financial circles.

Thai strategists also worry that the canal — by physically separating portions of southern Thailand — could encourage separatist groups in the Muslim majority southern provinces to step up their longstanding battle for an independent state.

This political issue has always in the past come in the way of serious discussion of the Kra Canal project.

But now, the project’s supporters say all these arguments against it are surmountable. “Technology is now available to build a canal tunnel. We do not have to cut the country,” said Vichai Panphoka, general manager of Bangkok branch of the German Dresdner Bank.

Some Thai economists argue that the financial hurdle is not too big a problem, since it could draw investment from China and the Middle East, two major beneficiaries of cutting down travel time and costs due to the Kra Canal. Japan and Korea would benefit since the canal would be a major route for import of oil from the Middle East.

At home, the canal’s construction would create a huge demand for a variety of raw materials, services and labour, enough some say, to offset to a great extent the recession gripping the country.

“The Kra Canal project should be taken urgently on the national agenda as it can revitalise the Thai real and financial sectors,” Somphop said.

The proposal to revive the canal project has received support from the Thai army top brass and leading opposition parties like former Prime Minister Chavalit Yongchaiyudh’s New Aspiration Party.

But some caution that mega-projects like the Kra Canal are no magic solution to Thailand’s problems. “Everyone is looking at utopia. It is not something that could come by quickly and is subject to feasibility,” said Arporn Chewakriengkai, an adviser to the prime minister.

Deputy premier Supachai Panitchpakdee, a well-known economist, said: “The Kra Canal would need a lot of money and would create debts. We should avoid projects which cause large debts.”

He added that canal enthusiasts should not repeat the same mistake that has been Thailand’s bane — spending big without thinking much.