Economic Reasons that Thai Canal Will Eventually be Built

The trade route to the Indian Ocean through the Malacca Strait has the problems of pirates, shipwrecks, haze, sediment and shoals. Its rate of accidents is twice as high as the Suez Canal and four times higher than the Panama Canal.

An alternative shorter route is to build a canal at Kra Isthmus, Thailand. It will save shipment costs and time as the route is shortened by 1,000 km. In March 2014, China’s Daily reported that LiuGong Machinery Co. Ltd and XCMG, and private Sany Heavy Industry Co Ltd were beginning preparations on the Kra Isthmus Canal but this was then denied by the companies.

Economically it seems likely that the Thai canal project will get started at some point in the five to ten years.

China trade with ASEAN is nearing $500 billion per year.

In 2011 dollars, the Thai Canal could hypothetically reduce annual oil shipping costs by $49 billion if the entire traffic of the competing straight were diverted, disregarding canal fees and the return trip costs of the empty tanker.

The Kra Isthmus, a mere 44 kilometers at its thinnest point, would render the current necessity for navigating south and around the entire Malaysian peninsula in East-West transit obsolete, connecting the Andaman Sea in the Indian Ocean to the South China Sea. The fuel and time savings wouldn’t be as great as they were in the case of the Panama or Suez canals, but a Thai Canal (also known as the Kra Canal) could assuage some of the overcrowding currently experienced in and near the Strait of Malacca.

Were the Thai Canal to be built, Malaysia and Singapore would suffer somewhat, but Malacca will always remain strategically salient for trade between the Persian Gulf and Indonesia or Australia.

Myanmar, Cambodia, and Vietnam would benefit greatly from a canal. For Myanmar, its littoral remains isolated from the South China Sea nexus of the other Southeast Asian states, making trade between it and sea-based Southeast Asian partners reliant on the Malacca passage. The Thai Canal would reduce the costs of sea-based trade significantly for Myanmar.

India, Japan and China – all net importers of energy – would benefit from having trade traverse the Kra Isthmus as well

A Chinese plan calls for construction over ten years employing roughly 30,000 workers and costing between 20 and 25 billion American dollars.