Quora Answer: What are the Strategic Implications of the Kra Isthmus Canal to Singapore & Malaysia?

The following is my answer to a Quora question: “What are the strategic implications of the Kra Isthmus Canal plan to Singapore and Malaysia, as the import hub ports in Southeast Asia?” 

The Kra Isthmus canal was proposed to bypass the congestion of the Malacca Straits, and reduce its strategic importance as a chokepoint.  It has been pushed by Chinese interests as an alternative route for oil tankers.  There have been some dire predictions about how it would cause Singapore to lose up to 30% of its shipping volume, and the effect would be felt 15 years from the completion of the canal.  I am not saying that the canal would not be built, but the business case for it is not attractive enough for most investors.  Here are some concerns. 

Firstly, the environmental impact study has to be done again, and it would likely be controversial.  There is a lot of sand and rocks to be moved.  It will impact the currents and the ecology of the continental shelf of both sides, and there will be massive pollution from the sudden increase in tanker traffic. 

Secondly, whilst the shortest distance of 44 km is a lot shorter than that of the Panama Canal, which is 77 km, there is an engineering challenge because the highlands it cuts through is higher than that of the Panama Canal.  The Panama Canal mitigates this by the use of locks.  The downside of the locks is that it limits the size of vessels that can transit the canal, the Panamax size.  A canal with locks will not be able to handle the VLCCs, ULCCs, super tankers and the very largest container ships.  They will still have to sail the Malacca Straits.  Considering the economies of scale in the shipment of crude oil, cutting two or more days from a trip on smaller vessels is still much more expensive than a single ultra-large crude carrier going through the Malacca Straits.  This reduces its economic and strategic value considerably.  And if the canal management cannot handle the traffic, the wait would be much longer. 

Thirdly, a canal without the attendant port facilities is not very useful.  Thailand has to build two major ports, at both ends, to service the traffic, and they must be close to the standards of Singapore to lure essential energy traffic from Singapore.  That is a decades long work in progress, not to mention very expensive. 

From a Thai perspective, the consequences of a canal look less and less palatable for a totally different reason.  The canal will become an internal barrier between the north of the country and the separatist south, and become a chokepoint for moving assets to quell the restive south.  Should there be an insurgency, cutting the bridges across the canal limits the government response and makes it difficult to move military assets into the region. 

Additionally, the Thai government does not have the capacity to fund the construction. Singapore is not going to fund a project that affects her strategic position.  The southern nations of ASEAN have nothing to gain from it, and this will split the bloc.  A weakened ASEAN is also a weakened Thailand on the international stage.  This means that funding has to come externally.  The US will not fund it if they cannot put a military base there, just like it has at the Panama Canal.  This weakens the legitimacy of Thailand’s monarchy, and its officially neutral position.  Japan and South Korea could possibly fund it, but China would not allow that, and lose control of an alternative access to the Andaman Sea.  Conversely, although 80% of Japan’s and South Korea’s energy traffic goes through the Malacca Straits, the Malacca Straits is too far away for them to mitigate Chinese military domination.  The Kra Canal is well within reach of Chinese military assets in the South China Sea region.  This puts untenable pressure on Japan and South Korea in any time of increased tension. 

China is eager to fund the project, previously as part of its “String of Pearls” strategy, which has morphed into the “One Belt, One Road Initiative”.  “One Belt, One Road Initiative” is part of China’s grand strategy to dominate areas of interest from East Asia to Central Asia and East Africa for energy and food security.  This involves cheap credit for infrastructure development at strategic points to lull poorer countries into a debt trap in order to gain control of ports, mines and production facilities.  Thailand is quite aware of what happened in Sri Lanka’s Hambantota port.  Sri Lanka were unable to repay these loans and China gained a 99-year lease on a port that could conceivably be an eventual competitor to Colombo.  For the Kra Canal to be built, the debt burden would be significantly more, in the hundreds of billions, since the cost involves not only the building of the canal, but the need to upgrade all infrastructure along its length.  Thailand does not want to lose control of the canal to China, and possibly lose the four southern provinces.  They are not stupid. 

Considering all the political, financial and economic challenges that need to be overcome for the Kra Canal to be built, unless there are significant changes in the political and strategic landscape, there will be no canal.  Even if there is a canal, Singapore’s value proposition is not merely its strategic position, but political neutrality, economic stability and efficient management.  Ships will continue to get bigger, and unless the canal is upgraded, it will eventually be bypassed again.  There will always be a Suezmax and a Panamax since the Suez Canal and the Panama Canal bypass entire continents.  In this case, the distance saved is a matter of two days at the most.  The political and strategic costs are not attractive.