Reported Kra Isthmus canal could offer huge advantages for global trade

By Hu Weijia Source:Global Times Published: 2015-5-20 20:08:02

Media reports on Tuesday said that enterprises from Thailand and China had signed a memorandum of understanding (MOU) for a canal project through the Kra Isthmus in Thailand, with the aim of offering an alternative to the Malacca Strait as a gateway from Asia-Pacific to the Indian Ocean.

Hong Lei, spokesperson for the Chinese Foreign Ministry, was quoted by the Xinhua News Agency as saying on Tuesday that the Chinese government had no official involvement in the MOU for the Kra Isthmus canal project.

In my view, the project should not be viewed as political cooperation between governments, but as market-orientated economic cooperation.

It would be better for it to be financed by enterprises and operated in a market-oriented way in the future as it will offer huge benefits for global traders and the investors can profit from canal fees.

The canal, if completed, will benefit not only Asian economies including China, Japan and ASEAN countries, but also their trade partners such as the EU.

The 100-kilometer artificial link would shorten the voyage between the Indian Ocean and Asia-Pacific by some 1,200 kilometers, saving shipping costs and shortening the sailing time by several days compared with the current maritime trade route through the Malacca Strait.

The new canal would also reduce risks for shipping, as the Malacca Strait has a relatively high risk of shipwrecks and piracy compared with other sea transport hubs such as the Panama Canal.

The Malacca Strait is currently a vital transport hub for Asian trade, with more than 60,000 vessels passing through it every year, carrying 25 percent of total global shipping trade, media reports said.

The Kra Isthmus canal is expected to ease overcrowding by offering an alternative maritime trade route, while also avoiding a standstill in global trade if the Malacca Strait were to be blockaded.

But it will not be easy to put the canal proposal into practice, as there may be some political resistance from ASEAN countries and from outside Asia.

The project was initially proposed years ago but has been delayed by political factors. The Kra Isthmus is located in the south of Thailand, where separatist activities have sometimes been reported.

Media reports said around 40 percent of the Thai public are not in favor of the project due to concerns that it could spark political unrest in the country, as well as the threat to the environment from building the canal.

The project could also face political resistance because the canal, if completed, will divert traffic and business away from the Malacca Strait region, which would harm the interests of nearby countries.

The project may also face political resistance from outside Asia.

Based on public data, currently around 80 percent of China's crude oil imports are shipped through the Malacca Strait and the Kra Isthmus canal would reduce risks facing China if the Malacca Strait were to be possibly blockaded because of war or other political events.

However, resistance to the canal would not prevent China from diversifying its oil import channels, as the Malacca Strait's importance to China's oil imports is already declining.

Xinhua reported in January that the China-Myanmar Crude Oil Pipeline, construction of which was completed in May 2014, is designed to transport 22 million tons of crude oil per year, which will significantly reduce China's dependence on the Malacca Strait.

The author is a reporter with the Global Times.

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