Can The Thai Canal Project Destroy Singapore?

by Patrick Liew on August 23, 2017

In the 17th century, French developer Ferdinand de Lesseps proposed a canal to be developed to link the Indian Ocean and the South China Sea.

The Thai Canal, also known as Kra Canal or Kra Isthmus Canal would shorten voyages from the west to the east by 1,200km.

As a result, ships could bypass Singapore and quite possibly end Singapore’s position as a shipping hub.
The new Thai King Vajiralongkorn, who ascended the throne in 2016, was reported by LaRouche PAC on Tuesday, 17 Jan 2017 to be in favour of developing the Thai Canal.

Many key leaders in Thailand have also voiced their support for the project.

In recent time, there were unconfirmed rumors that China will go ahead with making the Thai Canal a reality.

How then will the Thai Canal project affect Singapore?

1. Historically, Thailand could have developed its ports at Chumphon on the east and Ranong on the west.

The two ports could have been strategically enjoined by a canal at the Isthmus of Kra or by road or rail.

This development could have posed a major challenge to Singapore’s shipping businesses and attract more investments to Thailand.

However, Thailand has chosen not to embark on the development because it might pollute the sea and beaches.

The development’s impact on the environment would affect tourism, a major pillar of the Thai economy and an industry that supported livelihoods of many people.

2. China may have the resources to build the Thai Canal.
However, a key challenge for the Chinese is to secure a firm contract with the Thai government.

This is not an easy task because there were multiple changes of governments in recent times and they happened within a short period of time.

Furthermore, the Thai military regime has been known to revoke existing agreements.

They may not honor deals that were contracted by the previous civilian administration.

Such policy flip-flops are major obstacles to success of the canal project and it can affect the project’s profitability, stability and growth.

In addition, success of the Thai Canal depends very much on the strength, will and resources of the Thai government and people.

It is also a function of Thailand’s political stability and security, and consistency and continuity of its national policies.
3. Moving forward, if the Thai Authorities want to develop the Thai Canal, they have to acquire many parcels of land at and around the targeted area.

These parcels of land belong to private owners, some of whom may be uncontactable.

The challenge is that the laws in Thailand does not make it easy to support such an acquisition.

That’s why Thailand faces major difficulties in building an extensive metro train network in Bangkok.

4. Acquisitions of private land may come with a major sociopolitical price.

For example, there may be civil disorder and social unrest, especially if residents are forcibly evicted from the land.

There are not many leaders that will stick out their neck and risk their political future.

5. The southern part of Thailand is a hotbed for Muslim separatist insurgents.

By developing the Thai Canal, it would physically separate those restive provinces and offer better protection for the secessionists from government forces.

These secessionists may use the opportunity to declare their own country.

They may choose to sabotage the Thai Canal project or use it as a bargaining chip to negotiate favorable terms for themselves.

6. The Thai Canal project can only shorten shipping distance by about 1200 km.

It is nowhere in comparison to the Suez or Panama Canal which cuts down shipping distance by about 7000 and 15000 km respectively.

Critical advantage from shortening the distance depends on the effectiveness and efficiency of managing the Thai Canal, including charges levied due to tolls.

By comparison, the Strait of Malacca is not controlled by any entity and provides for free passageway.

Furthermore, the Thai Canal may not be able to take large cargo ships. It may only be able to handle a limited number of ships.

Traveling through the canal may also be slower than traveling through the Strait of Malacca because of the limited space.

7. Singapore’s edge in the shipping industry is not necessary due to its location.

There are other locations that offers better advantages such as Tanjung Priok in Jakarta; which is located nearer to the Sunda Strait.

Malaysia has also built a very modern port at Tanjung Pelepas (very close to Singapore), and also has a good facility at Port Klang close to Kuala Lumpur.

In the past, these ports were not able to overtake the port of Singapore.

If anything else, when these ports do well, they also contribute to the success of the port in Singapore.

In a similar way, when Thailand prospers, chances are Singapore will prosper too.

8. Shipping companies are first and foremost more concerned about providing good service to their customers and ensuring safety and security of their customer’s goods.

They choose to load and unload their goods in Singapore because of our political stability, rule of law, ease of doing business, and reliable and efficient system.

In addition, they are also attracted by the international standing of our port, banking and financial systems, global logistical chain, and complete eco-system for trade and commerce.

9. Shipping companies and their customers are also concerned about cascade of detrimental effects due to corruption and lack of reliability and control.

In this regard, Singapore has an edge over many countries.

Singapore has consistently been rated as one of the least corrupted countries in the world by Transparency International (TI).

We are also the least corrupted country in Asia according to the Political and Economic Risk Consultancy’s Report on Corruption in Asia.

10. Most shipping companies are more focused on transshipment than on pursuing shorter shipping distance because transshipment makes more money for them.

They generally prefer to have their ships travel short distances to logistic hubs to unload their goods.

They then load up goods for delivery to the ship’s point of origin.

Goods left in the logistic hub would then be taken on to another ship and be delivered to its intended destination.

Many ships choose to stop at the port in Singapore because it has steadily built its infrastructure, systems, connectivity and other advantages to become the world’s largest transshipment centre.

Over the years, the PSA International, one of the world’s largest port operators, has acquired bases of operations along major shipping trade routes rather than rely on Singapore’s port alone.

Currently, it has interests and operations in Belgium, China, Colombia, Italy, India, Indonesia, Japan, Panama, Pakistan, Portugal, Saudi, Thailand, Turkey, Vietnam, and Singapore.

As a transshipment centre, when the other ports in the region do well, it can also contribute to the profit, advantage and growth of Singapore’s port.

11. In the final analysis, the new economy is not just about ports, roads and railway tracks.

The physical distribution and delivery of goods may not offer the highest value-added services and generate the best profits.

For example, strengthening multilateral partnerships and channels and free trade alliances and agreements, supported by advanced technological and financial services can play a more important role in the future economy.

We should continue to strengthen our infrastructure and edge in the marketplace.

At the same time, we should develop additional capacities and capabilities to capitalize on new markets, businesses and opportunities.

If we play our game right, Singapore can be a vital toll gate for global trade.

Singapore can be an essential hub and spoke, and the node, router and connector of international commerce.


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