Kra Canal: The Doom of Singapore?
About 1,200 kilometres north of Singapore along the landbridge of southern Thailand lies the Kra Isthmus—the narrowest part of the Malay Peninsula. For centuries great engineers and geostrategists have been masterplanning the construction of a canal across the isthmus, thus linking the Andaman Sea directly to the Gulf of Thailand—a project so grand that it could transform the economic and geopolitical landscape of the whole region. Recently, the debate on the development of the Kra Canal resurfaced following an initiation of the feasibility study of the Canal by the National Reform Council of Thailand and China’s announcement expressing her interest in investing in this mega-project. On 15 May 2015, a memorandum of understanding was signed by the China-Thailand Kra Infrastructure Investment and Development Company (中泰克拉基礎設施投資開發有限公司) in Guangzhou to advance the project, although Thai government denied reports that an agreement had been signed with China to construct the canal. Nonetheless, the repercussions of a realisation of this project will be tremendous and must be carefully assessed. Once built, the Canal can shorten the route from the Indian Ocean to the South China Sea by as much as 1,200 nautical miles and will undoubtedly shift maritime traffic away from the narrow Strait of Malacca. This could be the golden opportunity for Thailand to revert her economic slump and take on a more dominant role in ASEAN affairs, and for China to secure its oil imports from the Middle East from a potential blockade of the Malacca Strait by the United States. While this appears to be a win-win situation for Thailand, China, and some other ASEAN countries like Vietnam that could benefit from its construction, Singapore, whose economic growth relies heavily on the maritime traffic across the Malacca Strait, has just as much to lose.
Economic Benefits and Security Concerns of Thailand
The construction of such a waterway will create enormous opportunities for the Thai economy which has been stagnating since the 1997 Asian Financial Crisis. The revenue generated from navigation and toll fee, export tariffs and trading activities will transform Thailand into a regional hub for trans-shipment, currency trading and other supporting services and ancillary industries, even rivalling the regional dominance of Singapore. It will also attract foreign investors (mainly from China) to inject capital into the infrastructural development of the region, which has become increasingly difficult because of the domestic political instability and regime changes that so frequently dominate Thailand’s political scene. The growth of supporting industries will create vast employment opportunities for the Thais: it is estimated that the construction will require at least 100,000 construction workers, engineers and heavy machine operators to carry out, and once the Canal started functioning, another 30,000 jobs will be generated for the operation and maintenance of the Canal.However, despite these economic benefits that the Kra Canal could potential produce, Thailand is wary of the security implications of physically dividing the landmass and the potential foreign policy fallout with other ASEAN members, particularly Malaysia and Singapore. It is questionable whether the construction of the Canal will serve as a unifying force to redress the development disparity between the poorer southern region and the more prosperous central region, or as a flashpoint which could further instigate separatist movements in the Muslim-dominated southern provinces such as Pattani, Yala, and Narathiwat. Therefore, the Thai government must weigh the economic benefits against the conceivable threats to her territorial integrity very cautiously before taking the final step that has the potential of irreversibly changing the country’s future trajectory forever.
China and Her Maritime Silk Road Ambitions
China’s creation of the Asian Infrastructure Investment Bank (AIIB) in 2014 saw the first step towards materialising her vision of a Maritime Silk Road that traverses the seas of Southeast Asia and the Indian Ocean, linking the sea routes from the Middle East and Africa closer to China. The Kra Canal, if built, will be one of the most crucial and strategic developments in realising her Maritime Silk Road ambitions. Currently, almost all China’s oil imports from the Middle East pass through the narrow Strait of Malacca, and the joint US-Indian patrols of the Strait have long been a source of discomfort for China. In light of the American ‘pivot to Asia’ policy which seeks to contain its rise and the increasing tension between China and US allies in the region such as the Philippines over territorial disputes, China has grown more anxious about a potential blockade of the Malacca Strait by the US naval fleet, which will cut off China’s main oil supply from the Middle East. Should that happen, heavy losses will be inflicted on the Chinese economy which allegedly only has 7 days of oil reserve. Thus, it is in China’s vital interest to build the Canal as an alternative route to reduce her reliance on the US-controlled Malacca Strait and keep it within her sphere of influence by generously investing in the project.
The Doom of Singapore?
For centuries Singapore has enjoyed her strategic location on the major sea route that links the East and Southeast Asia to the Middle East and India, and the Port of Singapore is currently the second busiest port in the world. Singapore’s economy is thus largely fuelled by trans-shipment and entrepôt trade and heavily dependent on the traffic volume. Unfortunately, the Strait of Malacca today is plagued by piracy, congestion, and risk of grounding. Worse still, being international water, there has been virtually no attempt to manage the cross-traffic in the Malacca Strait, therefore making the sea lane increasingly inefficient as vessels often have to slow down to avoid accidents. This makes the Kra Canal a more viable alternative to the Strait of Malacca and will inevitably divert maritime traffic away from Singapore. When the Canal is completed, the outflow of shipment volume may send Singapore tail-spinning into an economic recession that is nearly impossible to recover from—that is the Doom of Singapore. Such devastating impact on the Singapore economy can also create a huge rift between her and countries which could potentially benefit from the project (e.g. Thailand, Vietnam, and Myanmar to a lesser extent), damaging her bilateral relations and jeopardising her position in the ASEAN. It seems that Singapore has nothing to gain and everything to lose from this project. Is that really the case?We should not be overly pessimistic if we look at the larger picture—one of ASEAN economic integration. The establishment of the ASEAN Economic Community (AEC) in 2015 is the first major milestone in the regional economic integration agenda in ASEAN, offering opportunities in the form of a huge market of US$2.6 trillion and over 622 million people. The Kra Canal mega-project presents a significant opportunity for ASEAN countries to foster greater cooperations with one another and demonstrate regional multilateralism, and to test the solidarity and maturity of this institution. In the long run, the economic benefits that the Kra Canal could bring to the whole region through rippling effect from increased intra-ASEAN and international trade could outweigh the temporary recession experienced by Singapore and Malaysia. In addition, the advancement of ASEAN as a whole could consolidate its standing in the international community and grant ASEAN countries, including Singapore, more political leverage in international affairs.Thus, this project might not exactly be a zero-sum game for Singapore as many have speculated, but rather it has the potential of becoming the greatest leap ever in the development of an economically integrated ASEAN. However, multiple agreements must be negotiated upon among ASEAN countries, in particular between Thailand and Singapore to ensure that the construction of Kra Canal has a mutually beneficial outcome and brings ASEAN countries closer together instead of pulling them apart. Governments in Thailand and Singapore must also engage more experts to anticipate future political ramifications and act accordingly to make ensure that the public opinion is in their favour. Nonetheless, this is no easy feat in the world of Realpolitik. Thus, it remains for us to see whether the Kra Canal will engender the doom of Singapore or the boom of ASEAN.
Bibliography & Further Reading
http://thediplomat.com/2013/12/how-a-thai-canal-could-transform-southeast-asia/http://journals.sub.uni-hamburg.de/giga/jsaa/article/download/584/582https://chinadailymail.com/2015/05/17/china-announces-strategically-important-kra-isthmus-canal-in-thailand/http://www.wallstreetdaily.com/2016/01/27/thailand-kra-canal-china-silk-road/http://www.kracanal-sez.com/Benefit.htmlhttp://asean.org/asean-economic-community/