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Thai Kra Canal – numbers don’t stack up

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OPINION

The possibility of Thailand being sliced into 2, with a canal running east to west through the middle of the Isthmus of Kra (the Thai section of the Malay Peninsula), is back on the table. There’s a lot of heated response from readers, for and against the plans. Is there an economic model to support the new canal? How much time and money would it save? Is a ‘land bridge’ a better option? How would Singapore (the biggest loser in the project) react to the project if it went ahead?

We published a response to a ‘land bridge’ alternative last week from Tony P. Restall, aka. Mr Free Zone, Port & Free Zone Global Expert, and a long term proponent and consultant of the Kra Canal project. The following was a well-argued response from a reader who says the ‘numbers’ for any canal-type project just don’t stack up…

Thai Kra Canal - numbers don't stack up | News by Thaiger

“You really can’t back up those numbers. You completely fail to address the many very real problems with this concept.
Bloggers from Singapore and Malaysia aren’t needed to point out the geology of the isthmus… it is obviously more expensive to either blast through mountains or build a large number of locks.

You also have to have the right width and depth to get the right sized vessels physically through it. You have to establish the actual speed of a vessel moving through the whole system, which will be very low numbers of knots, plus additional time costs in lock transitions, and then add up all that time and compare it to the relative simplicity of motoring round the peninsula at double figures of knots.

You also have to add in the cost of queueing and waiting for access to your hypothetical canal. It’s simple maths really. It takes quite a few hours to transit Suez, even without locks, and ships queue at Mediterranean coast. The cost of accessing the canal for any small amount of time you think you might save is not economic for ship operators. Your canal would have to be cheaper than the cost of fuel for travelling around the peninsula, and would have to vary with the price of HFO (heavy fuel oil).

The part of the isthmus with the least amount of material and mountains in the way, is the part west of Koh Samui across to Ranong. You have to explain how you are going to accommodate tourism in those established prime spots on the east coast with several hundred large vessels motoring through and anchoring off the coast as they queue to enter this hypothetical canal.

They may also be legitimately subject to inspection for things like ballast water invasive species and pollution, given that the east coast is a prime tourist area, and the west coast is a sensitive conservation area, and also a prime tourist area. There are reasonable questions about how you mitigate environmental degradation that would affect both prime tourism and sensitive marine coastal ecosystems which play a key role in the food web and coastal livelihoods of local people.

Why do you think it’s easier to blast through even more rock for even further in the south of the isthmus, or build even more locks to get up and over the mountains, when the location is even nearer to the simpler route around the peninsula?!

You basically prove that the project is nonviable, because you recognise the impact on tourism and environment in the north, where the imagined time saving for ships is theoretically greater, and you recognise that the insurgency in the more mountainous and wider south is not viable as well because of that insurgency. The idea is a complete non-starter, better off spending all that on an undersea tunnel from Phuket to Medan if you like grand projects.

After you’ve addressed all that, you then need to describe costs for design the development of infrastructure for ports, drydocks, cargo handling, fuel storage, equipment and maintenance companies, staff, training establishments, and ancillary support services. This would require building a new city and port complex larger than Map Tha Phut, to compete with existing options, and where would you put it? Surat Thani? Ranong? It needs an airport, motorway, and rail links, and all the other modern infrastructure. Your scheme will sink way more than $50 billion. It’s a hit and hope idea, where you assume that you can get enough traffic paying the fees to pass through your canal for long enough to pay it off… it would bankrupt the nation.

What you are essentially proposing is similar to cutting a canal through Denmark or from Bristol to Southampton, or across Italy or Korea or Japan or UAE. It doesn’t make any sense from an economic, environmental, and industrial point of view, and doesn’t offer anything of interest to marine operators.

Your ideas about the shipping industry are living in the past, that ship has sailed, there are no big profits to be made like in the golden years, even Dubai understand that as they shift more aware from shipping and oil and towards “high tech”.

“Rinky Stingpiece” (as published in The Thaiger comments section)

Thai Kra Canal - numbers don't stack up | News by Thaiger

 

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8 Comments

8 Comments

  1. Issan John

    Saturday, September 12, 2020 at 10:39 am

    Let’s be clear. Tony Restall is neither a “global expert” on port and free zones nor (at least yet) a “consultant” for the Kra Canal study, however much he would like to be. His involvement with the Dubai Free Zone / Port was as a salesman, NOT a planner, as the Free Port’s easily available publicity clearly shows.

    His idea that “passing trade” through the canal would stimulate industry and manufacturing along the canal route as it did in Dubai is transparently nonsense. Unlike a port such as Dubai and Singapore or Hong Kong, where vessels stop and cross transfer, “passing trade” through a canal simply “passes”. If shipping has to stop and queue for longer than the couple of days it could potentially save going “the long way round” then it’s costing money, not saving it.

    That’s the whole point of a canal – to act as a shortcut, where it’s possible, not to act as a port.

    This really couldn’t be simpler or more blindingly obvious.

    There would not only be no direct benefit, as RS has clearly shown beyond any doubt above, but there would be none of the spin-offs either. It’s an even crazier project than having submarines in the Gulf of Thailand where they can’t even operate successfully due to the lack of depth – pure “keeping up with the Jones’s”, whatever the cost.

    The study is no more than an opportunity for self-styled “experts” and hangers-on to help themselves to some of the millions of dollars that will be wasted “evaluating” a project which has no possible benefits and not even the faintest possibility of breaking even, which should be obvious to all except those taking part in the “study” who will be the only ones to ever profit from the absurd idea.

    • Rinky Stingpiece

      Saturday, September 12, 2020 at 10:57 am

      The start point should always be “what problem are you trying to solve?”, and then “whose problem is it?”

      If Indonesia suddenly decided to develop Batam (opposite Singapore) into a Singapore 2.0, or if Malaysia decided to build a canal across Malay peninsula (probably unlikely), where would your Kra canal be then in terms of profitability?

      Any project like this can’t be a solo project, nor an extension of Chinese Communist imperialism.

  2. Martin

    Saturday, September 12, 2020 at 11:08 am

    Fully agree it will never be cost effective. Just waste and damage the environment. Why spend money for investigation in this kind of project that will never realize. The ones that will make money is only the people making this investigation. Then the case will be closed but the people happy that still make some money
    The route around Singapore is too short to make a channel to save cost
    China will of course benefit economically on this project.
    Scrap It

  3. Rinky Stingpiece

    Saturday, September 12, 2020 at 11:36 am

    I’ve changed my mind? Why won’t you publish it?
    You didn’t ask me before publishing that. I could have written something more considered and balanced.

  4. EdwardV

    Saturday, September 12, 2020 at 9:31 pm

    No doubt economics is the main point, but there are others that should play a part in any decision. Most everyone agrees a canal would be an ecological disaster for the area. There is the issue of the separatists and creating a natural border which would embolden them. There is also the whole Chinese debt trap issue which should really matter. The canal not only has to cover its cost but also the huge interest payment that comes with these Chinese loans. There are also some serious questions about quality control with many past projects completed by these Chinese contractors. Same with issue all of these projects are mostly completed with Chinese not native labor. Last there is the consideration needed about future sovereignty issues. Any Chinese loan comes with the provision the canal becomes Chinese property if Thailand fails to make the payments. There is also the theory the Chinese might support the separatists in order to confiscate the canal in the name of protecting their investment (see the US vs Colombia via the Panama Canal). The Chinese at the very least could demand Thailand crush the separatists to protect their investment as they are demanding in Pakistan. Last the canal would become a first target in any war between China and India. Nothing like seeing your huge investment being blown to bits.

  5. Rinky Stingpiece

    Monday, September 14, 2020 at 9:16 am

    You still haven’t posted my “right to reply” to my own involuntary article that I don’t get paid for.

    You know the one where I talk about national parks, and multi-national collaboration with Singapore, Malaysia, Japan, Hollamd, UK, Denmark to stop this being just another Chinese geopolitics debt trap thing.

    What’s that all about then?

  6. Jackkreng40

    Monday, September 14, 2020 at 5:26 pm

    Kra canal is a most cost effective to built. The canal will reduce travel time and shipping cost when comprared to rounding thruogh Singspore to get to Bay of Bengal. As to the danger of Thai Southern Muslim separatist taking this opportunity to split Thailand at the Kra canal that is an unfounded fear.If Thailand have a modern and strong econmic and military presences around the canal the sepatist split at the canal will not happen.Suez canal is a good example.Thailand is not the old weak Columbia of 19th century that lost the Panama canal.

    • EdwardV

      Wednesday, September 16, 2020 at 11:07 pm

      Why is the canal cost effective to build? The current estimates are in the $28-30 billion USD range, that’s not cost effective in anyone’s book. On top of that, canals have huge maintenance costs, they need constant dredging. These “mega” projects always run over budget. Sometimes to a huge degree. Also the Chinese contractors don’t have a good record of staying on budget either. Every study to date has shown the numbers don’t work, that the canal isn’t cost effective. Hence why Thailand still hasn’t moved forward after all these decades. As to travel time, that’s a laugh. It’s estimated to only save 2-3 days of transit time. The Suez canal saves about 20 days, while the Panama canal saves 3-5 months of shipping time. It’s the reason the Suez and Panama canals can charge huge fees, while the Kra canal won’t be able to do so. As to the separatists, Thailand has had a strong economy and military presence in the area for a couple of decades now and have yet to quell the violence or unrest. The actual facts don’t support your claim. Actually the Suez canal works against your argument. Egypt’s Sini peninsula is a hot bed of unrest, violence and rebellion for decades. Last the Colombia analogy. Yes they are in very different situation than Thailand. However that just means the potential for a takeover would happen after construction and not before like with Colombia. Besides the fact all China has to do is wait for Thailand to default on the payment. The Chinese can easily start supplying money and weapons to the separatists if they so choose. Wait a little while and then move in and scoop up the canal in the interest of protecting their investment. Oh and don’t for a minute think the Chinese are your friends and would never do such a thing, The Chinese have no true friends. They only have interests and nothing stands in the way of those.

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