Can you dig it?

Can you dig it?

Talk of a canal across Thailand resurfaces, this time with a new name, a new route and high-powered backers who have strong ties to China.

An artist's impression shows a version of the Kra Canal, which has been the subject of billions of baht worth of taxpayer-funded studies over the past six decades. photo: photographer
An artist's impression shows a version of the Kra Canal, which has been the subject of billions of baht worth of taxpayer-funded studies over the past six decades. photo: photographer

Asia's most ambitious never-built megaproject is back in the news, this time with some high-powered backing and the potential to be blessed by China as part of its Belt and Road programme. But that won't make building a canal across Thailand any easier.

The tens of billions of dollars in costs aside, a canal will require a comprehensive feasibility study that seriously addresses human and environmental impacts, as well as multiple sources of funding in order to reduce reliance on any one source, in other words China, say experts.

The plan for a 135-kilometre shipping canal across Thailand's narrows Isthmus of Kra to link the Pacific and Indian oceans is hardly new. Popularly known as the Kra Canal, it has been the subject of countless studies, all of them ultimately shelved, that swallowed up billions of baht of Thai taxpayers' money over the last six decades.

In recent years, however, the idea of a canal has been given a new lifeline by China's Belt and Road and Maritime Silk Road initiatives. As part of that programme, China in January this year released plans for three ocean-based "blue economic passages". The Kra Canal was not one of them, but Beijing did mention its willingness to look at multi-dimensional approaches to maritime cooperation.

That was enough to revive the spirits of canal promoters in Thailand. Academics from King Mongkut's Institute of Technology Ladkrabang and the newly formed Thai Canal Association (TCA) -- consisting of retired generals, politicians and prominent businessmen with Chinese ties -- are now pushing for an economic feasibility study coupled with an environmental impact assessment (EIA) for the scheme.

But even though both Thailand and China stand to be among the winners if this Asian version of the Panama or Suez canals is built, relying solely on the Beijing-backed Asian Infrastructure Investment Bank (AIIB) to fund a canal or Chinese firms to build it would be ill-advised, say experts.

They point to the example of Nicaragua, which in 2013 awarded a concession for a huge canal project to a Hong Kong-based group controlled by Chinese billionaire Wang Jing. The project has faced complaints about lack of transparency, potential environmental destruction and human rights abuses. The financial viability is highly questionable and Mr Wang has scarcely been seen in the past two years after losing up to 80% of his wealth in stock market setbacks. It is not clear if the project will ever start.

The TCA signalled its seriousness by staging an international conference on the Thai Canal last month in Bangkok, where the featured speaker was Ilya Espino de Marotta, executive vice-president of the Panama Canal Expansion Project.

"A sea-level canal (in Thailand) is possible because the topography allows it and canals are good because if you do good market research, you know you are going to have customers and it is good for the world's environment because you usually provide a shorter route which means there are lower CO2 emissions," she told Asia Focus on the sidelines of the event.

Ms Espino de Marotta oversaw all aspects of the US$5.2-billion Panama Canal expansion from its start in 2007 to its successful completion in June 2016.

Pakdee Tanapura, vice-president of the economic board of the TCA and head of the study team, said shipping times between the South China Sea and the Andaman Sea could be reduced by at least two or three days, with the distance cut by at least 1,200 kilometres compared with the narrow, traffic-choked, and piracy-prone Strait of Malacca. If built, the Thai Canal would be roughly at the same latitude as Phuket.

The Thai Canal would link China, Japan and other East Asian nations with the oil fields of the Middle East and major markets in Europe, Africa and India. Equally significantly, it would provide an alternative to the Strait of Malacca, the world's busiest shipping route, through which a record 84,000 vessels passed last year.

A study by the Maritime Institute of Malaysia forecasts that by 2025, about 140,000 vessels and freighters will be passing through the Strait of Malacca, beyond its capacity of 120,000.

"The (Thai) canal can provide economies of scale because moving goods through water is more advantageous than by land as it should reduce shipping costs," Ms Espino de Marotta said.

"In Panama, our canal has provided a lot of good for the country because the tolls and the revenues that come in are from the users, not internal, so it is an injection of money into the country."

Since the Panama Canal is a non-profit organisation, every penny in excess of operating, maintenance and investment costs goes straight to the Panamanian government, to be invested in whatever it sees fit. Ports and related businesses also benefit from extra income from transshipment.

In Thailand's case, a rail link from the canal to the Kunming-Singapore rail line could provide additional economic benefits, promoters say.

If the canal is run by a for-profit organisation, the benefits to the public would depend a lot on how the government taxes it and how that revenue is distributed, Ms Espino de Marotta said. But if it is a non-profit or government entity, all the revenues will go to the project and the public will benefit.

A project on such a huge scale cannot go ahead, of course, without considering the human and environmental impact. The Panama Canal expansion project ultimately involved the relocation of only four families, making it "very easy", the Panamanian executive said.

"I don't know how many people would be affected by the Thai Canal but one of the first things you have to do before starting any project would be the social and environmental part. You need to make sure you find a route that makes the canal economically feasible and try to have the least impact in terms of the environment and the people," she said.

"What we did with the few people we relocated is that we actually purchased the land, gave them the land title and built them a house to a standard that was better than what they had and according to their needs."

If they were fishermen, a place where they could fish was sought, and if they were farmers, relocating them to a place where they could grow crops was the goal.

The project did involve a major reforestation project that lasted five years and relied heavily on people from the affected communities.

"One year for planting and four years for maintenance, and they earned income for those five years and were also taught how to do this type of project," said Ms Espino de Marotta. "Some of them even grew some crops that they can sell like coffee or different kinds of vegetables or fruits, which means they can make an income for life."

When the original Panama Canal was built in 1904 and opened in 1914, the country was still part of Colombia. The United States saw a unique opportunity -- all the rights to the canal were transferred to the Americans in return for their guarantee of Panama's independence. The US owned and administered the Panama Canal Zone, which was finally returned to Panama in 1979, but full Panamanian control did not take effect until 1999.

"The canal was built by them so they took advantage or they reaped the benefit for 80-something years before they returned it to Panama, so this second time around, we did everything on our own and we did not want any influence from foreign investors over the canal's expansion," said Ms Espino de Marotta.

For the expansion, she said, Panama self-financed $2.9 billion and borrowed $2.3 billion from banks, repayable over 20 years with a 10-year grace period.

"If you are going to partner with another government, definitely it would have to be with no rights to the land as Nicaragua tried to do recently," she added.

Ms Espino de Marotta noted that Panama borrrowed money from five different multilateral lenders such as the World Bank so "we do not owe anything to any country", and that is something Thailand should take into an account.

"We were going to go with private banking first but it was too risky, so we went with multilateral agencies, but we never considered another country partnering with us," she said.

"We did five years and $40 million worth of in-depth studies on finance, marketing, EIA, social and engineering considerations before we started the expansion project," she said. "The current studies for the Thai Canal, for me, still look more academic and unless you can tell the people the resources of the study, you are not going to get the support that you need."

It took the backers of the Panama Canal expansion project six months to explain to people what it was all about before the issue was put to a referendum.

So who is interested in the Thai Canal? Dr Norio Yamamoto, president of the Japanese Global Infrastructure Fund Foundation, told Asia Focus that his group had long been interested in the idea, while the AIIB and ADB are the other prime candidates.

Rolf-Dieter Daniel, president of the European Association for Business and Commerce (EABC) in Thailand, said its members were very interested in helping to realise the project.

"We would try to bring knowhow from Europe to Thailand because we believe the canal will provide European industries with more opportunity in the region from this giant infrastructure plan," Georg Wolff, chairman of the rail and road infrastructure working group of the EABC, told Asia Focus.

"The project will bring in money for Thai taxpayers and it would be easy to find international funding because it is to the advantage of whoever is in the chain of international trade."

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