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How a Thai canal could transform Southeast Asia

An idea to cut a channel a through southern Thailand could change the political and economic landscape of the whole region

Southeast Asia's importance as a major gateway for maritime trade is well appreciated. The Strait of Malacca is the doorway from the Indian Ocean to the broader Asia-Pacific region and enables the transport of oil and other strategic resources to East Asia's many ports, from Manila to Tokyo. It's not surprising then, that the idea of a canal through the Kra Isthmus in Thailand has been a topic of interest for seafarers, traders, and geo-strategists since roughly the late-17th century.

A glance at Southeast Asian geography, and the merits of such an idea are immediately apparent - doubly so to seafarers. The Kra Isthmus, a mere 44 kilometres at its thinnest point, would render the current necessity for navigating south and around the entire Malaysian peninsula in East-West transit obsolete, connecting the Andaman Sea in the Indian Ocean to the South China Sea. The fuel and time savings wouldn't be as great as they were in the case of the Panama or Suez canals, but a Thai Canal (also known as the Kra Canal) could assuage some of the overcrowding currently experienced in and near the Strait of Malacca.

So what's the problem?

So, if the canal is such a great idea, why hasn't it been built?

The answer to that lies partly in history, and partly in contemporary politics. In short, not everyone thinks it's such a great idea. One of the first serious attempts to study the feasibility of such a canal was conducted by the French engineer De Lamar in the late 17th century, at the request of King Narai of Siam. The idea was tabled due to its technological unfeasibility at the time. It resurfaced a century later under King Rama I, again to no avail. During this time, the Thai monarchy recognised the strategic importance of a canal in facilitating its own troop movements.

In the late 19th century, the British Empire - in the interests of protecting the dominance of Singapore as a major regional hub - agreed that it would not build a canal through the Kra Isthmus. This policy later crystallised as Article 7 of the 1946 Anglo-Thai Treaty which states that "The Siamese Government undertake[s] that no canal linking the Indian Ocean and Gulf of Siam shall be cut across Siamese territory without the prior concurrence of the Government of the United Kingdom".

In the 20th century, following European decolonisation and Thailand's emergence as a constitutional monarchy, the Thai canal project received little attention, at least until the 1980s. In October 1983, EIR and the Fusion Energy Foundation briefed Thailand's Ministry of Transportation on the construction of the canal. Their main pitch focused on the dynamism it would bring to the Thai economy. In the same decade Japanese engineering firms suggested the use of Peaceful Nuclear Explosives (PNE) to bore a path for the waterway through the mountainous terrain.

After a lull, the Asian financial crisis in the late 1990s reinvigorated interest in the canal. Japan's Global Infrastructure Fund (GIF) conducted a feasibility study, which estimated a cost of $20 billion for a 50-kilometre canal across the Kra Isthmus. During Thaksin Shinawatra's tenure from 2001 to his ouster in 2006, the project was once again placed on the backburner amid other, more-pressing issues. Yingluck Shinawatra's ascent to power has brought the canal back to the limelight. According to one expert, "Her party has voiced its commitment to reviewing and reinstating various development projects, including the Thai canal, which aimed to develop and mend the country's economy".

The creation of a canal isn't a geopolitical fait accompli by any means. Given the disruptive effect on the trade status quo emerging from such a canal, Thailand's partners in Asean and elsewhere in Asia have a variety of views on the project.

Winners and losers

For Malaysia and Singapore, debates on the canal are somewhat zero-sum, since diverting traffic and activity away from the tip of the Malaysian peninsula is detrimental to both their interests. The US Energy Information Administration notes that Malacca's importance to global energy trade isn't shrinking anytime soon; it writes that Malacca "is the key choke-point in Asia with an estimated 15.2 million bbl/d flow in 2011, compared to 13.8 million bbl/d in 2007". It remains the shortest route between Persian Gulf suppliers and East Asian oil consumers - something the Thai canal threatens very directly. Were the Thai waterway to be built, Malaysia and Singapore would suffer somewhat, but Malacca will always remain strategically important for trade between the Persian Gulf and Indonesia or Australia.

Myanmar, Cambodia, and Vietnam would benefit greatly from a canal. For Myanmar, its littoral remains isolated from the South China Sea nexus of the other Southeast Asian states, making trade between it and sea-based Southeast Asian partners reliant on the Malacca passage. The Thai canal would reduce the costs of sea-based trade significantly for Myanmar. Cambodia is already expected to galvanise economic growth along its coastal cities via the Greater Mekong Subregion Southern Economic Corridor (SEC) - a project the Thai Canal and the associated increase in maritime traffic along the Cambodian coast would only accelerate. Vietnam, which receives 90 per cent of all its consumable goods and commodities via the sea, could find itself on track to rival Singapore as a major Asia-Pacific trading hub.

India, Japan and China - all net importers of energy - would benefit from having trade traverse the Kra Isthmus as well. Thailand, which has enjoyed a strategic economic partnership with China, could easily pitch the project to Chinese investors. China, in an attempt to demonstrate regional leadership and goodwill towards Asean, would do well to provide capital backing - indeed, reports from the late 2000s appear to have anticipated this. For India, a Thai canal is a direct assist to its "Look-East" Policy, which promotes greater engagement with Southeast Asia. Given the current state of Indo-Vietnamese relations, the canal would also improve India's access to a major strategic partner on the South China Sea littoral.

Assuming that the Kra Isthmus would be subject to the same or at least a similar international regime of law as the Suez Canal, it would remain strategically insulated and open were conflict ever to evolve in the South China Sea. Currently, joint US-Indian patrols of the Straits of Malacca are a source of discomfort for China. The US doesn't have any bases in the immediate vicinity, but the Seventh Fleet's activities certainly necessitate a clear and open Malaccan passageway. For India, an excessive Chinese stake in the development of the Thai canal would lend credence to an additional pearl on the China's perceived "String of Pearls" strategy.

The debate on the canal also remains alive and well in Thailand, where proponents flaunt its economic benefit and opponents fear that a canal physically isolating the southern part of the country could galvanise separatist movements. There are five Muslim-majority districts south of the proposed canal. During the final years of Thaksin Shinawatra's tenure, the government cracked down on separatists on the Kra Isthmus. Since then, Thailand-Malaysia relations have become strained over Thai accusations that Malaysia supported separatists in the south. The construction of a canal in these circumstances could add physical isolation to what is now political isolation along ethnic lines - Thai separatists are largely ethnic Malay Muslims. The Thai canal thus remains a deeply polarising topic in Thailand.

If constructed, it would deeply transform the strategic and economic landscape of the Asia-Pacific. The onus is on Thailand to take the ultimate steps towards bringing the canal to reality, balancing its national security and economic interests in the process. The project also represents a significant opportunity for Southeast Asian multilateralism and cooperation. Asean could demonstrate its maturity as a regional institution by cooperating on the development of the canal (respecting its policy of "non-interference" in the affairs of member states). Additionally, India, Japan and China - given their interests in the development of such a canal - could contribute capital and political leverage in bringing this four-century-old idea to life. However, despite its great promise, the geopolitical implications of the Thai canal are every bit as delicate as the canal itself is transformative. Realistically, those hoping to see the Kra canal become a reality may have to wait a little longer.


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