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India sees debt diplomacy at play in China-backed Thai canal, finds talk of gains exaggerated

The Kra canal project envisages a canal cutting across Thailand, and connecting the Gulf of Thailand to the Andaman Sea. It seeks to offer an alternative route to busy Malacca Strait.  

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New Delhi: China’s push to build the Kra canal with Thailand, which would offer an alternative route to the busy Malacca Strait, is part of Beijing’s ‘debt diplomacy’ and could end up as a “White Elephant project”, an initial internal assessment by the Indian government says. 

The Kra canal project envisages a canal cutting across Thailand, and connecting the Gulf of Thailand to the Andaman Sea.  

Like several other projects, the Kra Canal project is also part of China’s Belt and Road Initiative, and is being touted as a new gateway to China’s 21st century Maritime Silk Road.

There is a growing belief that the canal could end up being the next front in the India-China standoff

New Delhi, however, believes that the canal could end up as another ‘White Elephant project’, a reference to an idiom that seeks to describe an entity that is far costlier than it’s useful.  

“China’s ploy of debt diplomacy is obviously at play and it could end up being a white elephant project. The ports of Hambantota and Gwadar, which have been ceded to China by Sri Lanka and Pakistan, demonstrate the true motives behind the Kra canal — a ploy to gain sovereignty over the Kra Isthmus in exchange for debt — a scenario that would strike at the very viability of Thailand as a nation,” reads the internal assessment of the project by the defence and security establishment.

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Project will negatively affect Thailand: Assessment

China has projected the Kra canal as a dream project and a means to improve maritime transportation in the region, akin to the Suez and the Panama canals, the assessment says. 

It adds that like its other projects, Beijing is flaunting it as an excellent opportunity for Thailand to enhance its economic potential by affording financial gain to maritime traders and charging toll fees and port usage charges. China also claims that the project will lead to development of the Kra Isthmus region and generate large employment opportunities for local residents. 

“It is also claimed that the canal will greatly benefit East Asian countries and littorals of IOR (Indian Ocean Rim Association) since the canal would result in reducing maritime transportation costs,” reads the Indian government’s internal assessment. “This saving has been described as close to 1,200 km in distance and 72 hours saving in time, to reach the Indian Ocean.”

Stating the geo-strategic significance of the project, the assessment mentions that Thailand, located in Southeast Asia, has the South China Sea (SCS) to the East and Andaman Sea to the West. 

“There are presently three major Straits in the region: Malacca, Sunda and Lombok. The preponderance of maritime trade passes through Malacca Strait, which is the busiest in the world,” the assessment reads. “The proposed Kra canal, if constructed, would bifurcate Thailand’s Kra isthmus and directly connect the SCS and Andaman Sea, bypassing Malacca.”

The assessment notes that the benefits being claimed by the proponents of the Kra canal may not be completely true and are “visibly exaggerated”. 

This project is likely to cause major environmental issues for Thailand, and would also negatively affect marine ecology and tourist sites (over 20 per cent of Thailand’s GDP is based on tourism), it says.

Geo-politically, the project may end up as another bone of contention in the already fragile Southeast Asia, since it may negatively affect the economies of Singapore and Malaysia, the assessment adds.

‘Benefits greatly exaggerated’

The assessment says that the most overstated claim about the Kra canal is its financial viability and the savings in distance and time expected for the merchant marine. 

“Firstly, the total distance saved by routing maritime traffic through Kra Canal instead of transiting through the Malacca Strait is less than 500 kilometres. To make matters worse, when this distance is translated into actual transit time of merchant ships, the resultant saving in time is well under 10 hours. 

“This is because merchant ships transiting through the much wider Malacca Strait do so at continuous high speeds of over 25km per hour. However, the Kra canal will be excavated through the Kra Isthmus and will be a very narrow channel of water through which ships would have to proceed at ‘canal speed’, around 10-12 km per hour,” it says.

The assessment also notes that there are likely to be delays in embarking and disembarking ‘pilots’, expert mariners who guide ships through canals, and also when ships wait in line for their turn to start the journey through the canal. 

Giving a cost analysis, it says that one will have to look at the financial viability and the net saving in costs that will accrue to the merchant marine. 

“One must keep in mind that sea passage through the Malacca Strait is free of cost since it is an international strait. On the other hand, the expected $30 billion cost of the Kra canal will result in heavy charges being levied on merchant ships transiting through the canal, similar to the Panama and Suez canals,” it adds. “Both these canals presently charge in excess of $5,00,000 per transit for a normal sized merchant vessel and it is very likely that the Kra canal will charge at least these rates, if not much higher.”

Given that the route through the Kra canal will only result in a saving of 10 hours for merchant traffic, as compared to the Malacca Strait, the cost of fuel saved is likely to be only around $25,000, a fraction of the transit cost of over $500,000, it added. 

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  1. Kra canal is a win-win- for China but a lose-lose for Thailand primarily designed
    for China to circumvent Malacca bottlenecks at Thailand’s expense:

  2. how come the indians has so much to say when the whole India is in a mess? Its not like u all are managing the country well to start looking at what others are doing with theirs. Thailand leadership are 100x better and wiser and I am sure they dont need India input.

  3. The Southern provinces of Thailand are Muslim-dominated and the Kra canal will create a geographic separation from the Buddhist dominated provinces. There is already a soft separatist movement underway — I dont think the Thai govt is so gullible that they would let go of this strategic location (close to Malacca) in return for Chinese debt. Sometimes geopolitics create their own anti-chinese counter-balances.

  4. India is the biggest beneficiary of BRI related loan, while telling other countries the loans could be a debt trap.

  5. Thailand has already rejected the project as it may lead to secessionist tendencies with China interfering on the side of secessionists. It has happened before with the Panama canal where the US was the villain. Thailand will be foolish not to learn from this.

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