Kra Canal and the Transformation of Thai Maritime Transport

As we have already stated earlier, ships going through the Straits of Malacca carry more than 4.200 billion tons per annum. In value, they represent approximately 20% of world cargo. As of today, the Laem Chabang Port of Thailand services around 5.9 million containers (TEUs) per annum, ranking it 22nd in the world. The Laem Chabang Port represents the largest commercial port in Thailand and handling only exports and imports of Thailand. Vessels using the port are feeder ships that transfer their cargo onto larger ocean-going vessels at the Port of Singapore. Thailand has little opportunity to benefit from shipping traffic in the Straits of Malacca.
On a per annum basis, 10,426 vessels dock at the Laem Chabang Port, representing a total of some 70 million metric ton of goods (2012).

*Not including 814,970 cars/year

From the above table, one can see that a geographical advantage alone is not enough. There must also be economic opportunity and infrastructure.
In the case of Singapore, the Port is fortunate to be situated on the international Sea Lane of Communication. The Port was developed and has been offering quality services since long. Therefore, the Port of Singapore is a full-fledged Maritime Logistic Hub.
The development of Port Klang is another interesting example in that Malaysia is also geographically situated on the international Sea Lane of Communication. The Malaysian government decided to expand the facilities at Port Klang turning it into a large deep sea port to handle a wide variety of cargos (containers, liquid cargo, bulk cargo, etc.).
In the span of only 20 years, Klang Port now ranks 14th in the world. The volume of cargo is equivalent to more than 10 million containers (TEU). This very successful accomplishment has raised the GDP per capita, ranking Malaysia as 3rd among ASEAN countries, following Singapore (1st) and Brunei (2nd).

As aforementioned, the Laem Chabang Port is a feeder port. All import and export shipments, to and from Laem Chabang Port, have to pass through the Port of Singapore or Klang Port. Each year, Thailand exports and imports goods worth more than 13 billion baht per annum. To this figure, one still has to add approximately 15-18% to take into account the costs of shipping and logistics. In this manner, Thailand is, in effect, losing around 2-2.6 billion baht per year. More than 90% of the costs of shipping and logistics then become a significant income for foreign companies.
Should the Kra Canal be constructed, goods could be shipped directly from a port in Thailand directly out to its destination overseas without having to transit through a third country. This would reduce handling, logistics costs and in turn, production costs as well. In addition, any logistics costs incurred would remain within Thailand.

Table of Exports and Imports for Thailand

The construction of the Kra Canal and the development of special economic zones would add value to the Thai economy in many ways:

  1. The Kra Canal is situated on the international sea lane of communication and is under the sovereignty of Thailand. Instead of going through the Straits of Malacca, it could reduce shipping time by 48 hours. Investors would be able to receive return on their investments by collecting tolls directly from the ocean-going vessels.
  2. The Kra Canal is an important infrastructure project that can be part of the Infrastructure Stock which has a life span of hundreds of years and increased value with time.
  3. Open up a significant investment opportunity (approximately US $ 20 billion) which would be able to attract Foreign Direct Investments (FDI).
  4. The Kra Canal is a quality investment project that would be able to create at least 3 million employment opportunities.
  5. The Kra Canal project will revolutionize both the agricultural and industrial sectors.
  6. It will impact the way the country is managed. The administrative system will have to be modernized.
  7. The Kra Canal will help to better connect Thailand with the southwestern part of China. Chinese goods could go through the Laem Chabang Port or Sathahip Port to reach the Indian Ocean by way of the Kra Canal. This route is shorter for goods that would otherwise have to make their way from Kunming to Zhenchen or Hong Kong, thus reducing their transportation costs. Both Laem Chabang Port and Sathahip Deep Sea Port are ready to immediately accommodate transportation of cargo by either land or sea.

The Kra Canal enhance the significance of both Laem Chabang Port and Sathahip Port. Cargo transportation by land from the western part of China as well as cargo transportation by sea using the Malacca Straits together would transform

Thailand into an attractive Maritime Logistics Hub. At the same time, Port of Songkhla has the potential to handle up to more than 14 million barrels of oil per day coming from the Middle East and heading for the South China Sea. Songkhla could become an oil refining center of importance not less than Singapore.