kracal-silkroad

THE KRA CANAL AND THE REFORM OF THAILAND

Thailand needs to turn its crisis into a situation of opportunity. It is important that Thailand accelerate its economic growth, assuring more economic stability in the long term.

Therefore, a large-scale infrastructure project is key to instigate significant change in the Thai economy:

  1. The Kra Canal Project, during the first ten years following the construction of the canal itself, will be able to create around 3 million jobs. 30,000 persons will be employed in the management of the Canal. Within 5 years, 150,000 persons is expected to be employed in the development of industrial projects in the area, of these will be middle and high level echelons. This number will increase to 400,000 within 10 years. Once the Special Economic Zone is set up, there will be employment for at least one million workers. In reality, the multiple spin-off effect of this large-scale infrastructure project is likely to create employment on all levels for approximately 3 million people. Within 10-20 years following the opening of the Kra Canal, workers that would have been employed in the first phase of the Kra Canal project would naturally act as the catalyst for change in the Thai labor force, changing it from an unqualified and backward labor force to one with high qualifications, from an uneducated work force to one with a high level of education.
  1. The national revenue for the country would be higher because of the ability to collect more taxes from the industrial sector and investments in the Special Economic Zone. As a result, increase in government revenue would necessarily follow. It is interesting to note that the 70% of the national budget that is used to pay monthly salaries of civil servants would drop to only 30%. While the other 70% of the national budget would be used to finance the development of the country, the reversal of the present situation.
  1. Thailand would become more competitive thanks to added value coming from maritime cargo transportation. Thailand would become an important link in the international sea lane of communication. Logistics costs would drop to the level of 8% of the GDP, a rate similar to that of developed countries.
  1. Develop national competitiveness in 4 areas

4.1 Economic Performance

4.2 Efficiency of the Public Sector

4.3 Efficiency of the Business Sector

4.4 Efficiency of the Infrastructures

  1. Development of Special Economic Zone within the Kra Canal Zone would
    lead to a major reform in the administrative system, creating a new administration within the present system. Once recognised as workable, it is likely that the new administrative system would be brought in to bring about reform in other parts of the country, a major reform that would be there to stay. This would be change based on reason and without conflict and violence.
  1. By investing in the Kra Canal project in order to bring about modern reform in Thailand, the country’s educational system would be forced to undergo major change to upgrade the general educational level of the Thai population. There would lead to a generation change, a new generation of Thai people, modern and internationalized world citizens at the same time.

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Partially reporduced from original post kracanal-maritimesilkroad.com

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A Thai Canal to Be Part of China’s Silk Road

Published Wed, Jan 27, 2016  |  , Senior Correspondent

t was an idea that first emerged in the 17th century; but it may take 21st century technology to turn it into reality.

The idea is to build a canal across the less-than-30 mile Kra Isthmus in Thailand – connecting the Andaman Sea in the Indian Ocean to the South China Sea.

The logic supporting the Thai Canal, or Kra Canal, is solid – ships would no longer have to go the long way around Singapore, through the pirate-infested chokepoint known as the Strait of Malacca.

Shippers could shave off three or four days from their travel time, translating to a $300,000 savings on the cost of a 100,000 ton cargo ship voyage.

More than 15 million barrels of oil per day – about 17% of the world’s daily production – are transported through the Strait alone.

The Kra Canal would also alleviate congestion. The Strait can currently accommodate about 122,000 ships. However, by 2025, roughly 140,000 ships will be plying the waters.

Delay, Delay, Delay

So why hasn’t this project moved forward yet?

One reason is money. The canal is estimated to cost at least $20 to $30 billion to build.

And of course, there’s the matter of complicated Thai politics. Some in Thailand say the canal will divide the nation into two countries.

Then there’s the debate over how the economic benefits of the canal will be divvied up.

From a practical viewpoint, there are 13 proposed routes through the Kai Isthmus as to where the canal would actually go. And no surprise – neighboring countries, Singapore and Malaysia, who want to keep benefiting from the ship traffic through the Strait, are strongly opposed to the canal.

China’s Maritime Silk Road

Overlaying this is the geopolitical battle between China and the United States. for influence in the region.

China would like to make the proposed canal a part of its Maritime Silk Road. This was suggested in the ambitious plan unveiled in 2013 by Chinese President Xi Jinping – a plan to create the modern-day equivalent of the historic Silk Road. The plan aimed at having new land and water routes tying China to trading partners all the way to Europe.

The China-led Asian Infrastructure Bank is the perfect financing tool for such a project. I expect the project to get a push, as China needs to play a little catch-up.

In neighboring Vietnam, the government has given the go-ahead for a new $2.5 billion deep water port – the Hon Khoai Port – to be built in Vietnam’s southern most province, Ca Mau. It’s believed that 85% of the funding for it will come from the U.S. Export-Import Bank and that the project will be led by American engineering giant Bechtel.

The Vietnamese port could stand on its own merits as a port for coal. But half of its berths are slated for non-coal items. Ironically, that means it will absolutely flourish with the building of a China-backed Kra Canal. See the map below.

Proposed Map of Kra Canal project

Will It Be Built?

There was a supposed agreement this past summer between Thailand’s Asia Union Group and China-led China-Thailand Kra Infrastructure & Development to build the canal. The Chinese company is already building other infrastructure in Thailand.

But within days, there were denials of any deal. Thailand likely backed away under intense diplomatic pressure from the United States.

But sooner or later, the Thai government will give a China-led project the thumbs-up. The economic opportunity to become a regional maritime center, surpassing Singapore and Malaysia, is going to be too good to pass up. And China is patient enough to wait for Thailand’s approval.

Good investing,

Tim Maverick

Source wallstreetdaily.com

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