The all-time champion for an on-again, off-again mega-project is the building of a canal across the Kra isthmus, a narrow piece of land connecting the upper and lower southern provinces. First proposed more than 300 years ago, the dream has been resurrected countless times ever since.

Get prepared for another. Three days from now, the findings of a year-long 150-million baht Kra Canal pre-feasibility study are scheduled to be released in Songkhla. (Presumably, the term "pre-feasibility" was used because only the government can order an official feasibility study.) Since the study’s main sponsor, the Japan-based Global Infrastructure Fund, is a long-time proponent of the project, don’t be surprised if the findings favour the building of the canal.

That doesn’t mean that the results can be dismissed lightly, however. By all indications, the report is serious and comprehensive. Prepared with the help of Thai academics and foreign consultants, the ten-chapter report goes far beyond economic and engineering considerations, looking also at the canal’s likely social, political and environmental impact.

The report should make interesting reading and I hope it receives wide media coverage. Below are some things to consider in assessing the report’s conclusions on the economic viability of the project.

An artist's coneption of the proposed Kra Canal.

Whether the report ends up supporting or challenging the practicality of the project, it is certain to consider a number of basic factors. These include an overall rationale for the canal, its possible routes, its dimensions, its projected construction costs, the time it is likely to take to complete it, the amount of traffic projected to move through it, its estimated economic returns, and, of course, where the money is likely to come from.

The merits of a Kra Canal have already been widely publicised by the project’s advocates. A canal through southern Thailand, they say, could save from one to three days of travel time for ships plying the waters between the Middle East and Japan. It would also allow them to avoid the often hazardous waters of the crowded Straits of Malacca. Attracting even twenty to twenty-five percent of current traffic through the Straits, say proponents, could earn the country considerable revenue.

Thus far, three potential routes, all about 100 kilometres long, have received serious consideration – from Ranong to Chumphon, from Phang Nga to Surat Thani and from Satun to Songkhla. The completed canal would likely have to be about 30 metres deep and 190 to 200 metres wide in order to facilitate the flow of two-way traffic.

Estimates for the total cost of building the canal range between 400 and 800 billion baht. Construction is projected to last anywhere from 10 to 20 years.

However, say canal supporters, once the canal is fully functional, revenue could approach 200 billion baht a year. A large oil tanker, for example, might pay several million baht for a single passage. Revenue, of course, depends on traffic. Here, estimates vary dramatically, ranging from a low of about 10,000 ships a year to a high of 220,000.

Where would the funding come from? Japan has been suggested to be a likely source for a significant portion since its shippers would benefit the most. International funds such as the Organisation for Economic Co-operation and Development, the World Bank, the Asian Development Bank and the International Finance Corporation have also been mentioned as possible contributors. This section of the report will obviously receive some of the closest scrutiny.

Ultimately, the assessment of economic feasibility of the project is likely to hinge on the traffic projected to pass through the canal. To help us evaluate the conclusions reached in the upcoming report, let’s do some preliminary number crunching of our own.

As a Bangkok Post reader pointed out last year in a letter to Postbag, the upper estimate of 220,000 ships per year seems wildly optimistic. That would mean 25 ships per hour or one ship every 2.5 minutes each day for the entire year. And remember these are not small fishing boats we’re talking about! Even the often-quoted figure of 100,000 ships seems a stretch.

Curious, I checked the traffic in two of the world’s most famous waterways, the Suez and Panama Canals. According to Egyptian Central Bank figures, 13,472 ships – about 37 a day – passed through the Suez Canal in 1998. Interestingly, only 2,127 of these were oil tankers.

As for the Panama Canal, the latest figures show a daily average of about 30 ships or slightly over 10,000 per year. Thus, an annual figure of 100,000 would be fully four times the current combined traffic of the Suez and Panama Canals.

Of course, proponents will quickly point out that traffic figures for the Kra Canal are based on estimates beginning a minimum of 15 years in the future. Still, if figures for the Suez Canal are in any way relevant, that could be worrisome too. Annual traffic through that canal has actually declined by 4000 ships since 1991.

Projections so far into the future are also very problematic for calculating construction expenses. You will recall the sky train ended up costing almost twice the original estimate and construction of that project took only three and a half years.

As for funding, it is important to note that many of the potential benefits cited by project supporters are peripheral to the economic success of the canal itself. For example, some supporters claim that over 20 years the project could provide employment for between three to five million people. While this might be of importance to organisations like the World Bank, it would hardly move hard-headed investors eager for a good return.

This is not to say that the project should not be carried out. It only points out the need for intense scrutiny by unbiased experts. Hopefully, the soon-to-be released report will provide a good starting point.

The Kra Canal proposal has provoked considerable debate over the years on the pages of the Bangkok Post. Here are excerpts from two opposing viewpoints that appeared early last year.

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Shortcut to prosperity

A large ship nears the end of its journey through the Panama Canal running up charges which could easily approach one million baht. Analysts wonder how many such ships might be attracted to the proposed Kra Canal and how many of them canal authorities could practically handle.

Kasem Chandranoi
The dredging of a canal across the Kra isthmus, the narrowest part of southern Thailand, is important, particularly during the current economic stagnation. The plan was raised centuries ago in the reign of King Narai the Great when trade with France was at its height.

The possibility of the project was raised again recently by a volunteer group under the Science Association of Thailand. At a seminar, the group said the project would create jobs that are needed in times of the economic crisis and would stimulate the economy.

If the Kra Canal project materialises, it may attract up to 100,000 ships that normally follow a longer and more hazardous route via the Straits of Malacca every year.

It may be an overstatement to say that the Kra Canal will bring wealth to the country, but it cannot be denied that the canal will attract business from all over the world, particularly from Asian countries such as China, Japan, Korea and Indochina.

The Kra Canal project has been debated for more than 321 years and it is high time it was put into action. For sure, a concerted effort is needed to mobilise funds for such a mega-project, but members of Parliament, with their power and influence, are capable of getting their wealthy and powerful businessmen to participate.

Considering the fact that the canal can cut the travel time from 2,000 km to merely 100 km or save two to three days journey, it will not be too difficult to persuade Asian countries to co-invest and share the profit. The project is a good solution for Asian countries to help one another get out of the economic crisis. Thailand may share 51 percent of the cost of construction while the remaining is divided among its Asian counterparts.

At present, the Strait of Malacca is seriously congested, causing 149 collisions in Indonesia, Singapore and Malaysia. The Kra Canal would greatly help ease the traffic in the area.

Academics estimate the construction cost at 500 billion baht and the project would take seven to 10 years to complete. Apart from the passage fees, industries around the area will bring in revenue of up to 25 to 100 billion baht per year. The canal will promote cultural exchange, as some 400 million Asians can be expected to visit pass through its ports.

We have to bear in mind that we owe the IMF 900 billion baht. How many years will it take to pay off this debt if we refuse to launch such a promising and hugely profitable project?

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Let's give Kra canal project a miss

Kowit Sanandang (Business Editor, Bangkok Post)
Last week, it was mentioned here the Thai government needs to relax fiscal and monetary policies which would lead to spending more to help revive the country's sagging economy.

Of course now everybody is looking for projects to spend on but I am amazed by a proposal by many quarters to implement the so-called Kra canal project.

Certainly, the proponents of the project would mention all the benefits the country would gain if it is implemented. We hear the dredging of a canal across the Kra Isthmus in Ranong province to link the Gulf of Thailand with the Andaman Sea would create jobs, investment and help stimulate the economy.

The canal may attract up to 100,000 ships and earn up to 100 billion baht in revenue from industries around the area in addition to ship passage fees.

Sounds impressive, but I don't buy the canal idea because of two major reasons. Firstly, I do not believe the benefits the supporters are expecting the country to gain from the canal, will materialise. It's more or less a pipe dream. Secondly, the risk to the environment is too great for the country and the people to bear.

I am not alone on this because the country's economic planner, the National Economic and Social Development Board (NESDB) has repeatedly said the canal is not viable due to, among other things, the size of the investment required and the long period before investors get any returns. The latest estimate of the capital outlay could be as high as 500-800 billion baht.

Investors must have that amount of financing in hand because this kind of a project is unlike other projects in the sense that it must be 100% complete in order to be operational and generate any income at all.

Long-term prospects of the canal are changing, a recent study by Chulalongkorn University shows. Currently lower than 500,000-ton oil vessels are plying this route due to the economic slump and in the distant future, less oil might be transported because this commodity will play a lesser role as the world's energy source. And the smaller oil tankers will compare the passage fee with what they can save by shortening the route by a day or two. It's unlikely that we can charge cheap passage fee because of the canal's heavy cost of investment.