|The opening the sky train last month was
somewhat of a milestone for Thailand. It marked one of the
few examples in recent history of the actual completion of a
mega-project. Others, like the new airport and the moribund
Hopewell elevated railway project, are still only distant dreams.
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.Basic factors
| An artist's coneption
of the proposed Kra
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
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
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.Crunching the numbers
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
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
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.
Know these words and
an important event in the development or history
not active or growing
a narrow body of land with water on both sides
which connects two larger bodies of land
brought back to life; revived
an analysis conducted to determine
whether or not a proposed project is practical
what might be expected
not taken seriously
evaluating; determining the worth or accuracy of
(of information) made widely known
making regular journeys or trips
to make possible; to make convenient
(informal) statistical analysis
expecting unrealistically good
an exaggeration; an unrealistic expectation
not central to; not as important as something
to persuade or convince; to cause interest in
neutral; not favouring one side or
OUR STORIES FROM THE
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
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
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?
February 13, 1999
a time of little or no economic growth; a
planned or done together with others
to gather together
Let's give Kra canal project a miss
Kowit Sanandang (Business Editor, Bangkok
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
February 13, 1999
•This lesson was prepared by Acharn Terry Fredrickson, BA
Stanford, MA (TESL) University of Minnesota, Manager of the
Educational Services Department at the Bangkok Post and general
editor of this programme.
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monetary and fiscal policy
fiscal policy refers to
government budgets and spending; monetary policy refers to the
determination of the money supply, interest rates, and the value of
don’t believe or accept
to actually happen
an extremely unrealistic idea
functional; able to conduct