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Economy

Kra Isthmus shortcut would mean big shifts in Southeast Asia

BEIJING -- The Kra Isthmus is rapidly becoming a focus of international interest as rumors swirl over plans to build a canal or a railroad across a strip of land less than 100km wide between the Andaman Sea, which is part of the Indian Ocean, and the Gulf of Thailand, an arm of the South China Sea.

     If such a project is completed, new shipping routes could open up that would offer an alternative to the Strait of Malacca. While the feasibility of building a shortcut is unclear, Chinese President Xi Jinping's One Belt, One Road initiative has clearly raised interest in the area.

     In mid-May, a rumor spread that Chinese and Thai companies had agreed to a joint study of the Kra Isthmus as a canal site. No information was given on which two corporations had reached a deal, and both governments denied involvement in any canal project.

     "The specifics of the agreement are national secrets and I cannot give you details," said a person in charge of the Chinese side over the phone before the connection was cut. Reportedly, the plan is to build a canal 102km long, 400 meters wide and 25 meters deep over 10 years.

Cut to the chase

If the plan were to come to fruition, providing a detour away from the Strait of Malacca, it could shorten the route between the Indian Ocean and mainland China by about 1,200km, or two to five days, cutting the cost of a 100,000-ton cargo ship voyage by about $300,000.

     The facts of the supposed agreement are not known. The rumor traces back to a photo from a signing ceremony that appeared on May 15 on the official Weibo microblog account of the Ningbo Maritime Safety Administration. Ningbo is a port city in Zhejiang Province. The photo appears to show representatives of Thailand's Asia Union Group and  China's China-Thailand Kra Infrastructure Investment & Development signing an agreement to construct a canal. But the photo was quickly deleted. At a regular news conference held immediately afterward, a spokesman for China's Ministry of Foreign Affairs said: "I have never heard about any government involvement" in the project. Thai Prime Minister Prayuth Chan-ocha also said there is no such plan, calling the rumor nonsense.

     The Nation, an English-language newspaper based in Thailand, reported in early June that the South Korean government had proposed building a railway across the isthmus. The Korean Railroad Research Institute and a Thai university will sign a memorandum on joint research and development of a 57km line through two adjoining provinces: Ranong Province on the Andaman Sea and Chumphon Province on the Gulf of Thailand. This plan is generally considered less harmful to the environment than a canal.

Winners and losers

Plans to build canals and the like in the area have been floated since the 17th century. None of the recent plans has ever gotten off the drawing board, insiders say, because of conflicts of interest among members of the overseas Chinese business community, who are key players in Southeast Asia's economies.

     A canal across the Kra Isthmus would benefit the Chinese business community in Thailand, but a shortcut that bypasses the Strait of Malacca sparks concern among businesspeople in Singapore over the city-state losing its importance as a trading hub. They fiercely oppose a canal. "Unless the Chinese business community in Southeast Asia achieves a consensus, no plan for development of the Kra Isthmus will come to pass," said an executive with an ethnic Chinese conglomerate in Thailand. 

     What makes the situation different today is Xi's One Belt, One Road plan, which seeks to improve land and sea links between China and Europe. This jives well with the goals of a Kra plan. With the new China-led Asian Infrastructure Investment Bank set to open for business soon, promoters of big regional projects will be ready with proposals.

     During his time as the top official in Fujian Province, the ancestral home of many overseas Chinese, Xi built a large personal network. If he were to exert his influence, Chinese business leaders in Southeast Asia might resolve their differences. Xi's ambitions could redraw the geopolitical map of Southeast Asia.

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