Renewed hype over China-Thai canal project: 5 things about the Kra Canal

Will the Kra Canal ever be built, or is it just a pipe dream?

The idea of building a canal through the Kra Isthmus came up hundreds of years ago, and it has been resurrected many times since.

Chinese media reported this week that two organisations - the China-Thailand Kra Infrastructure Investment and Development, and Asia Union Group - had signed a memorandum of understanding to construct the canal, but the Chinese government quickly said it was not involved in the project.

If the canal materialises, Singapore will certainly be impacted as ships will be able to bypass Singapore's port and the Straits of Malacca.

Here is more about the elusive canal:

1. What is the Kra Canal?

The Kra Canal would cut through Thailand's Kra Isthmus, the narrowest neck of South Thailand, connecting the Gulf of Thailand with the Andaman Sea.

Approximately 102km long, it could take eight to 10 years to build. Current estimates put building costs at about US$28 billion (S$37 billion).

Skipping Singapore and Peninsula Malaysia, ships could cut up to 72 hours of sailing time or 1,200km in distance.

They will also be able to avoid the congested Straits of Malacca, which has seen increased pirate activity in recent years.

2. A project with 400 years of history

The idea was first mooted by Siamese King Narai as far back as 1677.

Every so often the idea resurfaces, for example in the 1870s, after the Suez Canal demonstrated that a man-made canal was viable.

The 1946 Anglo-Thai treaty forbade the Siamese government from building such a canal without prior agreement of the British government.

The British deemed the canal a threat to the dominance of Singapore - then a British colony - as a regional shipping hub.

The idea was revived in the 1950s and the 1970s, and the thread was picked up in the 1980s by the Japanese. It made an appearance every decade or so, and often when a new administration comes into power in Thailand.

As China's economy boomed, the Thais have turned to the Chinese to lend support the project.

Proponents of the project continue to push for it. Last year, businessman Pakdee Tanapura, a member of a Kra Canal Committee, told The Straits Times that the canal could be part of China's Maritime Silk Route,which is aimed at improving connectivity and trade through the South China Sea.

3. Impact on Singapore

The waterway is likely to reduce the number of ships travelling through Singapore. The maritime industry contributed about 7 per cent to Singapore's GDP in 2014.

But some experts say the impact may be limited.

Dr Li Zhenfu from Dalian Maritime University said: "Distance is important but ships have to consider services and facilities as well. The foundation and reputation that Singapore's port has built up cannot be replicated immediately."

4. Impact for Thailand and China

Thailand's economy could do with a boost from such a project, and potential benefits include port fees, tolls, foreign investment and infrastructure developments around the region.

For China, the shorter route would mean time and cost savings when importing oil from Africa and the Middle East. It could give a boost to China's ports in Shanghai, Hong Kong and Shenzhen.

5. Why it may never happen

Analysts say that for the cost of building the canal, the savings of around 72 hours for ships is not significant enough.

The Panama Canal cuts about 12,000km off a journey by bypassing South America, while the Suez took 10,000km off a trip between Europe and South Asia.

There are also environmental consequences and security considerations for the Kra Canal.

Many in the Thai establishment would not be happy with a canal that appears to separate the country's four southernmost provinces from the rest of the country.

The provinces have historically resisted Bangkok's rule and are torn by separatist insurgency.

If these obstacles were overcome, questions such as what to do with the tonnes of soil excavated and where to relocate millions of people who live along the proposed site still have to answered.