Bat­tle un­der­way for con­trol of Straits of Malacca

New Straits Times - - Business World -

this month, var­i­ous me­dia out­lets re­ported that China and Thai­land had signed an agree­ment to build the lon­gawaited Kra Canal.

How­ever, both China and Thai­land have de­nied this deal.

The Kra Canal is an es­ti­mated 100km-long canal cut­ting through south­ern Thai­land, link­ing the In­dian and Pa­cific Ocean. This idea has been mooted since the 17th cen­tury.

This canal would shorten travel time by 1,200km, or about five sail­ing days.

To­day, the Straits of Malacca is one of the busiest ship­ping routes in the world and, due to its depth (25m) and width re­stric­tions of 2.5km at it nar­row­est point, it is a true mar­itime bot­tle­neck!

Not sur­pris­ingly, the in­dus­try is keen on re­mov­ing this bot­tle­neck i n the l arge East-West trade.

The Kra Canal ben­e­fits ship­ping lines and com­mod­ity trade. This is due to its shorter ship­ping route; abil­ity to han­dle large con­tainer, bulk and oil & gas ves­sels; and risk man­age­ment by hav­ing an al­ter­na­tive to the straits.

Thai­land has the vi­sion of be­com­ing the l ogis­tics hub of Asean. Like Suez and Panama, the Kra Canal will make Thai­land au­to­mat­i­cally a mar­itime hub (which it is cur­rently not).

On the other hand, Sin­ga­pore is afraid of a fur­ther ero­sion of its trans­ship­ment func­tion, as it has a small home mar­ket and in­dus­trial clus­ter to rely on.

Malaysian ports will likely also see their trans­ship­ment vol­umes af­fected by this new canal, as a sig­nif­i­cant part of the ship­ping lines will switch to the Kra Canal route in­stead of sail­ing the straits via Sin­ga­pore.

Al­though I am con­fi­dent that the Kra Canal will ma­te­ri­alise one day, there are also var­i­ous other mega port projects in the pipe­line that will im­pact trade flows in the Straits of Malacca.

In Malaysia, the Me­laka Gate­way fea­tures a deep-sea port and cruise ter­mi­nal to be built on Pu­lau Me­laka off the coast of Me­laka. The project is a joint ven­ture be­tween the Malacca govern­ment’s KAJ Devel­op­ment Sdn Bhd and Chi­nese en­ergy com­pany Pow­erChina In­ter­na­tional.

MMC Corp Bhd, Sime Darby Bhd and Adani Ports and Spe­cial Eco­nomic Zone Ltd are plan­ning to de­velop a new port on Carey Is­land.

This port is po­si­tioned as an ex­pan­sion of Port Klang, but will be able to han­dle more cargo than North­port and West­ports com­bined.

Port of Kuala Tan­jung in North Su­ma­tra (In­done­sia) is a joint project be­tween In­done­sia’s Pelindo I and the Dutch Port of Rot­ter­dam.

Kuala Tan­jung is a deep-sea port that is en­vi­sioned to be the next mega trans­ship­ment hub that would be able to re­ceive next gen­er­a­tion con­tainer ves­sels and serve smaller con­tainer ves­sels from sur­round­ing South­east Asian coun­tries.

At a very strate­gic location, Dawei deep sea port in Myan­mar would al­low a su­pe­rior sea-rail or sea-road in­ter­modal con­nec­tion from Dawei, via Bangkok, all the way to China.

This project has fea­tured for many years in the news, but lack of agree­ment on ex­ter­nal fi­nanc­ing has re­sulted in the project not yet start­ing.

Fi­nally, Sin­ga­pore is ex­pand­ing its con­tainer ter­mi­nals through the devel­op­ment of its Tuas Con­tainer Ter­mi­nal in four phases over the com­ing 30 years.

South and South­east Asia is be­com­ing the new man­u­fac­tur­ing hub of the world, af­ter pro­duc­tion costs in China have be­come too ex­pen­sive.

This shift will in­crease the trade flows be­tween East and West, where the Straits of Malacca be­comes the cen­tre of grav­ity in the mar­itime “Silk Road”.

The bat­tle for the Straits of Malacca con­tainer busi­ness is on!

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