Thailand: A Canal Too Far

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November 26, 2018: China is again proposing to fund the construction of the 135 kilometer Kra Canal that would cost $30 billion and connect the Gulf of Thailand and the Andaman Sea. The canal through the narrowest part of Thailand has been proposed for centuries but the expense and lack of sufficient economic incentive thwarted all earlier efforts. The emergence of major economies in East Asia (China, Japan, South Korea and Taiwan) have changed that calculation. A canal that would shorten voyages between East Asia and point west by 2,200 kilometers (two days at sea) compared to going through the Malacca Strait makes it worthwhile for about 30 percent of the current Malacca traffic (especially large tankers or container ships) to pay a large canal transit fee (over $100,000 for a large vessel). It works for the Panama and Suez canals, although those two save ships much larger amounts of time (to go around the southern tips of South America or Africa). But the Malacca Strait handles a much larger percentage (about half and two-thirds of all tanker traffic) of world sea transport traffic. China is especially eager to incorporate the Kra Canal into its Obor (One Belt, One Road) project that has China financing and building roads, railroads, pipelines, ports and canals and ease travel via Eurasia and adjacent waterways. Nations who benefit by being next to the Malacca Strait always opposed the Kra Canal but now Malacca is becoming crowded to the point to overload. The canal would greatly reduce the roads connecting the four southernmost provinces with the rest of the country. Bridges over the canal are expensive (they must be high enough to let the largest ships pass) so there would be few of them. Panama only has two bridges (with one more being built) and Suez also has two (one for rail traffic) and a tunnel. With the Chinese bridge construction would probably be part of the canal project. Thailand needs the bridges because most of the very lucrative tourist resorts are on those four southern provinces.

Election Hustles

One indicator that the long-awaited return of democracy (national elections) will take place soon (late February 2019) is the military government ordering state-owned enterprises (which comprise a few percent of GDP and even less of the workforce) to increase investment as much as possible in order to boost financial results. That’s a desperate move but the military government is eager to improve national economic performance before the elections. In the third quarter of 2018 GDP growth was only 3.3 percent. Earlier in the year 2018 GDP growth was expected to hit 4.1 percent for the year but the reality was worse with 2018 GDP growth certain to be less than four percent. Paying attention to what people want wins elections, not just ordering people to do what some generals and their cronies think is best. Eventually, the coup must end or face the risk of a nationwide insurrection. As with past coups, there will be elections and the generals want to ensure that a vindictive elected government doesn’t get power and seek revenge. The most obvious potential error the generals made was changing the constitution to give the military more power permanently. The other damaging policy was depending on China (for weapons and investment) despite the knowledge that such an approach drives away traditional (Western) business partners. The continuing decline in their ratings indicates a failure to deal with these problems.

Another obstacle is the fact that most Thais prefer to maintain the alliance with the United States rather than do more business with China. It was the American connection that made Thailand a popular (and profitable) place for Western (especially American) firms to set up Asian manufacturing operations since the 1960s. Thailand became one of the most prosperous nations in the region with per-capita GDP increasing tenfold from 1960 to 2016. Thais expect this to continue but instead Thai GDP growth has fallen behind all of the neighbors since the 2014 coup. The army realized the economic problems could not be ignored. Unemployment is still low (under two percent) but income was declining as are opportunities for getting better jobs. As far as the economy goes everyone else in the region is doing better and the military cannot hide that or explain it away.

November 24, 2018: In the north (Phrae Province), a temporary police checkpoint caught some drug smugglers by surprise (which was why the temporary checkpoints are used) and although the smugglers pickup truck turned and sped away the police caught up with the vehicle and two of the three men in it were arrested. The truck held five million methamphetamine pills. Elsewhere in the north (Chiang Rai Province), soldiers near the Burma border ambushed seven Burmese smugglers carrying drugs into Thailand. The troops killed five of the smugglers (who were carrying a million methamphetamine pills) but the other two escaped back into Burma. The six million meth pills seized in one day were worth nearly $20 million (consumer cost). Thailand continues having problems with the drug trade in neighboring Burma, where the northern tribes fight to resist government efforts to suppress the drug production. The largest state in northern Burma (Shan state) illegal drugs are the mainstay of the economy. The Burmese methamphetamine is a regional problem and in each of the last few years over a billion dollars in meth (usually in pill form) was seized in neighboring countries. After 2008 annual seizures rapidly increased and are now several hundred million doses of methamphetamine, worth over a billion dollars. Methamphetamine is the most popular drug in Southeast Asia and there are believed to be nearly a million meth addicts in Thailand, plus many tourists who indulge. Most (nearly half) of the seized pills are taken in China, followed by Thailand and most of it is coming from meth labs in northern Burma. The Burmese meth has become hugely popular in China, which is pressuring the Burmese government to do more about the problem and that has resulted in more police activity up there, but not enough to put a dent in the drug business. The Thais and Chinese are aware that the Burmese drug gangs have local security forces on the payroll, which is why these clashes with Burmese drug smugglers only seem to happen in Thailand. China plays down the fact that the smugglers don’t have much trouble on the Chinese side of the border because of the corruption.

November 16, 2018: The government extended the state of emergency in the Moslem south for another three months. The government has been doing this since 2005. This gives the police and army additional powers of search and arrest. Some problems are not solved by a state of emergency. For example, the three southern provinces have suffered a major measles outbreak this year, infecting 2,300 so far and killing 18. Most of these victims are children who comprise nearly all the fatalities. The source of this outbreak is a number of local Islamic radicals who have persuaded (or intimidated) many parents to not have their children vaccinated because of rumors that the vaccine was actually a plot by non-Moslems (most Thais are Buddhists) to poison Moslem children or pollute them because vaccines are believed to contain material from pigs (which are considered haram, or unclean, for Moslems). It’s not just measles vaccine that gets denounced but other vaccines as well. The most senior Moslem clerics in the south preach that the vaccines are safe and not haram (forbidden) but that does not prevent many parents from believing the myths even if they have not been threatened.

November 12, 2018: Thailand has been identifying and expelling Burmese in the country illegally. So far over 2,000 illegals have been arrested and sent back to Burma. The crackdown began in early October and it is estimated that over 10,000 illegals have returned to Burma, most of them voluntarily. Meanwhile about 20,000 Burmese enter Thailand each month legally to take unfilled jobs. This sort of thing works both ways. About 10,000 Thais in South Korea (legally) to work were recently rounded up and expelled for overstaying their visas. Many Thais continue to go overseas temporarily for better paying jobs. Israel is a favorite destination because since 2000 (when the Palestinian leaders declared war on Israel) most Palestinians who had long worked in Israel were no longer allowed in. Currently, some 20,000 Thais are in Israel replacing unavailable Palestinians.

November 2, 2018: In the south (Pattani province), two local defense volunteers were shot dead by men on motorcycles. The defense volunteers were on duty guarding a marketplace. The killers grabbed the weapons of the dead men and fled. Violence in the south continues to decline and killings are investigated to not only to catch Islamic terrorists but also to discover if it was simply a robbery or someone settling a private or family feud. There has always been more crime in the south, in part because of the busy smuggling gangs moving goods in and out of Malaysia. Those gangs spawned lots of other crime and eventually the current separatist/Islamic terrorist violence.

 

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