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DEVELOPMENT ( New Inter-Asia Trade Route ) INVESTMENT AND CONSTRUCTION SCHEDULE In1986, the Fusion Energy Foundation conducted a study on the investment of the construction. It revealed that the expense for the two lane canal for 250,000 dwt tankers, using ordinary excavation methods, would be approximately US$ 16,830 Million or, Baht 420,750 Million (taking the currency exchange rate at US$1.00 = Bht25.00. The expense for option 2.2,2.3 and 2.4 would be less (at approximately US$11,200 to US$15,147 Millionor, Baht 280,000 to 378,675 Million. It would take around 10 years to finish the project by ordinary excavation methods. Notes: Excavation by the use of nuclear energy can save costs by up to 40% but this construction method is considered as unsuitable

ECONOMIC FEASIBILITY OF THE KRA CANAL

It is very important to conduct a feasibility study on the economic aspects of the Kra Canal because the construction of a canal for international navigation needs to have an enormous amount of investment. Therefore, a careful decision must be made on sound principles. It has to be considered whether the Kra Canal is the construction of a basic economic structure to elevate the country's economy from an agriculture to an industrial base. Without considering the finer details, it seems that the Kra Canal Project requires a large amount of investment capital. However, spending allot of investment in developing the basic economic structure is worthwhile. This was the basic principle that Friedrich List, the father of industrial development in Germany, and, Henry Carey, the consultant of economic issues, which President Lincoln adopted in reforming America's economy after the Civil War.It was also a philosophy that the Japanese reformers in the Meiji period fostered which enabled Japan to have an industrial revolution in the late C.19.

Friedrich List, a German economist in 1830(1) convinced the German Government to construct railways throughout the country. He pointed out that the construction of railways is the foundation of a basic structure for an economy, not an enterprise creating profit in the form of values of exchange, as thought by other economics. It is the building up of a real asset of the country; i.e. creating the power to produce wealth which is even more valuable than asset itself. Although investment in the creation of an economic base, such as; the construction of railways and canals, require high values of exchange, it is considered a spending of expense to create the power for producing wealth. The prosperity of a country does not depend only on the amount of assets. Rather, the assets have to be in proportion with the power of producing wealth. The construction of railways in the middle of C.19 enabled Germany to become a powerful country although she did not possess as many colonies or, as much estates as the other European who were in the colony hunters. Even though Germany was later defeated in two World Wars and her assets destroyed, Germany at present still retains her economic power. This is due to the fact that Germany has the power to produce wealth by following the theory of Friedrich List.

Friedrich List's theory is opposite to the theory that limits economic growth of some economics who support only small scale projects. The latter theory not only restricts the intellectual growth of creators and practitioners and some of the projects based on this theory destroy natural and human resources in Thailand. During the past 20 years of Thailand's development., economists who advocate the theory of "limiting growth" have protested against huge projects such as the Kra Canal Project without giving reasonable support of their ideas. The feasibility study on the economy of the Kra Canal will make issues clearer to the public. After the data is disseminated, the argument will be more critical and creative than that in the past. The feasibility study conducted by TAMS in 1973 focused only on navigation of oil tanker which is regarded as a weak point of his study. However, from the study on the current economic situation, it can be seen that those who can gain benefits from the Kra Canal Project are:

Oil tankers and vessels can save time and transportation costs as a result of shorter sailing distances.
Thailand benefits directly from the collection of Canal fees; develop her merchant fleets; and the development of industry along the canal banks and in the adjacent areas .The ASEAN countries especially Singapore will benefit from the economic and commercial development in this region.
Japan, South Korea and Taiwan, being big producers will benefit together with the countries in Europe, the Middle East and in the Indian Peninsula. Like other countries, China and India will benefit from the commercial growth and the convenience resulting from navigation which links the Pacific Ocean and the Indian Ocean.

Since many parties benefit from this project, the feasibility study on the economic aspect will have to take the following factors into consideration: Geographical features and congestion in the Straits of Malacca. Potential of commerce deriving from the project. Investment and prediction on profits from vessels using the canal.

GEOGRAPHICAL FEATURES AND CONGESTION IN THE STRAITS OF MALACCA

On the world map, it can be seen that there are 4 choke points linking navigation in all the oceans; namely, Bering Straits, Panma Canal, Suez Canal and the Straits of Malacca, Panama Canal, Suez Canal and the Straits of Malacca.

From the study of world cargo, there was a continuous increase in world cargo from 800 million metric tons in 1955 tons to 3,500 million tons in 1985. It is expected that the world cargo will increase to 5,000 million tons by 2000. The vessels passing through the Panama Canal, the Suez Canal and the Straits of Malacca can take cargoes of up to 650 million metric tons a year. More than 320 million metric tons or half of this total is transported through the Straits of Malacca while the Suez Canal and the Panama Canal caters the remaining amount. As it is , the Straits of Malacca is congested and it is expected than from 2000 on wards, the Straits of Malacca will be very congested.

Congestion in the straits of Malacca
Data from various sources predicted that by 2020 there will be approximately 197,500 tankers passing through the Straits of Malacca, in which 167,500 will be large tankers. This is due to the estimated increases of large vessels at a rate of around 50% every year.

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Navigation Problems in the Straits of Malacca

The length of the Straits of Malacca is 600 miles. Since allot of tankers and vessels pass through the Straits of Malacca and if it has to be closed because of an accident of whatsoever reason, it will have an effect on about 10% of the world's cargo. The problems facing navigation in the Straits of Malacca is that its depth is about 23 meters deep and the narrowest part is only 1,200 meters wide. If each tanker runs at a speed of 7 nautical miles at an interval of 0.75 sea-miles/tanker(about 1 hour) and there are tankers moving in 4 lanes, 24 hours a day, the Straits of Malacca can accommodate up to 325,000 tankers in oun year. However, this estimation does not correspond to the actual situation. To be safe, one lane is provided for large tankers passing each other and the other two lanes are for small vessels. Therefore, in reality there are only about 200,000 tankers moving through the Straits of Malacca in a year because tankers of more than 200,000 dwt cannot pass through this Straits as it is only 23 meters deep.

In the past, there have many serious accidents in the Straits of Malacca. To cite some examples, in 1973 the Great Loyalty, an oil tanker with Liberian registration collided with the Oswego Merchant, a vessel from Singapore. In the same month, another vessel, the Carnation collided with an oil tanker from Cyprus. The most serious accident happened on January 7, 1975 when the Showa Maru, a 237,600 dwt tanker from Japan, was stranded only 5 miles from the Singapore coast. Thousands of tons of crude oil leaked from the tanker and contaminated the coasts of Singapore, Indonesia and Malaysia. This was more serious than the accident caused by the Torrey Canyon, and ol tanker that was stranded in the English channel. It is estimated that the danger from navigation in the Straits of Malacca will increase together with the increasing number of tankers. After allot of accidents, the Singapore Government prohibited tankers heavier than 200,000 dwt from passing through the Straits of Malacca. Large tankers have to use the Lombok Straits and the Sunda Straits instead. If Thailand decides to construct the Kra Canal now, this canal will be inaugurated in 2020 and the congestion problem in the Straits of Malacca will have solved by then.

Potential of Commerce from the Project

This factor is as important as the first one. Although very little distance is saved for vessels plying the North Sea and the Baltic Sea, the Kiel Canal has enchanted the commercial potential between the two industrial center of Amsterdam and Hamburg. The Kra Canal will have a similar function to the Kiel Canal in this respect as it saves far less distance when compare to either the Suez Canal or the Panama Canal. Like the Kiel Canal, although the Kra Canal does not save much distance, it increases the effectiveness of international trade. The Kra Canal will enable Songkla to be an important seaport like Amsterdam and Hamburg because of the Kiel Canal.In 1987, it is predicted that 24,000 vessels would pass through the Kra Canal. When the cargoes are categorized, oil transportation comes first even though there might be a decrease in oil consumption. It is expected that if the Kra Canal could inaugurated in 1987, the oil tankers that would be passing through this canal would be 250 million tons freight plying from the West to the East.

If the oil tankers plying from the West to the East are expected to have a 1.5% annual increase, between 1975 and 2000, there will be oil tankers of 310 million tons freight passing through. The increase will be gradually slowed to only 400 millions tons per year. For other vessels plying from the West to the East, there will be an annual increase of 2.5%, i.e. 5% increase. Thus , in 1987 there are vessels plying from the West to the East of 30 million tons freight. The number will increase to 80 million tons and 154 million tons by 2000 and 2045 respectively.

Even though there are no oil tankers plying from the East to the West, other cargoes amounting to 34 metric tons are carried (from East to West). However, the increase in goods transported on this route is quite high, i.e. 5% a year. It is expected that there will be cargoes from the East to he West totalling 83 million tons by 2000 and 160 million tons by 2045. If the Kra Canal was inaugurated in 1988, there would be 314 million tons in the year 2,000,637 million tons by 2045 and 862 million tons by 2050(this estimate is conservatively low by taking only 2/3 of the present total transportation).

Predicted Profits Deriving From The Kra Canal

Two hypothesis can be drawn on the fee collection, as follows;

First , the Canal owner can charge 80% of the saved expenses resulting from the shortened sailing distance.
Empty tankers must pay half of 1;i.e. 40% of the saved expenses.

Therefore, in the year 2020, the Kra Canal will make a minimum profit estimated at US$250 to US$300 Million a year. After that there will be a 5% projected annual growth. When calculating the investment capital and pay back period; TAMS, the Fusion Energy Foundation and the Mitsubishi Research Institute agree that rout 5A is the most suitable access route. The Mitsubishi Research Institute suggested construction of the canal should be of two different depths; i.e. which is deep enough for empty 200,000 dwt tankers going from East to West. This type of canal can save more than Us$6,000 Million in construction costs. The pay back period depends on the amount of investment capital. If a two lane canal for 250,000 dwt tankers to pass each other is constructed, US$16,830 Million or , Baht, 420,750 Million ( using the exchange rate at Baht, 25.00- US$1.00), will be required and the pay back period will be approximately within 55-60 years after inauguration. This is calculated on the basis of actual interests (excluding inflation rates) at 2.5%. However, several sources have estimated hat the construction costs to be less than Baht, 300,000 Million. Dr. Boonrod Binthasan estimated that the construction requires an investment capital of around Baht, 200,000 Million. And, the parliament sub-committee which is in charge of the Kra Canal Project estimated an investment capital of Baht, 295,400 Million.
The feasibility study on the economic aspect of the Kra Canal is only a very preliminary one. Some of the data are inconsistent with actual facts. For example, the number of tankers passing through the Straits of Malacca is more than the estimated number recorded by the Port authority of Singapore. In reality, there are many vessels passing through the Straits of Malacca which the Singaporean authority is not aware of. In addition, there is no known data on the tankers passing through the Lombok Straits and the Sunda Straits. Thus, it can safely be predicted that the mentioned income from service charges are less than actual collections. It is proposed that LANDSAT images to be used in the feasibility study to determine the actual number of passing vessels, in order to clarify the economic aspect of the canal. The studies conducted by TAMS, Fusion Energy Foundation and Mitsubishi Research Institute were only estimates from statistics obtained from several sources. These organizations also proposed to seek investment funding for the actual feasibility study.
The government should take this opportunity to conduct a serious feasibility study on the Kra Canal to establish the following factors:

In order for the Government and other relevant authorities to profoundly understand the problems and the feasibility of the project.

Enable the Government to make a decision on the construction of the Kra Canal.

If the project has high feasibility, what measures should be set up to maintain the national policy for the next 10 tons. If the Kra Canal cannot be constructed, what should the government do to have industrial development? If the Kra Canal can be constructed, what economic plan should be drawn up to cope with the huge investment that will materialize?