While China’s ominous investments in Sri Lanka and Pakistan are grabbing headlines, China’s carrot and stick policy towards Thailand needs considerable attention. Yet another ASEAN conference successfully concluded last week at Manila and once again ASEAN (Association of South East Asian Nations) countries failed to bring out anti-Beijing resolution. ASEAN’s meek response to hegemonic China despite Beijing’s unremitting belligerence in South China Sea (SCS) reflects the growing discord within the ASEAN economic grouping. ASEAN which was painstakingly built as bulwark against China, is now wilting under the torment of Chinese divisive tactics. Apparent fissures inflicted by Chinese coercive economic diplomacy and muscle power of Beijing has eroded the solidarity of ASEAN countries.
Despite China’s penetrating aggression, being the single largest trading partner and largest investor in ASEAN countries, voices of protests within the group are seldom addressed. As of now, China’s relations with ASEAN countries is rather complex. Each country has a unique relation with China. Beijing managed wooed Cambodia and Laos with massive infrastructure investments. Besides trade and investments, Sino-Burma relations are leveraged by domestic insurgencies with Burmese militant groups having safe havens in Chinese territories. High-income group countries Brunei and Singapore are slowly trying to reduce their dependence on China. Beijing’s relations with middle-income group countries -Indonesia, Malaysia, Thailand and Vietnam are steered by increased economic activity and infrastructure initiatives.
Thailand is the second-largest economy in ASEAN. But of late, it is registering low levels of GDP growth and has history of buckling under international financial crisis. Ever since Asian financial crisis of 1998-99, Thai economy failed to regain its original momentum. Exports slid perceptibly, manufacturing sector failed to bounce back. Thai economy is now thriving on resurgent tourism and services sectors. By perpetually adopting “bamboo bending with the wind” kind of diplomacy, Thailand uniquely maintained its sovereignty and independence during the colonial and cold war era. Since 1945 Thailand shifted its orientation towards US. Boisterous economic and strategic rise of China has posed Thailand with a challenge of choosing between Washington and Beijing. With US retreating from this part of the World and an assertive China looming large over the region, Thailand was prompted to make a choice.
China and Thailand established diplomatic relations in 1975 which steadily expanded with time. Though Thai military juntas had strong ties with Washington, America’s receding presence in South East Asia prompted Thai establishment to shift allegiances. Moreover, unlike other countries in the region, Thailand had no territorial disputes with China and hence Thailand eagerly joined hands with China. Till 1999, American has been major weapons supplier for Thailand. Thai currency plummeted during financial crisis as American purchases became more expensive. Thailand began to look for other affordable options and eventually settled for Chinese supplies setting stage for enhanced military engagement. Both countries began joint military exercises in 2005 marking 30 years of diplomatic relations. Since 2006, balancing of relations between China and US became difficult for Thailand. By 2009, China replaced US as Thailand’s largest export market and soon Chinese FDI dominated established investors from US, Japan and Europe. Thailand also experienced a surge in Chinese tourists by 12%.
Thailand’s relations with US further weakened after the US refused to recognize and endorse the military government following a coup in 2014. While the west was highly critical of military junta, China endorsed the coup. Burdened by a stagnant economy, military generals offered several concessions to China. Prime Minister Prayuth Chan-ocha approved purchase of three submarines, 34 armored personnel carriers and 28 tanks worth $1billion from China (1). Gradually military cooperation has become corner stone of Sino-Thailand relations with Thailand’s boosted military spending after 2014 purchasing military hardware from China. In 2015, Thai and Chinese air forces conducted first joint exercises, and navies participated in joint drill “Blue Strike” in 2016. As US weaned away from Thailand to force military junta to reinstate democratic government, China reinvigorated its relations with Thailand. China eventually displaced Japan as Thailand’s largest investor in 2015. Cognizant of Thailand’s strategic location, which is dubbed as gateway to South east Asia, China vigorously rallied to boost its economic, trade, military with Thailand.
Thailand reciprocated China by repatriating Uighur militants and political dissidents in 2015. But China was irked by Thailand’s inordinate delay in approving the $5.5 billion high-speed rail project connecting China’s southern province of Kunming with Laos and Bangkok, a regional connectivity project under the BRI (Belt Road Initiative). Indicating its displeasure, China abstained from inviting Prime Minister Prayuth for the BRI summit at Beijing. Intimidated by diplomatic snub, Prayuth invoked the article 44, of Thai constitution, to circumvent the legislative body (parliament) and expedited the project. Through its “shame offensive tactics” China invariably compelled Thai government to fall in line.
China buoyed by geopolitical ambitions, determined to emerge as the regional superpower, unleashed quintessential tool of water diplomacy in South East Asia. Beijing revved up engagement with countries Myanmar, Cambodia, Laos and Thailand through which river Mekong flows. Mekong is dubbed as Amazon of Asia. In 1995, Thailand, Cambodia, Laos and Vietnam signed the Mekong River Commission (MRC) with Myanmar and China upstream countries as dialog partners. Interestingly, China the upper riparian country of Mekong evaded from being part of MRC but managed to have unparalleled control over the waters by constructing numerous dams along the course of river in its territory. Statistical reports indicate that China uses more than half of total waters of the river against 16% by the lower four riparian countries. China has dubious strategies for Mekong river. Aside, availing copious amounts of Mekong waters, obsessed with dam building China clinched numerous hydroelectric dam construction projects. Thus, Chinese companies besides enormously benefitting from infrastructure projects reaped dollars by selling electricity to respective countries. Unmindful of environmental concerns, China built several dams in all the four riparian countries despite mounting protests from locals. Stalling of the humongous Myitsone dam in Myanmar amidst growing protests by locals’ mirrors brewing anti-Chinese sentiments towards China financed dams.
Apart from the financial benefits, China aspired to convert the longest flowing river into largest shipping lane for Chinese trade. To facilitate swift shipping cargo, China entered into agreement with Myanmar, Laos and Thailand for blasting rocks and reefs in Mekong river in 2000. Disregarding environmental concerns like changing of river course, destruction of aquatic habitat and reefs, China carried out first phase of blasting in 2002. But was forced to stop in 2003 as reef blasting potentially aggravated territorial dispute between Thailand and Laos. China’s dam building spree had reduced catchment areas for fishing, reduced water flows to downstream countries, caused displacement of several people and threatened their livelihoods. Reports now indicate that intense damming of Mekong river made the lower riparian countries flood-prone.
China’s renewed outreach towards Thailand’s military regime can be ascribed to Beijing’s intentions of developing the isthmus of Kra in Southern Thailand into an “international golden waterway”. Interestingly, ambitious Chinese idea found semblance with plans of retired Thai military generals, academicians, businessmen who revived the idea of building a long canal across Southern Thailand connecting Pacific Ocean with Indian Ocean. Indeed, Chinese military first elaborated on this idea in the Naval and Merchant Ships magazine published by China’s largest ship building conglomerate CSSC in late 2015 (2). For long China has been battling fears of choking of its imports at the narrow Malacca Strait in an event of regional escalations by the US. 80% of Chinese imports pass through this choke point. Dubbed as Malacca Dilemma, China aspires to surmount the fears of blockade by the US by bypassing the strait and routing its imports through narrow isthmus of Kra. Kra links the Gulf of Thailand with Andaman Sea at same latitude as the island of Phuket. New reports indicate that China is keen on building Kra Canal, 135-kilometer-long, 450-meter-wide and 26-meter-deep. The proposed Kra canal would be 800 km south of Bangkok and 200km north of Thailand- Malaysia border. China right now is seriously contemplating on the incipient benefits of Kra canal over Malacca Straits which is the World’s busiest route but infested with pirates. Kra Canal route can reduce the travel time by two-three days or roughly 1200 kilometers.
As of now, Prime Minister Prayuth is opposed to proposal of Kra canal actively supported by the influential grouping of military which formed Thai Canal Association for Study and Development. It is working with Peking University in carrying out feasibility studies which are funded by a Chinese company. China is actively recruiting high power pro-Chinese Thai groups to intensively campaign for garnering public support. With apprehensions about the economic viability of Chinese investments looming large, sections of Thai community want that the project be internationally-funded. The estimated cost of canal development alone is $28 billion which is 8% of Thailand’s GDP and related infrastructure and special economic zone in the surrounding region would cost $22billion. Though the project can create 2.5 million jobs as Chinese financed projects come with an attached clause of employing Chinese personnel locals hardly stand a fair to make a living.
While the project can be a big boost to anemic Thai economy, public support is paltry. Thailand venerates traditional life style and strongly upholds ideas of environmental conservation. Besides, canal construction will have far-reaching implications on the security and sovereignty of Thailand as country will be divided into northern province with overwhelming Buddhist population and Southern province dominated by Malay-Muslims. Canal will create tensions among the ASEAN countries as Singapore might lose its business, indispensability and economic advantage. Development of this mega project will be replete with immense challenges and the hilly terrain of the region can pose formidable obstacles during construction. Above, all the canal will change the economic, financial and geopolitical arena of the region.
While the potential benefits of emerging as regional economic hub can bring prosperity to Thailand but returns are not assured and guaranteed. Unlike the Panama Canal or Suez Canal, Kra Canal has alternative transit route and hence recovering cost of investments will be long drawn. Also, unlike the OECD developmental assistance loans which have nominal interest Chinese loans have higher interest rates. With China’s appetite for resources sinking and economy showing signs of slowing down, shipping traffic might be less revenues may not be on expected lines. In absence of robust returns from the Kra canal Loan repayment will be an upheaval task for Thailand. Singapore is internationally acclaimed smart transiting hub and to have preferential advantage over Singapore the new port must offer better services. Else it might lose the competitive advantage and go down history as yet another shining example of Chinese debt trap diplomacy. Moreover, with growing risk of conflicts between India and China, Kra Canal can become another region of consternation. In a plausible war like scenario China may not be averse to sending war ships through this canal towards Andaman and Nicobar Islands.