Thailand Wants U.S. to Invest in $28 B Malacca Strait Bypass Project

Bypassing the crowded Malacca Strait could lower shipping costs and decrease transit times, which is significant given a quarter of the world’s traded goods pass through this narrow channel​.

Thailand Wants U.S. to Invest in $28 B Malacca Strait Bypass Project
Image Source: Bloomberg

Thailand is pitching a $28 billion project to the US that will bypass the Malacca Strait, one of the world's busiest sea lanes, and significantly cut shipping times between the Indian and Pacific oceans.

Aims of the Project

  • Time Saved: Cut travel time by an average of four days.
  • Cost Saved: Lower shipping costs by 15%.
  • Capacity and Efficiency: The western port is projected to handle 19.4 million TEUs, while the eastern port could handle 13.8 million TEUs, together accounting for about 23% of the Port of Malacca's cargo.
  • Economic Impact: The initiative is expected to create 280,000 jobs and potentially boost Thailand's annual economic growth rate to 5.5%.
  • Timeline and Investment: The project aims for completion by 2030, with provisions allowing foreign investors to own over 50% in joint ventures for the development of the ports and related infrastructure.

The Malacca Strait is a key oil chokepoint that links the Indian and Pacific Oceans, and it is the shortest sea route between Persian Gulf suppliers and key Asian markets. The Strait of Malacca is also an important transit route for liquefied natural gas (LNG) from Persian Gulf and African suppliers to East Asian countries with growing LNG demand.

Shift in Trade Dynamics: By offering an alternative route, the project could reduce the shipping industry's dependence on the Malacca Strait, a move that might shift trade patterns in Southeast Asia.

Relations with Asian Nations: Enhanced connectivity and potentially increased trade efficiency could strengthen Thailand's economic ties with other Asian countries and the U.S., who may invest in this infrastructure.

Strategic Implications: This new route may reduce the strategic leverage of countries controlling current chokepoints and potentially decrease vulnerabilities associated with maritime traffic through the South China Sea.

The US has long been concerned about the possibility of China's Indian Ocean sea lines being interdicted or blockaded. However, it is unclear how much impact the project will have on China's reliance on the Strait of Malacca, as China has already taken steps to reduce its over-reliance on the Strait of Malacca by developing alternative pipelines and ports.

Sources: Bloomberg | SCMP

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