PETALING JAYA: Port Klang is likely to suffer significant financial setbacks but Penang Port may gain from a land bridge across southern Thailand, according to analysts.
Karisma Putera Rahman of the think tank Bait Al-Amanah said Port Klang, which serves as the “gatekeeper” to the Strait of Malacca, the world’s busiest shipping lane, could see up to a 20% reduction in its cargo handling services.
On the other hand, Australia-Asean Chamber of Commerce vice-president Nordin Abdullah said Penang could gain from the “shortcut” between the Andaman Sea and the Gulf of Thailand given its close proximity to Thailand.
They were commenting on Thai Prime Minister Srettha Thavisin’s statement that his country is considering a new proposal to revive the centuries-old project when addressing investors at the sidelines of last week’s Asia-Pacific Economic Cooperation (Apec) summit in San Francisco.
The US$28 billion (RM131.31 billion) project will see the construction of two ports — Ranong in the west and Chumphon in the east — that will be connected by road or rail.
Srettha said the land route could reduce travel time for ships by up to four days and cut costs by up to 15%.
The idea for a direct route between the two bodies of water that sandwich the Isthmus of Kra, the strip of land that is connected to the Malay peninsular, was first mooted by the Thai monarch Narai the Great in 1677 but rather than trade, it was part of a military strategy — to move troops quickly in the event of an invasion by the nearby Burmese kingdom.
Over the centuries, the French and then the British also considered the idea for commercial reasons, but it focused on dredging a canal rather than a land route. Nonetheless, nothing has come to fruition.
Karisma told FMT Business that with the Strait of Malacca expected to reach its full capacity by 2030, the land bridge would serve as an ideal alternative route for maritime traffic.
However, he said, it would divert a significant portion of the cargo away from Port Klang, leading to losses for local shipping lines and jeopardising the port’s already precarious financial position.
He expects 15%-20% of the cargo traffic to be diverted from Malaysia and Singapore once the land bridge opens.
“Based on Port Klang’s 2022 volume of 13.22 million twenty-foot equivalent units (TEU), which generated a revenue of about RM2.4 billion, we can expect a drop in takings of RM360 million to RM480 million,” he added.
Advantage for Penang
Nordin told FMT Business that if Penang Port is efficiently run, it could serve as an alternative stop for shippers to unload their containers to be transported by rail to Thailand.
“However, it depends on whether or not it can be more efficient than the ports in Thailand. It is about being innovative, competitive and having the ability to offer a link to the global supply chain,” he added.
While the impact of the land bridge may raise concerns in Malaysia, there are some who are not so worried.
Federation of Malaysian Freight Forwarders vice-president Alvin Chua told FMT Business the additional cost of loading and unloading goods at the two Thai ports would likely cancel out the savings derived from the shorter travel time.
“Cargo handling is expensive. It can cost US$125,000 to US$150,000 per vessel per day,” he pointed out.
Furthermore, the new process would require two vessels instead of one to see the cargo to its destination.
Karisma agreed, saying that the process of docking, transporting the goods over 100km by road and then reloading onto another vessel could reduce the viability of using the land bridge.
“Therefore the true (economic) impact of such a project on Malaysia is still up in the air,” he said.
Impact on geopolitics
However, the project does raise broader geopolitical concerns.
Karisma said the land route would offer Chinese vessels a way to bypass Malaysian ports, thus compromising the bargaining chip Malaysia has in its bilateral relationship with China.
“This could complicate Malaysia’s ability to balance relations (it has) between the two superpowers,” he added. “It may complicate our ability to pursue a hedging strategy for our national interests as Malaysia straddles its role as a comprehensive and strategic partner for the US and China.”
Nordin sees it as a “smart move” by the Thais to ensure economic development in and around the two ports.
“In recent years, Thailand has done a lot to improve economic conditions in the south, but now hopefully it can be fast tracked,” he said.
Srettha, who pitched it to investors from China and Saudi Arabia, said the project could create 280,000 jobs and boost Thailand’s economic growth to 5.5%.