Gulf of Thailand

Viper52 SG

dkhoo, you are right when you say that any Kra Canal project's success is very much in the air as the distance saved is short as opposed to sailing down to Singapore and up again. But the distance saved is Only part of the equation. Most of this small extra distance is through the Straits of Singapore and Straits of Malacca, narrow congested waterways clogged with small islands and heavy traffic. Ships cannot do anywhere near a their maximum speed as they traverse these waterways. Add this to the fact that ships often have to wait to enter the Straits of Singapore, and then wait to enter the Straits of Malacca(or vice versa, depending on where they come from/go to) and you begin to see the likely feasibility for this project. The real time savings for using any proposed Kra Canal may be small, 1 to 2 days, but then one has to remember the saying, "Time is money". Now lets say the Kra Canal doesnt take all of SG port business away, lets say its only a "paltry" 20-30% of business. But whats the knock-on effect on Singapore as a whole? PTP eats away 10%, the Kra Canal eats another 20%. What are we left with?

MSC Evergreen left SG for 2 main reasons: High shipping charges and the fact PTP allows co-ownership. Your claim of "Singapore's high price is not just for fun -- it is because we give faster service and better connectivity" sounds like the crap excuse PSA gave at that time, and is reflected in the following 2 articles after MSC and Evergreen left

:Singapore port says won't get into price war

but then in 6/02

Asian rivalry turns into a ship fight

Of interest in the second article is the passage: "Last week, it announced big discounts on port charges, and invited foreign shippers to invest in what was once a jealously guarded ``Singaporeans only'' strategic asset."

Compare this with their claims in the first article dated 4/02, which among other things, stated: "PSA would not respond to competition by slashing rates, as this could result in an escalating price war,"

Which

1) Makes the 2nd statement ring *REALLY* hollow, and

2) Makes them look like fools, or worse, liars.

Which then raises the questions:

1) Is the price the shippers originally paid really the lowest premium price for premium quality, but more importantly

2) Why did it need such a hard kick in the teeth for them to wake up?

The bosses of Evergreen and MSC did not wake up one morning and said 'I know, we'll move our Singapore operations to PTP!'. It was a long considered move, and the result of unsuccessful attempts to get the docking charges in SG reduced and to have a stake in the port. Which was, as expected, rebuffed with "You're paying the lowest price possible for SG's port quality"(which as it turned out, wasn't the case). And before anyone wonders why not let bygones be bygones, this issue contains lessons for all sectors of our economy and for all Singaporeans who assert that they're Numero Uno and will always be.

Someone has pointed out in another forum sometime back, all PSA lost from this fiasco is some money, it will survive. But remember, every container that we lose does not affect only PSA. It also affects a whole host of other Singaporeans, from the driver who drives the prime-mover carrying the container to those whos job is linked to the contents of the container. And maybe, just maybe, more than money will be lost by these people. Chew on that

want to know SG

Sure or not.

CenturionMBT SG

Sure sure sure

dkhoo SG

Hmmm, those articles are interesting -- good find. I do admit that PSA can be rather arrogant at times. The humility of the old guard is slowly getting lost with the fresh blood entering the company. It is true that PSA needs an attitude adjustment and I am sure that this minor insult will work out in the long run.

About the Malacca Straits -- your point about the straits being overcrowded is exactly the reason why the canal will not be a problem. The straits are already over-capacity -- which implies that there is more traffic that wants to use it but can't. Even if the canal were dug, all it would mean is that more goods would decide to sail via the straits / canal rather than take some other route or not sail at all. The pie would get bigger and again everyone would get a piece. I am a strong disbeliever in zero sum games.

While I agree that PSA's typical GLC uncompetitiveness is a real problem, particularly in this depressed world economy, I cannot agree that the Kra canal would be a big problem even if it were built. Again, the canal has the smell of a political move rather than a strategic decision. I will believe it when I see it.

Viper52 SG

dkhoo,

glad you enjoyed the article, amazing what the Straits Times misses out isn't it? Smile

Agree with your analogy that the Straits of Malacca is overcrowded and the Kra Canal will ease the overcrowding, but my point remains, lets take a very basic example:

Randomly select a hundred ships that pass by Straits of Malacca today. Say, 70 call into Singapore, 30 sail on by.

Then factor in the Kra Canal, assume it relieves Straits of Malacca of 50% of traffic, or 50 ships. Best case scenario, the 30 that sail on by Singapore use the Kra, along with 20 ships that would have otherwise come to Singapore, use the Kra. That leaves PSA with 50 ships. Worse case(unlikely), it'll see only 20 of the 70 calling into Singapore.

Now
50/70 = 71% or 29% reduction
20/70 = 28% or 72% reduction

The real case will likely be somewhere near the best case, but even so, if you look at www.psa.com.sg, Singapore handled 15.52 million TEU last year. A 29% drop in traffic would roughly represent an almost 5 million TEU loss yearly. Can we afford that kind of haemohrrage? To answer that, remember that MSC had a 2 million TEU capacity in SG while Evergreen had only 1 million TEUs. As a country with no resources but a deepwater port that makes transshipment as one of its main source of revenue, I'd say we can't. Not during the best of times, and especially not in times like this. Remember the fact that each lost container doesn't just cause PSA losses?

Like I've said before, the above example is vastly simplified and makes lots of assumptions, but I think it will suffice in here.

Of course, its all hypothetical, for the Kra Canal hasn't been, or looks likely to be, built. But it gives the "We'll survive despite the Kra Canal because Singapore is always Numbah One!" camp something to think about. I hope.

silkmagic SG

I agreed that there might be a bigger pie for everyone but it is a big might…. We should think ahead of the competition as we do not have the resources to compete. Sometimes we might need people who are streetsmart and not academic brilliant to push us ahead. Not everything can be learnt from the books

dkhoo SG

That is why PSA is buying into ports all over the world Very Happy

All the earnings from Singapore's transshipments are from port charges to PSA (for imports and exports, it's quite different). So if we can own ports overseas, we are hedging our bets. If the Malaysian government allowed it, we would even buy a good piece of PTP and Klang and make their success OUR success Very Happy As it is, we own quite a lot of ports around the world, so we actual earn on transshipment at many places around the world.

If you can't beat them, BUY them.

Atobe SG

This is a classic example of how to "jump out" of an opposing party's efforts to box you in.

Instead of allowing ourselves to be squeezed, we move over and around the attempts to encircle us.

While we meet the immediate confrontation, we also take the long term strategic view, and move beyond our horizon.

This has been the life story of SGP since we were kicked out of an unhappy arrangement to begin with; and also the life story of many other smaller nations that are encircled by bigger competitions.

laser51088 SG

ok, I know this is a very old thread, but just wanna add something in. . .

The japanese also offered to help, financially AND technologically build the kra Canal, buit the Thais turned them down, probably pride, but we will never know. . . and yes, like what everyone else is saying, Malaysia also does not stand to gain anything at all with the building of the Canal, Thailand itself will be split, with their Muslims further south and their Buddhists north, not a very good idea to let ur people, already seperated by religion, to be seperated physically with a canal as well

my two cents, I dun expect replies, just for the sake of putting more info

bigballs11 SG

The Thai government must weight the advantages and disadvantages of building the kra canal, not just simple dug the canal and money will roll. If the canal project is to go ahead, the thai government will have to sacrifice the current lucrutive South Thailand tourism industry like Phuket and Krabi in the Andaman Sea and Ko Samui/Ko Pha Ngan in the Gulf of Thailand due to environmental impact. Who wants to spend $$$ in sea resorts where there is oil spill from moving cargo ships and murky waters left over by the big dig Mr. Green

foxtrout8 SG

for wat i know they bloody long gang idea can help them earn more money then the tourist industry could offer.......... Neutral

laser51088 SG

Its a risk the gotta take, if they are succesful in building the Canal, they'll have cash returns from ships using the Canal, on the other hand, if they are for any reason unsuccessful. then they can start crying already. . ., also will depend on response from shipping companies, but if I were a merchant,

shorter route=less travel time, less wages to pay my crew, and less time before my ship can be on its way carrying the next load of cargo again

of course, the very large ships won't be able to use it, but we are only discussing those who have an option

Atobe SG

To start with, finding the funds to build a Canal through the Isthmus of Kra will pose a major challenge to the Thais, and they will be seeking sources of financing from World Banks, Development Agencies, and possible partners to build and operate the canal.

This will pose a new opportunity for our PSA, who are presently diversifying their sources of revenues by buying their entries as management partners or joint owners of other ports all over the world.

Even with the construction of the Canal through the Isthmus of Kra linking sea traffic from the Bay of Bengal-Andaman Seas to the Gulf of Thailand the sea traffic through Singapore will only be marginally reduced.

Cargo from Europe will still have to be distributed throughout South-east Asia, and will still have to use Singapore as the most convenient hub for the region.

Cargo that head south towards Australia and New Zealand will pass through Singapore, if it has not taken a direct route from the Red Sea to Perth.

Only the cargo that has to transit between Europe and Northeast and East Asia will go through this Canal.

The intensity of the sea traffic through this canal will depend on how the canal design allow it to operate in two directions simultaneously, and how efficient the entire traffic flow is managed.

In this global environment, PSA will definitely get a slice of this action, and will not let pass a major project such as this; and the other Singapore GLCs will also get a slice in the design and construction of the canal which will take another ten to fifteen years at the very least.

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