Malaysia’s Thailand Strategic Card – Analysis

The visit of newly elected Thai Prime Minister Srettha Thavisin to Malaysia comes at a vital opportune need for Thailand to ensure long term economic and geostrategic returns. Chief among the objectives will be to strengthen traditional domains of greater economic and trade returns, for both countries.

Continuous efforts are made to cement deeper trade and economic security with greater bilateral returns in investments and economic relations in all sectors, especially on high technology and green and digital economy. Malaysia’s growing advantages will be sought after and the spillover effects of Malaysia’s growing efforts in bringing in top international firms from the US and the exodus from China. This includes the mobility of expertise, talents and technology and startups. Other critical areas include food and energy security, especially on resources that Malaysia has a bigger advantage including oil and gas and palm oil and rare earths.

In return, Thailand has advantage in food security and also offering mutual returns in digitalisation, innovation and tourism spillover impact. Socio economic and people to people ties will continue to be enhanced for historical appreciation based on trust and healthy interdependence.

In 2022, Thailand was Malaysia’s seventh largest trading partner globally and the third largest among Asean member states, with total trade amounting to RM122.03 billion, an increase of 17.9% compared with RM97.55 billion in 2021. Malaysia was also the second largest investor in Thailand within Asean and ranked ninth globally.

Thailand faces a growing number of internal socio-economic challenges which will need strategic and enduring long term solutions. For this,external economic support and investments remain vital. The proportion of elderly is rising faster in Thailand than in China, and is fast facing an aging population and workforce conundrum.

Tourism and the automotive industry have been propelling key fundamentals of the economy, but face long term risks. The EV collaboration and new frontiers of joint growth with Malaysia remain strategic for Bangkok in leading the regional drive in its entrenched traditional dominance in this field.

Thailand’s early presence in the automotive supply chains has propelled the country to be the tenth-largest producer of cars in the world, even surpassing countries like France and Britain. It has been increasingly under the radar of Beijing, eyeing Bangkok’s automotive prowess, with the Chinese investments reinforcing China’s already dominant position in Asian supply chains.

Security and Geopolitical Concerns

The strategic importance of Bangkok remains higher now, in the South China Sea and in the Andaman and the Nicobar Island Chain linking up to the entrance to Straits of Malacca and the Indian Ocean, with them being the emerging second front for Sino-US rivalry. Of all the conventional priorities on strengthening diplomatic and economic ties, food security remains an important venture, along with the joint advancement of SMEs and digital and green energy and economy and other areas in low politics that will also contribute to greater trust and cooperation in areas of high politics.

For the South China Sea, Bangkok will need Malaysia to continue to play a strong regional role especially in helming ASEAN in 2025, as Bangkok always hopes for a stabilising and peaceful situation in the contentious zones.

Bangkok fears a spiralling crisis, as it will be trapped between its dependence on China for economic and tourism returns, and the need to secure its borders from the aftermath of the conflict. Bangkok will also anticipate to get the request for a US support system in supporting US military and navy in the event of an all out conflict for support lines and docking purposes, among others.

Thailand will also need to get Malaysia’s support for its own solutions to Myanmar, as Bangkok is wary of the direct aftermath and seeing how ASEAN and the West have been hitting a dead end in ensuring renewed commitment from the junta and the Five Point Consensus remain futile. Malaysia will be persuaded to look beyond the current measures, and Bangkok will emphasise on the direct implications on Malaysia in terms of refugees and regional instability as well as legitimacy as the ASEAN Chair in 2025 if this issue prolongs or worsens.

Malaysia-Thailand ties are always defined by economic integration and spillover, defence and security and the long rooted southern conflict, as any implication from the conflict will impact Malaysia directly.

Thailand’s Strategic Card and Bittersweet Returns from Kra Canal

Thailand also has the leverage of reviving the Thai Canal or formerly known as the Kra canal project that will connect the Andaman Sea and the Indian Ocean to the South China Sea that once was the strategic dream of China, which will bypass Straits of Malacca in terms of trade route.

The Thai Canal is the proposed 135-km canal across southern Thailand that would connect the Gulf of Thailand with the Andaman Sea.

The long mooted canal across southern Thailand’s Kra Isthmus, the narrowest point of the Malay peninsula,would open a second sea route and access from China to the Indian Ocean. This will impact directly on Malaysia and Singapore’s competitiveness and change the geopolitical and power equation in the region and beyond.

Beijing’s plan is to save around 80 percent of the current cost of shipping energy imports through the Malacca Strait by diverting them through the canal once it becomes operational.

The first power and security implication will be on how this might benefit Beijing’s Indian Ocean ambitions, its trade route security and its Malacca Dilemma, and eventually giving it the expansive and strategic returns to its South China Sea objectives and in deterring Washington’s power containment efforts. The canal, if completed and successfully operational, will also hugely bolster Beijing’s power projection capacities alongside its new Ream base in Cambodia that will provide a second front support line for a three pronged return for its Pacific Ocean, Indian Ocean and South China Sea grand ambitions.

It provides a bulwark of both near and far shore offensive and support capacities for its naval projection that will be needed in its Pacific and Indian Ocean expansions and in defending its current bastion strategy in South China Sea.

It will allow the Chinese navy to hasten the travelling route for its naval ships from the South China Sea to the Indian Ocean without diverting more than 700 miles south to round the tip of Malaysia.

This creates a dilemma for Bangkok, if it were to revive the project with the investment from Beijing running into billions of dollars in digging the canal, it will also find itself mired in its own strategic trap with the associated strings attached.

A Thai canal would also boost Beijing’s String of Pearls strategy in choking India, already actively pushing west into the Bay of Bengal and the Indian Ocean.

This will effectively stimulate its connective capacity to its East African base in Djibouti and also in protecting its bases in Gwadar and the potential new railway that cuts through Myanmar in linking Yunnan to the Indian Ocean through Kyaukpyu in Myanmar, another strategic land connection that bypasses the Malacca Strait. This will threaten Dehi’s chokehold in the Nicobar Island chain and the control of the vital entry point into Malacca Strait. The potential Thai canal will prove to be a big win for Beijing’s regional power projection and securing its food, trade and energy security.

This directly serves as Beijing’s answer to Washington’s renewed defence deepening with Manila with new bases that directly challenge Beijing’s South China Sea’s grand military strategy, and as a needed support frontline in breaking Western dominance of the First Island Chain and reinforcing its anti access/area denial (A2/AD) capacity.

Future Risks and Geopolitical Repercussions

The Malacca Strait has been the key platform of global trade and commerce that runs through centuries and forms the main lifeline of economic support and continuity for Beijing, Tokyo, Seoul and Taipei. More than 80,000 ships a year transit the strait, bringing oil and essential resources to East Asia

Modern Singapore’s prosperity has also been a result of its strategic location at the tip of the strait. Now, Beijing has devised numerous fallback options to its Malacca Dilemma, both for its economic and security returns.

Some internal concerns include the further divide between north and south of Thailand should the canal take shape , made ever more critical in view of the unrest in the south.

Thailand risks splitting itself in two, where the canal could become a symbolic border between “mainland” Thailand in the north and a separatist movement in the south, hampering Thailand’s counterinsurgency campaign.

Some analysts have pointed out the risks involved, where it is stated that it is not inconceivable that China might have the potential to exert greater chips and cards in the future over the dominance of the canal. Others include the dwindling control over the southern provinces should the canal get the go ahead, apart from the Thai economy falling into the all familiar debt trap.

The long term economic viability and returns also do not look rosy, as the estimated cost of construction is US$28 billion plus another $30 billion for related infrastructure. The benefits of distance shortening look dismal, as the canal would shorten distances only up to 1,200 km, as compared to the Suez Canal, which saves 7,000 km and the Panama Canal, which saves 13,000 km. Other factors including the slower speed through the canal and the need for queueing as well as toll payment all contribute to the less incentivising factors for ship owners and vessels to use it and to opt for the Malacca Strait. In this realm, only the security and military prospects remain the utmost factor.

A successful Thai canal project would reorient the political geography of Southeast Asia, bringing in China as a permanent security partner that could not easily be jettisoned.

Bangkok is well aware of the risks and openings ahead, with some calls for the building of railways and roads that connect the East and West instead of a canal.Those supporting the canal argued on the massive long term economic and strategic returns to Thailand, seeing how the current Malacca Strait has almost reached the safe limit in terms of shipping volume, and that building industrial parks and logistical hubs in complementing this canal will turn the country into one of the most important major transit arteries in Asia and beyond. Increased Chinese influence for the support of this project has also yielded greater inner support for this project.

While some have argued that the canal poses little threat to Washington or Delhi which can effectively counter that with existing or renewed bases and friendshoring capacities in the region, the impact will be more profound on the regional states especially in the traditionally China aligned continental Southeast Asia, where the comparatively weak civil societies remain highly vulnerable to Chinese interference. It is pointed out that Singapore receives the highest benefit from the geostrategic importance of the Malacca Strait only because Singapore has an open economy that is relatively free from foreign influence. This serves as a critical reminder for Thailand should ponder that lesson before it sticks its neck out for China.

Bangkok knows that it has the ultimate card in influencing both China and US responses and also Malaysia’s vulnerability.

Strengthen Security and Geostrategic Interdependence with Bangkok

Most importantly, geopolitical agenda setting remains paramount, and Malaysia will seek new ventures to work closely with Thailand on connectivity and larger transportation linkages including public and trade routes, and closer ties in defence and security arrangements.

The importance of Thailand in providing joint security deterrence for non conventional threats remains crucial, but the larger picture is still with conventional threats, especially from China. Malaysia will need the buy-in and support from Thailand in facing tensions in South China Sea, and Thailand remains a crucial tie breaker in the China factor, as Chinese military grip in Cambodia has been entrenched with Ream port and other significant support fronts for China.

Thailand has been a close partner of the US for decades, with greater volumes of security and military partnerships and exchanges, and Malaysia will need to ensure that Thailand plays its part that has always seen Thailand being able to weather through the turbulent centuries with its sovereignty intact. Bangkok has always managed to serve both as a buffer and a strong deterrence capacity both in conflict prevention mechanisms and in hard power potential and calculations.

Thailand remains a crucial strategic partner for Malaysia, and the openings remain bullish on greater returns to both sides especially in the realm of geopolitical and security settings, provided both preserve the historical returns of smart and wise manoeuvre of geostrategic calculations in managing external powers and in maintaining the foresight and leverage on internal and joint strength and capacities.