Foreign Affairs
Malaysia-Thailand: Strengthening Strategic Ties

Thailand’s Minister Srettha Thavisin visit to Malaysia is crucial for ensuring long-term economic and geostrategic returns. The main objectives are to strengthen traditional domains of greater economic and trade returns for both countries. Thailand is working to cement deeper trade and economic security, particularly in high technology and green and digital economies.

Malaysia’s growing advantages, such as the mobility of expertise, talents, technology, and startups, will be sought after. Food and energy security are also critical areas, with Malaysia having a bigger advantage in resources like oil and gas, palm oil, and rare earths. In return, Thailand has an advantage in food security and mutual returns in digitalization, innovation, and tourism spillover impact. Socio-economic and people-to-people ties will be enhanced for historical appreciation based on trust and healthy interdependence.

In 2022, Thailand ranked as Malaysia’s seventh largest trading partner globally and the third largest among Asean member states. Thailand faces growing internal socio-economic challenges, including an aging population and workforce conundrum. Tourism and the automotive industry are driving key economic fundamentals, but face long-term risks. EV collaboration and joint growth with Malaysia remain strategic for Bangkok to lead the regional drive in this field.

Thailand’s automotive industry has made it the tenth-largest car producer globally, surpassing countries like France and Britain. Beijing is increasingly focusing on Bangkok’s automotive prowess, as Chinese investments reinforce China’s dominance in Asian supply chains. Bangkok’s strategic importance lies in the South China Sea and the Andaman and Nicobar Island Chain, which are emerging as a second front for Sino-US rivalry. Strengthening diplomatic and economic ties, food security, SMEs, digital and green energy, and economy are crucial areas.

For the South China Sea, Bangkok will need Malaysia’s support, particularly in helming ASEAN in 2025. Bangkok fears a spiraling crisis, trapped between its dependence on China for economic and tourism returns and the need to secure its borders post-conflict. The country will also request a US support system for military and navy support in case of conflict.

Thailand needs Malaysia’s support for its own solutions to Myanmar, as it is wary of the direct aftermath and the futility of ASEAN and the West’s commitment. Malaysia will be persuaded to look beyond current measures and emphasize the implications on Malaysia in terms of refugees and regional instability. Malaysia-Thailand ties are defined by economic integration, defense, security, and the long-rooted southern conflict, with any implications from the conflict directly impacting Malaysia. Thailand has the leverage to revive the Thai Canal, connecting the Andaman Sea and the Indian Ocean to the South China Sea, bypassing the Straits of Malacca.

The Thai Canal, a 135-km canal across southern Thailand, would connect the Gulf of Thailand with the Andaman Sea, opening a second sea route and access from China to the Indian Ocean. This would significantly impact 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% of the current cost of shipping energy imports through the Malacca Strait by diverting them through the canal once it becomes operational. The canal would also bolster Beijing’s power projection capacities, alongside its new Ream base in Cambodia, providing a second front support line for its Pacific Ocean, Indian Ocean, and South China Sea grand ambitions.

It would provide a bulwark of both near and far shore offensive and support capacities for its naval projection, which will be needed in its Pacific and Indian Ocean expansions and defending its current bastion strategy in the South China Sea. However, if Bangkok revives the project with billions of dollars in investment from Beijing, it would find itself 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.

The potential Thai canal could be a significant win for Beijing’s regional power projection and securing its food, trade, and energy security. This would serve as Beijing’s answer to Washington’s renewed defense deepening with Manila, challenging Beijing’s South China Sea’s grand military strategy. The Malacca Strait has been a key platform of global trade and commerce for centuries, providing economic support and continuity for Beijing, Tokyo, Seoul, and Taipei.

Over 80,000 ships annually pass through the Strait of Malacca, transporting oil and resources to East Asia. Singapore’s prosperity is attributed to its strategic location. Beijing has explored alternative solutions to the Malacca Dilemma for economic and security benefits. However, internal concerns include the potential divide between Thailand’s north and south, potentially hindering its counterinsurgency campaign.

The Thai canal project, which would shorten the Malacca Strait by 1,200 km, is facing significant risks and challenges. The estimated cost of construction is US$28 billion, with an additional $30 billion for related infrastructure. The benefits of the canal are also less significant, as it would only save up to 1,200 km compared to the Suez Canal and the Panama Canal. Other factors, such as slower speed and queueing, also contribute to less incentivising factors for ship owners and vessels to use the canal. The security and military prospects remain the most important factors.

A successful Thai canal project would reorient Southeast Asia’s political geography, bringing China as a permanent security partner. Bangkok is aware of the risks and openings, with some calling for the construction of railways and roads instead of a canal. Supporters argue that the canal will provide massive long-term economic and strategic returns to Thailand, as the Malacca Strait has reached its safe limit in terms of shipping volume. Increased Chinese influence has also led to greater inner support for the project.

The Malacca Strait, a strategically important region in Southeast Asia, poses a significant threat to regional states, particularly those in China-aligned regions. Singapore’s open economy and strategic importance make it a valuable asset to the region. Thailand should consider this before focusing on China, as Bangkok has the ultimate influence on both China and US responses and Malaysia’s vulnerability.

Malaysia will seek new ventures with Thailand to work closely on connectivity, transportation, defense, and security arrangements. Thailand’s role in providing joint security deterrence for non-conventional threats remains crucial, but the larger picture is still dominated by conventional threats, particularly from China. Malaysia will need Thailand’s support in facing tensions in the South China Sea and the China factor, as Chinese military grip in Cambodia is entrenched.

Thailand has been a close US partner for decades, with greater security and military partnerships and exchanges. Malaysia will need to ensure Thailand plays its part in managing external powers and maintaining the foresight and leverage on internal and joint strengths and capacities. Thailand remains a crucial strategic partner for Malaysia, with bullish returns on greater returns in geopolitical and security settings.

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