For centuries the Malacca Straits has been an important trade route and the role it has played in the global trade network is monumental. It was spices, camphor, porcelain, silk, perfume and precious stones in the 15th century. Today, about half of world oil supplies and a third of global trade pass through this waterway. All this is likely to change. This busy trade route has been declared the most dangerous marine passageway, more dangerous than the waters off Somalia.¬†With each pirate attack, the China-Singapore rail link and other Chinese overland trade routes that are in the pipeline are getting more appealing.
Ships with black sails, beady-eyed men in ragged discoloured clothes waiting for a cargo ship or a Chinese junk to appear in the horizon. And when one does, they start plotting ways to get on it. When the ship is near enough, they jump on board, and start plundering the cargo, slashing anyone who gets in the way. That was probably how it was in the early days when Malacca Straits was emerging as a port of great importance for goods from China to India and the Middle East.
Nothing much has changed. The same beady-eyed men with plunder in their minds. A certain level of modernisation may have crept in, but the intentions are still the same. And there are more of them now. The International Maritime Bureau says that the number of pirate attacks in the Malacca Straits has increased so much that it is now the most dangerous maritime passageway in the world.
The number of attacks in the straits as a whole had dropped but it is the rising figures in Indonesia that has made the straits more dangerous than the waters off Somalia. Of the 138 piracy incidents recorded worldwide in the first six months of this year, 48 were in Indonesia. While global piracy had dropped substantially, down from 439 cases in 2011, the figures in Indonesia, however, was increasing. Most attacks happen in the waters around the Riau province, particularly around the ports in Dumai and Belawan.
New areas are emerging. One of them is around the island of Batam and nearby Belakang Island, which is close to Singapore. Batam is a low-cost manufacturing enclave and the products are exported via Singapore. Poor Indonesians who head for Batam for jobs and local fishermen battling with poor fishing yields are the prime targets of pirate mafias. The local mafias organise criminal activities alongside bigger syndicates.
These are low-level thefts in enclaves and areas that are hidden from the main route. They are not high-sea robberies that can be easily detected and crippled. Years ago, Indonesia, Malaysia and Singapore launched a campaign that aimed at curtailing piracy in the 960km long Malacca Straits. It has been successful in that the number of high-sea robberies has dropped and that the international shipping lane is much safer. But not the nooks and crannies.
Shipping to cost more
In 2005, Lloyd‚Äôs Market Association‚Äôs Joint War Committee declared the Malacca Straits an area that is in jeopardy of ‚Äúwar, strikes, terrorism and related perils‚Äù. This is the result of risk assessments on the area. There is a strong possibility that this declaration has caused higher insurance costs for the many thousands of ships that transit the route because of piracy in the Malacca Straits.
With the International Maritime Bureau recent report of higher piracy in the Malacca Straits, there is every likelihood that the insurance costs will go up further and some insurers may not even be willing to take on the risk. This will increase freight costs and, by extension, the cargo or products shipped. Faced with the possibility that piracy in the Malacca Straits was an evil that was not going to die, attempts were made to find a route and reduce reliance on the straits. Rightfully so. If a trade route is going to be filled with pirates and this is going to raise freight cost, the most obvious solution would be to find alternatives. Trade in Southeast Asia should not be at the mercy of pirates.
Shelved alternative routes
Overland trade routes have been mulled for ages and by different countries and for different reasons. One of the earliest plans was the Thai Canal Project, an idea which was mooted in the 17th century. This involves building a canal across the Isthmus of Kra in southern Thailand, which is the narrowest part of the Malay peninsula. The project involved cutting through high mountain ridges and it proved to be a costly affair which was why it was shelved. However, this is one of those projects that finds it way back to the discussion table and as late as a few years ago there was talk that the Japanese were interested in resurrecting the plan. It didn‚Äôt move beyond the ‚Äútalking‚Äù stage.
In the 1930s, the British administration in India started building a rail link from the Bay of Bengal to Yunnan, but construction stopped when World War II broke out. The British were thinking of the access they were to get to the Chinese market and the prospect of a shorter route.
The Yangzte River is the world‚Äôs busiest inland waterway. In 2011, it carried 1.6 billion metric tonnes worth of goods. The cities that exist along the Yangste River form an economic corridor that is the natural destination for this inward migration of industry. Kunming, the capital of Yunnan in the part of China that rests above Thailand with Myanmar to its west, is what China has been pinning all its hopes on.
The Chinese built the port at Kyaukpyu on Myanmar‚Äôs western coast and a gas terminal at Ramree Island prior to the recent opening up of the Myanmar regime. In February this year, the first part of the Pan-Asia railway that will eventually link Kunming with Malaysia and Singapore was opened. It is a 141km line between the Chinese cities of Yuxi and Mengzi. The line, mainly for freight transport, will go through Vietnam and travel down to the Malay peninsula. This will give China access to the ports in Vietnam, Thailand, Malaysia and Singapore.
Then there is the rail link between Kunming and Chittagong in Bangladesh. The rail project has been shelved for now due to dissenting public opinion in Myanmar because the rail link cuts through that country. However, if Myanmar can find a way to get around and it is determined to do so to boost bilateral trade with China, then there will be a clear bypassing of the Malacca Straits. This will be the new Silk Road. ¬†The problem of piracy in the Malacca Straits will dwindle into insignificance.
Once the Pan-Asia line and the link to Chittagong are completed, it will be the beginning of a new trade route and one that will be much used due to the shortened distance and it will provide a path of less resistance in freight movement. In short, the new rail lines will usher a golden era for the overland trade route. And this will spell the end of the Malacca Straits as a major route. The irony is that centuries ago, the Malacca Straits emerged and took over as the main trade route between East Asia and the rest of the world.
Now the tables have turned.