Economics Opportunities from Crossborder Infrastructure Building: A Case of the Second Mekong Intern

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Economics Opportunities from Cross-border
Infrastructure Building A Case of the Second
Mekong International Bridge and Route 9

• Dr. Suthiphand Chirathivat
• Chulalongkorn University
• 9 March 2007

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1. Introduction

• New linkages between region size and region
  performance on mainland SEA
• Long-term vision and strong political will (GMS
  and concerned interests)
• Arising opportunities with first-time ever
  cross-border infrastructural development
• Agglomeration effects as part of the new economic
  geography and integration of ASEAN

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2. Current Features

• Framework
• Importance of numerous border effects, made a
  number of economic relations organized within a
  single country rather than in separate countries
• Once cross-border transactions liberalized, it
  could create scale effects across countries,
  including enhanced intra-national and regional
  integration.
• Impact of scale effects on economies, trade and
  firm (both internal and external) human
  resources, environment

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2. Current Features (continued)

• Status
• East corridor of mainland SEA is already there
• Route 9 extends from Savannakhet to Dansavanh,
  combining 245 km, is now operating (funded by
  ADB, JICA and IBRD)
• Second Mekong International Bridge started its
  construction in 2004 and was opened last December
  2006 (joint Lao-Thai funding through 8.09
  billion-yen loan from JBIC)
• There are also infrastructural improvements in
  Thailand and Vietnam. Thailand spends its efforts
  to improve Mukdahan and its transport networks in
  the Northeast. Vietnam made improvement of Route
  9 for 84 km from Lao Bao to Dong Ha and then the
  Highway 1 to Da Nang (172 km), including Hai Van
  Pass and Da Nang Port.

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3. Significance and Impacts

• Development of land-locked regions of mainland
  SEA
• Thailand Northeasts access to the outside world.
  Distance from Mukdahan to Da Nang is 509 Km, and
  also to neighboring countries
• Lao PDR and its lower parts could access easier
  also to the sea and trade within the region and
  also with the rest of the world
• Vietnam, central region, expects to develop more
  with the opening up to the outside world
• Integral part to the long-term development vision
  for the EWEC to stimulate growth of participating
  areas and raise the incomes of their residents

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3. Significance and Impacts (continued)

• Route 9 and the Second Mekong International
  Bridge and its linkages to the economic corridor
  concept
• Efficient resource allocation of underlying
  sub-regional complementarities
• Development of competitive advantages that will
  enhance the overall competitiveness of the EWEC
• Core vision is a single, unified geographical and
  economic unit
• Development must be long-term, given the
  far-reaching poverty and under-development
  characterizing many sections of the Corridor

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3. Significance and Impacts (continued)

• Route 9 and the Mekong Second International
  Bridge
• and the GMS programs
• EWEC is figured as one of transport development
  projects, one of the 11 priority programs of the
  GMS, designed by the ADB for 2003-2012 (10-12
  billions US)
• EWEC strategy includes spatial planning with
  initiatives ranked by priority, physical
  infrastructure development, policy and procedural
  reform, support programs, skills development,
  capital and financing and institutional
  development
• EWEC also encompasses a defined geographic space,
  with greater emphasis on bilateral, rather than
  multilateral initiatives, particularly border
  crossing between two countries. It also places a
  greater emphasis on the careful spatial and
  physical planning of the corridor and its
  surrounding area

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3. Significance and Impacts (continued)

• Lao PDR as an example
• Land locked but extensive common borders with
  Vietnam (2069 Km) and Thailand (1835 Km), also
  with China (505 Km) Cambodia (435 Km) and Myanmar
  (236 Km)
• Total population stands at 5.7 million with a
  total land area of 236,800 km2 compared to
  Savannakhet of 0.8 million with 21,774 km2 and
  Champasack of 0.6 million with 15,415 km2
• GDP stands around 2 billion US with a per capita
  income of 330 dollars as compared to Thailand GDP
  147 billion with a per capita income of 2,302
  dollars and Vietnams GDP of 38 billion US with
  a per capita income of 467 dollars

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3. Significance and Impacts (continued)

• Lao PDR an example (continued)
• Total passengers in 2003 is 1.7 million persons
  (1.5 million by land) with the total number of
  636,361 tourists (in 2003) including Thailand
  (377,748) Vietnam (39,874) and China (21,232).
• Total exports in 2003 stand at 141.3 million US
  (mainly agricultural mineral products and
  resources like electric power) while total
  imports in 2003 represent 207 million US
  consisting of consumer goods, raw materials,
  intermediate products and machinery.
• Total freight transport in 2003 is equivalent to
  3.06 million tons of which by land freight
  transport is of 2.17 million tons and river ways
  transport is of 0.89 million tons.

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3. Significance and Impacts (continued)

• Lao PDR expects major changes from Route 9 and
  the Second Mekong International bridge
• Crossing from Mukdahan to Savannakhet was by
  ferry and relatively slow, requiring up to 2
  hours to traverse the 8 Km route between the two
  towns. Car transport was around 50 vehicles per
  day and total number of 115,272 passengers in
  2003.
• It is expected that car transport could increase
  to almost one thousand within the first two years
  as the total number of passengers would follow
  the suite.
• Lao PDRs agricultural and manufacturing output
  is also expected to be more efficiently allocated
  as a result of the improvement of land transport.

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3. Significance and Impacts (continued)

• Lao PDR expects major changes from Route 9
• and the Second Mekong International bridge
• (continued)
• At present, Savannakhet trades with Mukdahan in
  2003 totalled 110 million US with exports of 21
  million US and imports of 89 million US
• Significant improvement of border controls in Lao
  PDR and its neighbors like Thailand and Vietnam
  will enhance trade and investment quite
  tremendously.
• Institutional development both in the public and
  private sector is also expected to follow.
• Should the project like Nam Theun Dam2 be
  completed, Lao PDR would have excessive power
  capacity, thus helped to increase trade with
  neighbors like Thailand and Vietnam.

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3. Significance and Impacts (continued)

• Lao-Thai border controls
• Still impediments to trade and passengers after
  the opening of the bridge
• Yet to agree on bilateral entry fees and traffic
  rules for different types of vehicles to cross
  the bridge.
• Also Vietnam is still concerned about the
  difference of vehicles run
• Border controls to be improved with more trade
  facilitation and relaxed cross-border people
  flows
• More tripartite (Lao-Thai-Vietnam) cooperation
  planned to meet efficient use of this
  infrastructural building

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4. Implications for Participating Countries

• Lao PDR
• Major changes for its subsistence economy
• Infrastructural built-up and its readiness
• From land-locked to land-linked, its needs to
  change law, regulations and institutional
  development
• Role of the private sector development and its
  interactions with the public sector

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4. Implications for Participating Countries
(continued)

• Vietnam
• Expectations from these projects to improve
  regional growth and income of the Central region
  as compared to the North and the South
• Needs of consistent strategies to link with
  neighboring countries and the outside world
• Efficiency improvement in both public and private
  sector to respond to major changes, in
  particular, with regard to trade and investment

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4. Implications for Participating Countries
(continued)

• Thailand
• East Economic Corridor is developed faster than
  the West Economic Corridor
• Needs for institutional development and
  coordination to support such projects
• Increase economic potential and business
  opportunities for several Northeastern and
  Northern provinces
• Consistent policy to assist Lao PDR in their
  regional development
• Thailands provinces could link increasingly in
  terms of trade and production to neighboring
  countries and the outside world

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Changes of Total Production after the Second
Mekhong Bridge
??????? 100,000 ???????
80,000 100,000 ???????
??????? 80,000 ???????
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Changes of GPP after the Second Mekhong Bridge
??????? 70,000 ???????
20,000 70,000 ???????
??????? 20,000 ???????
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???????????????????????????????????????
Bangkok, the Hub of Thailand
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4) Implication for Participating Countries
(continued)

• A Case of Mukdahan province
• Upgrading the role of Mukdahan as a province in
  EWEC
• How to turn the province into Thailands gateway
  for trade and investment with Southern Lao,
  Central Vietnam, and the rest of the world
• Impact on regional and provincial economy, human
  resources, environment, urban dynamics, all as
  part of a new economic geography
• Concrete steps toward new changes in the province
  ie. logistics, transport, warehouse, Sawannakhet
  airport, distribution center, new business
• Immigration figure for Mukdahan show that inbound
  and outbound passengers with passports jumped
  from 57,379 in 2004 to 124,606 in 2005 and
  175,561 in the first ten months of 2006

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4. Implications for Participating Countries
(continued)

• Other organizations and outsiders
• Role of ADB through GMS programs is also, at
  present, the key to the kinds of the future
  outlook
• There is also the Mekong River Commission dealing
  with resources and its use, although China is not
  yet in
• ASEAN-China should take these initiatives more
  fully and discuss the role of China in the
  mainland SEA development
• Japanese strategy towards GMS and EWEC explains
  much why Japan strongly involves with different
  initiatives and cross-border regional development
• ASEAN has its own IAI and the Hanoi Action Plan.
  It remains to be seen how ASEAN will take GMS and
  other sub-regional initiatives into its future
  AEC.

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5. Conclusion

• Cross-border infrastructure could turn mainland
  SEA and GMS into a major greenfield development
  site
• Each country/region needs to address challenges
  and opportunities accordingly
• Monitoring more closely changes and development
  of these regions to make efficient use of
  cross-border infrastructure to support regional
  integration and sustainable development
• More indepth and practical research needed to
  support specific and comprehensive policy agenda