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

Dr. Suthiphand ChirathivatDr. Suthiphand Chirathivat

Chulalongkorn UniversityChulalongkorn University

9 March 20079 March 2007

1. Introduction1. Introduction

New linkages between region size and New linkages between region size and region performance on mainland SEAregion performance on mainland SEA

Long-term vision and strong political Long-term vision and strong political will (GMS and concerned interests)will (GMS and concerned interests)

Arising opportunities with first-time Arising opportunities with first-time ever cross-border infrastructural ever cross-border infrastructural developmentdevelopment

Agglomeration effects as part of the Agglomeration effects as part of the new economic geography and new economic geography and integration of ASEAN integration of ASEAN

2. Current Features2. Current Features

FrameworkFramework Importance of numerous “border” effects, Importance of numerous “border” effects,

made a number of economic relations made a number of economic relations organized within a single country rather than organized within a single country rather than in separate countriesin separate countries

Once cross-border transactions liberalized, it Once cross-border transactions liberalized, it could create scale effects across countries, could create scale effects across countries, including enhanced intra-national and including enhanced intra-national and regional integration.regional integration.

Impact of scale effects on economies, trade Impact of scale effects on economies, trade and firm (both internal and external)and firm (both internal and external) human human resources, environmentresources, environment

2. Current Features 2. Current Features (continued)(continued)

StatusStatus East corridor of mainland SEA is already thereEast corridor of mainland SEA is already there Route 9 extends from Savannakhet to Dansavanh, Route 9 extends from Savannakhet to Dansavanh,

combining 245 km, is now operating (funded by ADB, combining 245 km, is now operating (funded by ADB, JICA and IBRD)JICA and IBRD)

Second Mekong International Bridge started its Second Mekong International Bridge started its construction in 2004 and was opened last December construction in 2004 and was opened last December 2006 (joint Lao-Thai funding through 8.09 billion-yen 2006 (joint Lao-Thai funding through 8.09 billion-yen loan from JBIC)loan from JBIC)

There are also infrastructural improvements in There are also infrastructural improvements in Thailand and Vietnam. Thailand spends its efforts to Thailand and Vietnam. Thailand spends its efforts to improve Mukdahan and its transport networks in the improve Mukdahan and its transport networks in the Northeast. Vietnam made improvement of Route 9 for Northeast. Vietnam made improvement of Route 9 for 84 km from Lao Bao to Dong Ha and then the Highway 84 km from Lao Bao to Dong Ha and then the Highway 1 to Da Nang (172 km), including Hai Van Pass and Da 1 to Da Nang (172 km), including Hai Van Pass and Da Nang Port.Nang Port.

3. Significance and 3. Significance and ImpactsImpacts

Development of land-locked regions of Development of land-locked regions of mainland SEAmainland SEA

Thailand Northeast’s access to the outside world. Thailand Northeast’s access to the outside world. Distance from Mukdahan to Da Nang is 509 Km, Distance from Mukdahan to Da Nang is 509 Km, and also to neighboring countriesand also to neighboring countries

Lao PDR and its lower parts could access easier also Lao PDR and its lower parts could access easier also to the sea and trade within the region and also with to the sea and trade within the region and also with the rest of the worldthe rest of the world

Vietnam, central region, expects to develop more Vietnam, central region, expects to develop more with the opening up to the outside worldwith the opening up to the outside world

Integral part to the long-term development vision Integral part to the long-term development vision for the EWEC to stimulate growth of participating for the EWEC to stimulate growth of participating areas and raise the incomes of their residentsareas and raise the incomes of their residents

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Route 9 and the Second Mekong Route 9 and the Second Mekong International Bridge and its linkages to International Bridge and its linkages to the economic corridor conceptthe economic corridor concept

Efficient resource allocation of underlying sub-Efficient resource allocation of underlying sub-regional complementaritiesregional complementarities

Development of competitive advantages that Development of competitive advantages that will enhance the overall competitiveness of will enhance the overall competitiveness of the EWECthe EWEC

Core vision is a single, unified geographical Core vision is a single, unified geographical and economic unit and economic unit

Development must be long-term, given the Development must be long-term, given the far-reaching poverty and under-development far-reaching poverty and under-development characterizing many sections of the Corridorcharacterizing many sections of the Corridor

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Route 9 and the Mekong Second International Bridge Route 9 and the Mekong Second International Bridge and the GMS programsand the GMS programs EWEC is figured as one of transport development projects, EWEC is figured as one of transport development projects,

one of the 11 priority programs of the GMS, designed by the one of the 11 priority programs of the GMS, designed by the ADB for 2003-2012 (10-12 billions US$)ADB for 2003-2012 (10-12 billions US$)

EWEC strategy includes spatial planning with initiatives EWEC strategy includes spatial planning with initiatives ranked by priority, physical infrastructure development, ranked by priority, physical infrastructure development, policy and procedural reform, support programs, skills policy and procedural reform, support programs, skills development, capital and financing and institutional development, capital and financing and institutional developmentdevelopment

EWEC also encompasses a defined geographic space, with EWEC also encompasses a defined geographic space, with greater emphasis on bilateral, rather than multilateral greater emphasis on bilateral, rather than multilateral initiatives, particularly border crossing between two initiatives, particularly border crossing between two countries. It also places a greater emphasis on the careful countries. It also places a greater emphasis on the careful spatial and physical planning of the corridor and its spatial and physical planning of the corridor and its surrounding areasurrounding area

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Lao PDR as an exampleLao PDR as an example Land locked but extensive common borders with Land locked but extensive common borders with

Vietnam (2069 Km) and Thailand (1835 Km), also Vietnam (2069 Km) and Thailand (1835 Km), also with China (505 Km) Cambodia (435 Km) and with China (505 Km) Cambodia (435 Km) and Myanmar (236 Km)Myanmar (236 Km)

Total population stands at 5.7 million with a total Total population stands at 5.7 million with a total land area of 236,800 kmland area of 236,800 km22 compared to compared to Savannakhet of 0.8 million with 21,774 kmSavannakhet of 0.8 million with 21,774 km22 and and Champasack of 0.6 million with 15,415 kmChampasack of 0.6 million with 15,415 km22

GDP stands around 2 billion US$ with a per capita GDP stands around 2 billion US$ with a per capita income of 330 dollars as compared to Thailand income of 330 dollars as compared to Thailand GDP 147 billion $ with a per capita income of GDP 147 billion $ with a per capita income of 2,302 dollars and Vietnam’s GDP of 38 billion 2,302 dollars and Vietnam’s GDP of 38 billion US$ with a per capita income of 467 dollarsUS$ with a per capita income of 467 dollars

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Lao PDR an exampleLao PDR an example (continued)(continued) Total passengers in 2003 is 1.7 million persons Total passengers in 2003 is 1.7 million persons

(1.5 million by land) with the total number of (1.5 million by land) with the total number of 636,361 tourists (in 2003) including Thailand 636,361 tourists (in 2003) including Thailand (377,748) Vietnam (39,874) and China (21,232).(377,748) Vietnam (39,874) and China (21,232).

Total exports in 2003 stand at 141.3 million US$ Total exports in 2003 stand at 141.3 million US$ (mainly agricultural mineral products and (mainly agricultural mineral products and resources like electric power) while total imports resources like electric power) while total imports in 2003 represent 207 million US$ consisting of in 2003 represent 207 million US$ consisting of consumer goods, raw materials, intermediate consumer goods, raw materials, intermediate products and machinery.products and machinery.

Total freight transport in 2003 is equivalent to Total freight transport in 2003 is equivalent to 3.06 million tons of which by land freight transport 3.06 million tons of which by land freight transport is of 2.17 million tons and river ways transport is is of 2.17 million tons and river ways transport is of 0.89 million tons.of 0.89 million tons.

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Lao PDR expects major changes from Route 9 Lao PDR expects major changes from Route 9 and the Second Mekong International bridgeand the Second Mekong International bridge

Crossing from Mukdahan to Savannakhet was by Crossing from Mukdahan to Savannakhet was by ferry and relatively slow, requiring up to 2 hours to ferry and relatively slow, requiring up to 2 hours to traverse the 8 Km route between the two towns. traverse the 8 Km route between the two towns. Car transport was around 50 vehicles per day and Car transport was around 50 vehicles per day and total number of 115,272 passengers in 2003.total number of 115,272 passengers in 2003.

It is expected that car transport could increase to It is expected that car transport could increase to almost one thousand within the first two years as almost one thousand within the first two years as the total number of passengers would follow the the total number of passengers would follow the suite.suite.

Lao PDR’s agricultural and manufacturing output is Lao PDR’s agricultural and manufacturing output is also expected to be more efficiently allocated as a also expected to be more efficiently allocated as a result of the improvement of land transport.result of the improvement of land transport.

3. Significance and Impacts 3. Significance and Impacts (continued)(continued)

Lao PDR expects major changes from Route 9 Lao PDR expects major changes from Route 9 and the Second Mekong International bridgeand the Second Mekong International bridge(continued)(continued) At present, Savannakhet trades with Mukdahan in At present, Savannakhet trades with Mukdahan in

2003 totalled 110 million US$ with exports of 21 2003 totalled 110 million US$ with exports of 21 million US$ and imports of 89 million US$million US$ and imports of 89 million US$

Significant improvement of border controls in Lao PDR Significant improvement of border controls in Lao PDR and its neighbors like Thailand and Vietnam will and its neighbors like Thailand and Vietnam will enhance trade and investment quite tremendously.enhance trade and investment quite tremendously.

Institutional development both in the public and Institutional development both in the public and private sector is also expected to follow.private sector is also expected to follow.

Should the project like Nam Theun Dam2 beShould the project like Nam Theun Dam2 be completed, Lao PDR would have excessive power completed, Lao PDR would have excessive power capacity, thuscapacity, thus helped to increase trade with neighbors helped to increase trade with neighbors like Thailand and Vietnam.like Thailand and Vietnam.

3. 3. Significance and Impacts Significance and Impacts (continued)(continued)

Lao-Thai border controlsLao-Thai border controls Still impediments to trade and passengers after Still impediments to trade and passengers after

the opening of the bridgethe opening of the bridge Yet to agree on bilateral entry fees and traffic Yet to agree on bilateral entry fees and traffic

rules for different types of vehicles to cross the rules for different types of vehicles to cross the bridge.bridge.

Also Vietnam is still concerned about the Also Vietnam is still concerned about the difference of vehicles rundifference of vehicles run

Border controls to be improved with more trade Border controls to be improved with more trade facilitation and relaxed cross-border people flowsfacilitation and relaxed cross-border people flows

More tripartite (Lao-Thai-Vietnam) cooperation More tripartite (Lao-Thai-Vietnam) cooperation planned to meet efficient use of this planned to meet efficient use of this infrastructural buildinginfrastructural building

4. Implications for 4. Implications for Participating CountriesParticipating Countries

Lao PDRLao PDR Major changes for its subsistence economyMajor changes for its subsistence economy Infrastructural built-up and its readiness Infrastructural built-up and its readiness From land-locked to land-linked, its needs to From land-locked to land-linked, its needs to

change law, regulations and institutional change law, regulations and institutional developmentdevelopment

Role of the private sector development and Role of the private sector development and

its interactions with the public sectorits interactions with the public sector

4. Implications for 4. Implications for Participating Countries Participating Countries (continued)(continued)

VietnamVietnam Expectations from these projects to improve Expectations from these projects to improve

regional growth and income of the Central regional growth and income of the Central region as compared to the North and the Southregion as compared to the North and the South

Needs of consistent strategies to link with Needs of consistent strategies to link with neighboring countries and the outside worldneighboring countries and the outside world

Efficiency improvement in both public and Efficiency improvement in both public and private sector to respond to major changes, in private sector to respond to major changes, in particular, with regard to trade and investmentparticular, with regard to trade and investment

4. Implications for 4. Implications for Participating Countries Participating Countries (continued)(continued)ThailandThailand East Economic Corridor is developed faster than East Economic Corridor is developed faster than

the West Economic Corridorthe West Economic Corridor Needs for institutional development and Needs for institutional development and

coordination to support such projectscoordination to support such projects Increase economic potential and business Increase economic potential and business

opportunities for several Northeastern and opportunities for several Northeastern and Northern provincesNorthern provinces

Consistent policy to assist Lao PDR in their regional Consistent policy to assist Lao PDR in their regional development development

Thailand’s provinces could link increasingly in Thailand’s provinces could link increasingly in terms of trade and production to neighboring terms of trade and production to neighboring countries and the outside worldcountries and the outside world

Changes of Total Production Changes of Total Production after the Second Mekhong Bridgeafter the Second Mekhong Bridge

มากกว่�า 100,000 ล้�านบาท80,000 – 100,000 ล้�านบาท

ต่ำ� ากว่�า 80,000 ล้�านบาท

Changes of GPP Changes of GPP after the Second Mekhong Bridgeafter the Second Mekhong Bridge

มากกว่�า 70,000 ล้�านบาท

20,000 – 70,000 ล้�านบาท

ต่ำ� ากว่�า 20,000 ล้�านบาท

เปรี�ยบเปรี�ยบเที�ยบการีเที�ยบการีขนส่ งขนส่ งผ่ านผ่ านแหลมแหลมฉบ�งและฉบ�งและดาน�งดาน�ง

Bangkok, the Hub of Thailand

4) Implication for 4) Implication for Participating Countries Participating Countries (continued)(continued)A Case of Mukdahan provinceA Case of Mukdahan province Upgrading the role of Mukdahan as a province in Upgrading the role of Mukdahan as a province in

EWECEWEC How to turn the province into Thailand’s gateway for How to turn the province into Thailand’s gateway for

trade and investment with Southern Lao, Central trade and investment with Southern Lao, Central Vietnam, and the rest of the world Vietnam, and the rest of the world

Impact on regional and provincial economy, human Impact on regional and provincial economy, human resources, environment, urban dynamics, all as part resources, environment, urban dynamics, all as part of a new economic geographyof a new economic geography

Concrete steps toward new changes in the province Concrete steps toward new changes in the province ie. logistics, transport, warehouse, Sawannakhet ie. logistics, transport, warehouse, Sawannakhet airport, distribution center, new businessairport, distribution center, new business

Immigration figure for Mukdahan show that inbound Immigration figure for Mukdahan show that inbound and outbound passengers with passports jumped and outbound passengers with passports jumped from 57,379 in 2004 to 124,606 in 2005 and 175,561 from 57,379 in 2004 to 124,606 in 2005 and 175,561 in the first ten months of 2006in the first ten months of 2006

4. Implications for 4. Implications for Participating Countries Participating Countries (continued)(continued)

Other organizations and outsidersOther organizations and outsiders Role of ADB through GMS programs is also, at Role of ADB through GMS programs is also, at

present, the key to the kinds of the future outlookpresent, the key to the kinds of the future outlook There is also the Mekong River Commission dealing There is also the Mekong River Commission dealing

with resources and its use, although China is not yet with resources and its use, although China is not yet in in

ASEAN-China should take these initiatives more fully ASEAN-China should take these initiatives more fully and discuss the role of China in the mainland SEA and discuss the role of China in the mainland SEA developmentdevelopment

Japanese strategy towards GMS and EWEC explains Japanese strategy towards GMS and EWEC explains much why Japan strongly involves with different much why Japan strongly involves with different initiatives and cross-border regional developmentinitiatives and cross-border regional development

ASEAN has its own IAI and the Hanoi Action Plan. It ASEAN has its own IAI and the Hanoi Action Plan. It remains to be seen how ASEAN will take GMS and remains to be seen how ASEAN will take GMS and other sub-regional initiatives into its future AEC.other sub-regional initiatives into its future AEC.

5. Conclusion5. Conclusion

Cross-border infrastructure could turn mainland Cross-border infrastructure could turn mainland SEA and GMS into a major greenfield SEA and GMS into a major greenfield development sitedevelopment site

Each country/region needs to address challenges Each country/region needs to address challenges and opportunities accordingly and opportunities accordingly

Monitoring more closely changes and Monitoring more closely changes and development of these regions to make efficient development of these regions to make efficient use of cross-border infrastructure to support use of cross-border infrastructure to support regional integration and sustainable developmentregional integration and sustainable development

More indepth and practical research needed to More indepth and practical research needed to support specific and comprehensive policy support specific and comprehensive policy agendaagenda