Download Economics Opportunities from Cross-border Infrastructure Building

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
1. Introduction
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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
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.
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Impact of scale effects on economies, trade and
firm (both internal and external) human resources,
environment
2. Current Features
(continued)
Status
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East corridor of mainland SEA is already there
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Route 9 extends from Savannakhet to Dansavanh,
combining 245 km, is now operating (funded by ADB,
JICA and IBRD)
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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)
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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.
3. Significance and Impacts
Development of land-locked regions of mainland
SEA
 Thailand Northeast’s 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
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 subregional 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 farreaching poverty and under-development
characterizing many sections of the Corridor
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$)
 EWEC strategy includes spatial planning with initiatives ranked
by priority, physical infrastructure development, policy and
procedural reform, support programs, skills development,
capital and financing and institutional development
 EWEC also encompasses a defined geographic space, with
greater emphasis on bilateral, rather than multilateral
initiatives, particularly border crossing between two countries.
It also places a greater emphasis on the careful spatial and
physical planning of the corridor and its surrounding area
3. Significance and Impacts
(continued)
Lao PDR as an example
 Land locked but extensive common borders with
Vietnam (2069 Km) and Thailand (1835 Km), also
with China (505 Km) Cambodia (435 Km) and
Myanmar (236 Km)
 Total population stands at 5.7 million with a total
land area of 236,800 km2 compared to Savannakhet
of 0.8 million with 21,774 km2 and Champasack of
0.6 million with 15,415 km2
 GDP stands around 2 billion US$ 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 Vietnam’s GDP of 38 billion US$ with a
per capita income of 467 dollars
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.
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 PDR’s agricultural and manufacturing output is also
expected to be more efficiently allocated as a result of
the improvement of land transport.
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.
3. Significance and Impacts
(continued)
Lao-Thai border controls
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Still impediments to trade and passengers after the
opening of the bridge
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Yet to agree on bilateral entry fees and traffic rules
for different types of vehicles to cross the bridge.
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Also Vietnam is still concerned about the difference
of vehicles run
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Border controls to be improved with more trade
facilitation and relaxed cross-border people flows
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More tripartite (Lao-Thai-Vietnam) cooperation
planned to meet efficient use of this infrastructural
building
4. Implications for
Participating Countries
Lao PDR
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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
4. Implications for Participating
Countries (continued)
Vietnam
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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
4. Implications for Participating
Countries (continued)
Thailand
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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
Thailand’s provinces could link increasingly in terms
of trade and production to neighboring countries
and the outside world
Changes of Total Production
after the Second Mekhong Bridge
มากกว่า 100,000 ล้านบาท
80,000 – 100,000 ล้าน
บาท
ตา่ กว่า 80,000 ล้านบาท
Changes of GPP
after the Second Mekhong Bridge
มากกว่า 70,000 ล้านบาท
20,000 – 70,000 ล้านบาท
ตา่ กว่า 20,000 ล้านบาท
Bangkok,
the Hub of Thailand
เปรี ยบเทียบ
การขนส่ งผ่าน
แหลมฉบัง
และดานัง
4) Implication for Participating
Countries (continued)
A Case of Mukdahan province
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Upgrading the role of Mukdahan as a province in
EWEC
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How to turn the province into Thailand’s gateway for
trade and investment with Southern Lao, Central
Vietnam, and the rest of the world
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Impact on regional and provincial economy, human
resources, environment, urban dynamics, all as part
of a new economic geography
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Concrete steps toward new changes in the province
ie. logistics, transport, warehouse, Sawannakhet
airport, distribution center, new business
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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
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.
5. Conclusion
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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 crossborder infrastructure to support regional integration
and sustainable development
More indepth and practical research needed to
support specific and comprehensive policy agenda