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Dr. Suthiphand Chirathivat Chulalongkorn University 9 March 2007

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

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Dr. Suthiphand Chirathivat Chulalongkorn University 9 March 2007

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  1. 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

  2. 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

  3. 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

  4. 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.

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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.

  10. 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.

  11. 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 becompleted, Lao PDR would have excessive power capacity, thushelped to increase trade with neighbors like Thailand and Vietnam.

  12. 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

  13. 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

  14. 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

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

  16. Changes of Total Production after the Second Mekhong Bridge มากกว่า 100,000 ล้านบาท 80,000 – 100,000 ล้านบาท ต่ำกว่า 80,000 ล้านบาท

  17. Changes of GPP after the Second Mekhong Bridge มากกว่า 70,000 ล้านบาท 20,000 – 70,000 ล้านบาท ต่ำกว่า 20,000 ล้านบาท

  18. เปรียบเทียบการขนส่งผ่านแหลมฉบังและดานังเปรียบเทียบการขนส่งผ่านแหลมฉบังและดานัง Bangkok, the Hub of Thailand

  19. 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 Thailand’s 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

  20. 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.

  21. 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

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