Development Initiatives in the Mekong Basin

1. Development Initiatives in the Mekong Basin PP 9.2

2. Presentation Overview • Greater Mekong Subregion Economic Cooperation Program • Development Gap • ASEAN Economic Community • Challenges for Mekong Countries • Capacity Building for Economic Integration

3. The GMS Economic Cooperation People’s Republic of China Land area: 633 thou sq km Population: 97.3 M GDP per capita: US$1,135 (figures for Yunnan and Guangxi only) Myanmar Land area: 677 thou sq km Population: 54.8 M GDP per capita: US$255 (2005) Viet Nam Land area: 332 thou sq km Population: 84.1 M GDP per capita: US$724 Thailand Land area: 513 thou sq km Population: 65.8 M GDP per capita: US$3,133 Lao PDR Land area: 237 thou sq km Population: 5.7 M GDP per capita: US$601 The GMS in 2006 Land area: 2.6 M sq km Population: 323 M GDP per capita: US$1,453* * excludes Myanmar Cambodia Land area: 181 thou sq km Population: 14.1 M GDP per capita: US$510

5. Why do we need GMS Cooperation? • Connectivity • Competitiveness • Community Building

7. Picture of War – Vietnam War

8. Powerless - picture

10. GMS Economic Cooperation • Vision: A more prosperous and harmonious GMS • Strategies • Connectivity • Competitiveness • Community Building

11. GMS Vision – MI Vision A more Prosperous and Harmonious Greater Mekong Subregion Capacity Building for Regional Development and Cooperation

12. The Economic Corridor Approach Infrastructure is developed in specific geographical areas based on economic potential. Usually starts with transport links, but extends to other infrastructure as well as the “software” for their optimal use. Some Characteristics of Economic Corridors: • Create links to major markets; • With nodal points – centers of enterprise development; • Extend the benefits of improved transport linkages to remote locations and integrates them with more prosperous areas; • Open up investment opportunities; • Promote synergies through the clustering of projects; • Provide demonstration effects. 12

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14. East-West Economic Corridor (EWEC) Progress, Issues and Way Forward

15. East-West Economic Corridor VIE: East-West Corridor (Lao Bao-Dong Ha) LAO: East-West Corridor (Phin-Dansavanh) JBIC-assisted 2nd Mekong International Bridge With assistance from the Royal Thai Government JBIC-assisted Hai Van Tunnel Construction and Da Nang Port Improvement 15

17. North-South Economic CorridorProgress, Issues and Way Forward

18. North-South Economic Corridor

19. To be completely upgraded by 2010 Upgraded with JBIC assistance; in good condition Upgrading completed in 2006. Ongoing with ADB loan assistance Completed in Dec. 2005 Financing of 4th Mekong bridge secured from PRC and Thailand North-South Economic Corridor Recently upgraded with Govt financing Financed by of PRC and Thailand, and ADB ADB loan approved in 2007 for new highway 19 19

20. Southern Economic CorridorProgress, Issues and Way Forward 20

21. Southern Economic Corridor • Inter-Corridor Link • Northern Sub-Corridor • Southern Coastal Sub- Corridor • Central Sub-Corridor 21

22. GMS Southern Economic Corridor • Mostly 4-lane highways; not a constraint to cross-border traffic. • Upgrading to be completed by 2009 with ADB and Japan assistance. • Upgrading of a section in Cambodia (70 km) to be completed by 2010 with assistance from Viet Nam; Financing requested for remaining sections. • Upgrading completed in 2007 with PRC assistance. • In good condition • Mostly 4-lane highways; not a constraint to cross-border traffic • Upgrading completed in 2007 with Thailand, Korea, World Bank and ADB assistance. • Upgrading to be completed by 2008 with ADB and Japan assistance. • Bridge over Mekong to be financed by Japan • Roads • Upgrading to be completed by 2010 with ADB, Korean, and Australian assistance. 22 • 22

23. Road Transport Network 1992

24. Road Transport Network 2006

25. Road Transport Network 2015 R3 a 228 km R3 b 253 km R 9 EWEC 246 3rd Bridge Nakhon Panom – Takek 4th Bridge – Chiang Kong - Hoisai

26. GMS Power Grid 1992 2004 2012 • Info. Super Highway Network Power Transmission Line Telecommunications Backbone

27. GMS Optical Fiber Subregional Fiber Optic Links will soon be completed in 3 loops i.e. East, North andWest Loops. Lower logistic cost in telecommunications will be enabling factor to attract more investment from outside the region into GMS. Proposed Transmission Network of Point to Point Architecture Proposed Transmission Network of Point to Point Architecture Proposed Transmission Network of Ring Architecture

28. BY 2009 FULL IMPLEMENTATION • Mukdahan – Savannakhet • Lao-Bao – Dansavanh POTENTIAL NEW BORDER CROSSING POINTS • Aranyaprathet – Poipet • Bavet – Moc Bai • Hekou – Lao Cai SECOND PHASE (commencing in 2007) FIRST PHASE (commencing in 2005/06) YOUYIGUAN (PRC) - HUU NGHI (VIE) • Myawaddy – Mae Sot • Mae Sai – Tachilek • Chongmek – Wang Tao • Houayxay – Chiang Khong THAKHEK (LAO) – HA TINH (VIE) • Nam Phao – Cau Treo THIRD PHASE (commencing in 2008/2009) • Nongkhai – Thanaleng • Mohan – Boten • Hat Lek – Cham Yeam • Veune Kham – Dong Kralor • Ruili – Muse LORK (CAM) – XA XIA (VIE) Geographic Coverage of CBTA

29. Promoting the GMS as a Single Tourist Destination • 2005: GMS Tourism Sector Strategy (2006-2015) – • Mekong River Corridor • Golden Triangle • East-West Corridor • Emerald Triangle • Southern Coastal • Green Cluster • Houphanh-Than-Hoa Oun La Tourism Circuit • Andaman Coast and Islands • 10. Red River Valley • 11. Guangxi-North Vietnam Islands Source: GMS Tourism Sector Strategy (2006-2015)

30. Interdependency of GMS Countries Available: Tin, Fisheries, Products Needs: Manganese, Iron • Resources: Available: Copper, Lead, Zinc, Tin, Iron Needs: Powdered Ores, Timber, Fisheries Products Available: Crude Oil, Gas, Coal, Apatite Needs: Steel, Refined Oil Available: Gas, Teak, Gemstone Needs: Refined Oil Available: Timber. Hydropower, Tin Needs: Fuel Available: Tin, Rubber, Natural Gas Needs: Fuel Available: Timber, Fisheries, Product, Gemstone Needs: Fuel

31. II. Diversity of GMS Source: IMF and National Bureau of Statistics of China *Data in 2008

32. II. Diversity of GMS (cont) Purchasing power in 2009: Source: IMF and National Bureau of Statistics of China *Data in 2008

33. “One Vision, One Identity, One Community” ASEAN GMS Countries - 2010 Land area: 1.94 M sq Km Population: 232 M ASEAN Countries - 2010 Land area: 4.48 M sq Km Population: 614 M

34. Per Capita GDP – US$ Source:–AEC Chartbook 2010

35. Limitation of GMS EC • Uneven development – 3 LDCs • CBTA implementation difficulties • Large economy vs small economy • Irregular Migration • Need to integrate into ASEAN and Global value chains

36. World Factory – ASEAN + 6 • import of intermediate goods increased from 26.9% to 33.1% in 2008 • and export of final goods increased from 30.1% to 33.1% One-third of the world export come from this region

37. World Consumption Market • ASEAN + 6 occupies around 49% of the world population and 25% in the world GDP • ASEAN 600 million people – become a trade hub of Asia. • ACFTA covers about 1.9 billion people and US$6000 billion in terms of GDP – making it the largest free trade area in the world.

38. Free Trade Agreements • ACFTA • ASEAN – Japan Comprehensive Economic Partnership (AJCEP) – 2008 • AKFTA • AANZFTA • ASEAN – India Regional Trade and Investment AREA (RTIA) 2002 • AIFTA - 2010

39. AEC4 Pillars • Single market and production base • Competitive economic region • Equitable economic development 0% tariff • Integration into the global economy

40. Challenges • Spaghetti bowl effect • Mega-competition in industry • Contract farming, agriculture land concession • Labor and migration issues • Political and border disputes • Environmental destruction

41. ASEAN Competitive Advantage Spaghetti bowl effect EU ACD ASEM GMS ACMECS NAFTA ASEAN Community (APSC, AEC, ASCC) APEC BIMSTEC WTO IMT- GT Korea Japan PRC India FTAs e.g. Japan, China, Australia, New Zealand, Bahrain, Peru, India, USA, BIMSTEC etc…

42. Mega-competitive Economy Chinese Production base in Thailand, bring parts and components from China (ACFTA, sales to India AIFTA Bring skilled workers from China

43. Mega-competitive Economy • China move down to CLMVT • Japan has to manage its risks, quake, nuclear – may force SMEs to relocate their plants to other countries

44. Replacement, reallocation, repositioning, geographical realignment and reorganization of industry.

45. Contract Farming and Big Agri. Land Concession will displace small land holders

46. Interdependent • Labor Migration • Second Wave Migration • Brain drain vs Brain gain • Transborder value chains • Export dependency

47. Thai economy depends 70% on export • ASEAN 21.4% • EU 12.8% • US 12/6% • Japan 11.8% • China 9.7% (NESDB 2008)

48. Priority HRD/Capacity Building Issues • Limited capacity to implement FTAs and trade and investment policies • Limited absorptive capacity for agriculture policies • Limited SME ability to integrate into GVC • Limited Good Agricultural Practices (GAP)

49. Trade and Investment • Limited capacity to implement FTAs and Investment Policies

50. Small and Medium Enterprises • Limited ability to integrate into ASEAN and global value chains