STRATEGY and ACTION PLAN for the GREATER MEKONG SUBREGION EAST–WEST ECONOMIC CORRIDOR STRATEGY and ACTION PLAN for the GREATER MEKONG SUBREGION EAST–WEST ECONOMIC CORRIDOR © 2010 Asian Development Bank All rights reserved. Published 2010. Printed in the Philippines. ISBN 978-92-9092-070-0 Publication Stock No. RPT090659 Cataloging-In-Publication Data Asian Development Bank. Strategy and action plan for the Greater Mekong Subregion East–West Economic Corridor. Mandaluyong City, Philippines: Asian Development Bank, 2010. 1. East–West Economic Corridor. 2. Greater Mekong Subregion. I. Asian Development Bank. The views expressed in this report are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. Notes: In this publication, “$” refers to US dollars. Figures without sources are the results of the work on the Strategy and Action Plan. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, contact Department of External Relations Fax +63 2 636 2648 [email protected] Contents List of Tables, Figures, and Boxes v Abbreviations vii Executive Summary 1 Map 5 Background and Accomplishments 6 Overview of the Corridor Area 6 First Strategy and Action Plan, 2001–2008 8 Accomplishments and Lessons 9 Perspective on the Development of the East–West Economic Corridor 14 The Consultation Process 14 Government Sector 15 Private Sector: Transport Interests 17 Private Sector: Provincial Interests 21 Development Partners 23 Development Vision and Goals 27 Development Challenges 27 Vision and Goals 30 Guiding Principles and Strategies to Achieve the Goals 31 Comparison between SAP 2009 and SAP 2001 32 Action Plan for Implementing the Strategy 34 Implementing the Strategy 34 Implementation Activities and Costing Matrix 35 Financing the Plan 38 Creating a Better Implementation Modality 40 Existing Institutional Mechanisms 40 Coordinating Institutional Activities 42 Monitoring and Evaluation 44 Promoting Sustained Private Sector–Led Growth I: The Business Environment 45 National Context of Private Sector Corridor Development 45 Subregional Initiatives for Private Sector Development 50 Targeting the Corridor’s Weakest Link in the Lao People's Democratic Republic 51 Proposed Private Sector Development Program for Savannakhet 54 Proposed Strategy and Implementation Modality 57 iv Strategy and Action Plan for the Greater Mekong Subregion East–West Economic Corridor Promoting Sustained Private Sector–Led Growth II: Trade, Investment, and Tourism 61 Cross-Border Trade 61 Investment and Special Economic Zones 66 Tourism 72 Proposed Strategy and Implementation Modality 78 Improving Equity and Reducing Poverty 83 Poverty and Inequality 83 Pro-Poor Policies 84 Proposed Strategy and Implementation Modality 85 Ensuring Environmental Sustainability 89 EWEC Environmental Impact 89 Core Environmental Program 89 Proposed Strategy and Implementation Modality 90 Enhancing Connectivity 92 EWEC Transport System 92 Secondary Road Improvement Program 95 Proposed Strategy and Implementation Modality 95 List of Tables, Figures, and Boxes Tables Table 1.1: Achievements of the EWEC under the 2001 Pre-Investment Strategy and Action Plan 11 Table 3.1: Selection of Focal Sectors Based on Impact in Key Performance Indicators 32 Table 3.2: Comparison between 2001 and 2009 Strategy and Action Plans 33 Table 4.1: Project Summary and Implementation Costs 35 Table 6.1: Micro, Small, and Medium-Sized Enterprise (MSME) Density and Employment of Selected EWEC Countries 46 Table 6.2: Savannakhet Major External Problems of Businesses 52 Table 6.3: Savannakhet Major Internal Problems of Businesses 54 Table 6.4: Action Plan for EWEC Development: Improving the Business Environment 59 Table 7.1: Top 10 Traded Products at Mukdahan–Savannakhet Border in 2008 62 Table 7.2: Exports at EWEC Border Checkpoints, 2002–2008 67 Table 7.3: Lao Bao Free Trade Area Zone 69 Table 7.4: EWEC Tourism Products 73 Table 7.5: Action Plan for EWEC Development: Trade, Investment, and Tourism 79 Table 8.1: Action Plan for EWEC Development: Reduce Poverty and Inequality 87 Table 9.1: Action Plan for EWEC Development: Environmental Conservation 91 Table 10.1: Action Plan for EWEC Development: Enhancing Connectivity 97 Figures Figure 1.1: East–West Economic Corridor Nodes 6 Figure 1.2: EWEC Strategy and Action Plan 2001 8 Figure 2.1: EWEC Linkages to National Development Plans 15 Figure 2.2: EWEC Complementary Corridors and Routes 18 Figure 2.3: EWEC Competing Corridors and Routes 20 Figure 2.4: Economic Impact of Full EWEC Implementation by 2025 22 vi Strategy and Action Plan for the Greater Mekong Subregion East–West Economic Corridor Figure 2.5: Donor Financing Sources for EWECs Transport Infrastructure 24 Figure 2.6: EWEC Transport-Related Donor Projects 24 Figure 3.1: Strategy and Action Plan 2009 29 Figure 4.1: Budget Allocation of 2008–2012 EWEC Action Plan 38 Figure 5.1: Economic Corridor Forum and the GMS Organizational Framework 43 Figure 6.1: MSME Density in Country Income Groups 45 Figure 6.2: Map of Savannakhet Province 51 Figure 6.3: A Model for Promoting Sustainable SME-Driven Businesses in Underperforming Areas of EWEC 55 Figure 7.1: Snapshot of EWEC Trade Flows, 2008 61 Figure 7.2: Export Performance of Myanmar–Thailand EWEC Border Trade, 1997–2008 63 Figure 7.3: Export Performance of Thailand–Lao PDR EWEC Border Trade, 1997–2008 63 Figure 7.4: Export Performance of Lao PDR–Viet Nam EWEC Border Trade, 2004–2008 64 Figure 7.5: Thailand’s Exports at Border Checkpoints, Annual Growth Rates versus Change in Border Checkpoint Market Shares 65 Figure 7.6: EWEC Priority Tourism Zones within GMS Overall Tourism Strategy 76 Figure 8.1: Poverty in the GMS Economic Corridors 84 Figure 8.2: Eastern Part of EWEC Provincial GDP and Poverty Incidence 86 Figure 10.1: EWEC Road Network 93 Box Box 6.1: Case Study of an Agribusiness in Savannakhet 57 Abbreviations ADB – Asian Development Bank AFTA – ASEAN Free Trade Area ASEAN – Association of Southeast Asian Nations AusAID – Australian Agency for International Development BCI – Biodiversity Conservation Corridor Initiative BDS – business development service CBTA – Cross-Border Transport Agreement CEP – Core Environment Program CEPT – common effective preferential tariff ECF – Economic Corridors Forum EOC – Environment Operations Center ERIA – Economic Research Institute for ASEAN and East Asia EWEC – East–West Economic Corridor EWEC-2 – Second East–West Economic Corridor FRETA – Freight Transport Association GDP – gross domestic product GMS – Greater Mekong Subregion GMS-BF – GMS Business Forum GTZ – Deutsche Gesellschaft für Technische Zusammenarbeit JBIC – Japan Bank for International Cooperation JICA – Japan International Cooperation Agency MSE – micro and small-scale enterprise MSMEs – micro, small, and medium-sized enterprises MTDP – Mekong Tourism Development Project NGO – nongovernment organization NSEC – North–South Economic Corridor ODA – official development assistance SEDP – Socio-Economic Development Plan SEZ – special economic zone viii Strategy and Action Plan for the Greater Mekong Subregion East–West Economic Corridor SMEs – small and medium-sized enterprises SPS – sanitary and phytosanitary TDF – Trade Development Facility UNESCO – United Nations Education, Scientific and Cultural Organization WGA – Working Group on Agriculture WTO – World Trade Organization Executive Summary n 1998, the Eighth GMS Ministerial Meeting held in Manila launched the East– West Economic Corridor (EWEC) as one of the flagship initiatives of the Greater IMekong Subregion (GMS). A decade later the EWEC has achieved many of the targeted infrastructural benchmarks. However, consensus is still lacking among government and development partner officials as well as private sector individuals on how to convert the transport corridor into an economic corridor. The original strategy and action plan for the EWEC, based on the Asian Development Bank’s (ADB) 2001 Pre-Investment Study, identified a broad range of initiatives and opportunities that were in some instances not taken up by stakeholders, particularly the private sector. Corridor-level impacts nonetheless show a potential upside in mainstreaming economic activity. Numerous interchange nodes link east–west trade with north– south trade, and this transportation network will likely produce large increases in traffic flows over the coming years. Nonetheless, as a development corridor, the EWEC targets some of the poorer areas of the GMS countries, and it is important to recognize this feature when reflecting on the strategic framework needed to transform the EWEC into an economic corridor. Coverage – This report aims to revise and update the strategy and action plan for the EWEC