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Preparatory Survey on Vientiane Logistics Park (VLP) Project (PPP Infrastructure Project) in Lao P.D.R

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Ministry of Public Works and Transport Lao Peoople’s Democratic Republic (Lao PDR) Preparatory Survey on Vientiane Logistics Park (VLP) Project (PPP Infrastructure Project) In Lao P.D.R. Final Report July 2015 Japan International Cooperation Agency (JICA) Nippon Express Co., Ltd. Nittsu Research Institute and Consulting, Inc. Nittsu Real Estate Co., Ltd. OS International Development Center of Japan Inc. JR 15-054 Ministry of Public Works and Transport Lao Peoople’s Democratic Republic (Lao PDR) Preparatory Survey on Vientiane Logistics Park (VLP) Project (PPP Infrastructure Project) In Lao P.D.R. Final Report July 2015 Japan International Cooperation Agency (JICA) Nippon Express Co., Ltd. Nittsu Research Institute and Consulting, Inc. Nittsu Real Estate Co., Ltd. International Development Center of Japan Inc. Exchange Rate (February 2015) 1USD=118.59JPN 1THB＝3.64JPN 1KIP＝0.015JPN Preparatory Survey on Vientiane logistics Park (VLP) Project in Lao PDR. Final Report Preparatory Survey on Vientiane Logistics Park (VLP) Project (PPP Infrastructure Project) in Lao P.D.R. Final Report Summary 1. Project Name Vientiane Logistics Park (VLP) (1) Project Site The Thanaleng area where the VLP is planned is located 15 km east-west from downtown Vientiane. It lies opposite Nong Khai Municipality of Thailand, so that Thanaleng has been traditionally a strategic place as a river-crossing point. In 1993, the first Friendship Bridge was completed at the Thanaleng area, which continues to hold its strategic position as an international cross border point. Dongphosy Forest is located approximately 3 km north from the bridge, which is under Vientiane Capital. The railway passes through the forest, and the Thanaleng station is located 3.5 km from the bridge. The Vientiane Logistics Park (VLP) is planned at north side of the station. (2) Container Yard Development Project at Thanaleng In parallel with the JICA feasibility study (2011) on which this survey is based, a survey on a planned railway extension to Vientiane Station was conducted with the support of the Thai Government. The survey included not only a new Vientiane Station plan but also a container yard (CY) plan for handling rail freight. For this reason, the JICA and 2. Project Site Thai survey teams made adjustments and discussed the integration of the CY planned by Thailand into the VLP Project. After the JICA Study, the Railway Department of MPWT and the Lao National Railways Authority (LNRA) developed a railway extension project from Thanaleng station to Vientiane Central Station, and decided to use Thai financial assistance to realize the project. The project originally has three (3) components, namely: 1) railway construction between Thanaleng station to Vientiane Central station; 2) construction of Vientiane Central station; and 3) container yard (CY) at Thanaleng station. In 2013, MPWT agreed with the Neighboring Countries Economic Development Cooperation Agency (NEDA) of Thailand on financial assistance for the first phase of the project and started the construction. The CY is targeted to be completed in July 2015. It is possible to select another site for the VLP in this survey, but there is no need to construct two CYs for rail freight in the same area. Therefore, The VLP development should harmonize with the CY development and part of the access road developed by the CY project. (1) Current Logistics Situation The volume of import and export cargo in Vientiane, similar to the Laos national logistics, is increasing because of an increase in commodity demand due to continued economic growth. About half of the import cargo in Laos passes through the First Friendship Bridge. On the other hand, with regard to export cargo, it has remained at about 4% of Laos’ overall 3. Current export volume. This means that the logistics in Vientiane capital mainly focuses on Logistics import cargo, and it is foreseen that the flow rate is gradually increased due to Situation in sustainable economic growth and urbanization in the future. Vientiane Import cargo trucks that pass through the First Friendship Bridge can be roughly divided into two: the ones going directly to the factories and construction sites and the ones going through the Thanaleng warehouse after passing through immigration. If it does not pass through the Thanaleng warehouse, it undergoes customs clearance at the First Friendship Bridge or at arrival factories and construction sites. (2) Customs Clearance Procedure i JICA PPP Infrastructure Project According to the interview survey, the average transit time for the customs procedure is one hour for export and 3 hours for import, with no negative assessment by the exporters/importers interviewed. According to Customs, ASYCUDA application results in a 36% reduction in transaction time. A similar positive assessment is reported from the local forwarders interview survey. (3) Current Situation of Thanaleng Warehouse The increase in cargo volume causes overcapacity at the Thanaleng Warehouse. Thus, while import cargo should stay at least one day in regulation, many cargoes actually go out from the warehouse just after the customs clearance procedure. Being called a "land-locked country" is usually used to represent Lao PDR's logistics backwardness, resulting from its geographical disadvantage (long distance from/to international market) as well as high logistics cost. For a long time, reducing this geographical disadvantage has been strongly sought after by improving logistics services. Along with the promotion of accelerating regional integration, such as fulfillment of the ASEAN Economic Community (AEC) in 2015, smoother and more efficient logistics services will be demanded to realize a speedy physical distribution across the region. The purpose of the VLP is to provide comprehensive and advanced logistics services 4. VLP Business that meet international standards while upgrading the current the Thanaleng Warehouse Concept function as an international gateway of the Vientiane area. The VLP aims to provide global standardized logistics services by installing a developed warehouse management system (WMS) as well as promoting information sharing among the various stakeholders. This strategy results in the following gains: • Government can achieve correct duty/tax collection, cargo management and trade statistics; • The VLP can provide accurate, speedy and low-cost logistics serviced by information linkage of cargo, vehicle and declaration; and • Users can enjoy quality services which, up to now, have not been provided not only in Lao PDR but also in neighboring countries. The VLP plans to provide a set of comprehensive and sophisticated logistics services by improving the existing the Thanaleng Warehouse service. Additionally, providing new and future services is taken into account.as a medium/long-range target. Existing Service Expansion New Service Future Service 1） Providing Land Area for 1） Low temperatures cold 1） Railway cargo On-chassis Customs storage 2） Inland container depot Clearance 2） Tenant service 3） Export consolidation 2） Public bonded warehouse 3） Imported automobile inventory (1) Existing Service Expansion 1） Providing Land Area for On-chassis Customs Clearance 5. VLP Service As a result of both the existing direct delivery and the Thanaleng Warehouse attachment practice, three types of transport are observed between the Friendship Bridge and the Thanaleng Warehouse, namely: (a) Customs clearance cargo; (b) Bonded transport cargo (cargo that should be stopped at the Thanaleng Warehouse); and (c) Domestic transport cargo. This makes it difficult for proper cargo management and accurate duty collection. To address this problem, it is recommended to adopt a principle that all vehicles should attach to the VLP and dispatch is allowed after confirming the completion of customs clearance. Therefore, the VLP should provide the space for on-chassis based customs clearance. 2） Public Bonded Warehouse The VLP will install an advanced WMS technology and will provide inventory service which meets global standards. As a result, importers will be able to store their cargo under bonded status even if they import large volumes. Moreover, just-in-time (JIT) type shipment becomes possible immediately after receiving orders from customers. Bonded ii Preparatory Survey on Vientiane logistics Park (VLP) Project in Lao PDR. Final Report storage will be beneficial for improving the importer’s cash flow because now it is necessary to pay duty at one time of the importation. 3） Imported Automobile Inventory Service The revenue from this service accounts for a large portion of the Thanaleng Warehouse's income. The open yard facility for automobiles is already full. Although the VLP will take over all services being provided by the Thanaleng Warehouse, it is proposed to continue using the current open yard facility for automobile inventory service. (2) New Services 1） Low Temperature/Cold Storage Currently, the Thanaleng Warehouse is not equipped with cold storage facilities. However, it is a universal trend that the demand for cold chain facilities grows in accordance with economic development. Even now, a large portion of such cargo is imported in the form of informal entry like passenger baggage. Considering this, the VLP should be equipped with cold storage facilities. VLP will provide temperature controlled transport service for sensitive cargo in order to secure the cargo quality up to delivering customers. 2） Tenants The leasing of warehouses and office space is welcomed for LIFFA
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