Developing West-Northern Provinces of Vietnam: Challenge to Integrate with GMS Market Via China-Laos-Vietnam Triangle Cooperation

CHAPTER 7

Developing West-Northern Provinces of Vietnam: Challenge to Integrate with GMS Market via China-Laos-Vietnam Triangle Cooperation

Phi Vinh Tuong

This chapter should be cited as:

Phi, Vinh Tuong, 2012. “Developing West-Northern Provinces of Vietnam: Challenge to Integrate with GMS Market via China-Laos-Vietnam Triangle Cooperation.” In Five

Triangle Areas in The Greater Mekong Subregion, edited by Masami Ishida, BRC

Research Report No.11, Bangkok Research Center, IDE-JETRO, Bangkok, Thailand.

CHAPTER 7
DEVELOPING WEST-NORTHEN PROVINCES OF VIETNAM: CHALLENGE TO INTEGRATE WITH
GMS MARKET VIA CHINA-LAOS-VIETNAM
TRIANGLE COOPERATION

Phi Vinh Tuong

INTRODUCTION

The economy of Vietnam has benefited from regional and world markets over the past 20 years of integration. Increasing trade promoted investment, job creation and poverty reduction, but the distribution of trade benefits was not equal across regions. Some remote and mountainous areas, such as the west-northern region of Vietnam, were left at the margin.
Even though they are important to the development of Vietnam, providing energy for industrialization, the lack of resource allocation hinders infrastructure development and, therefore, reduces their chances of access to regional and world markets. The initiative of developing one of the northern triangles, which consists of three west-northern provinces of Vietnam, the northern provinces of Laos and a southern part of Yunnan Province in China (we call the northern triangle as CHLV Triangle hereafter), could be a new approach for this region’s development. Strengthening the cooperation and specialization among these provinces may increase the chances of exporting local products with higher value added to regional markets, including the Greater Mekong Subregion (GMS) and south-western Chinese markets. However, making it a feasible plan requires efforts from both central and local governments to establish a concrete institutional framework of cooperation, especially with China.
This chapter presents an overview and search for development opportunities and challenges for the three west-northern provinces of Vietnam (Son La, Lai Chau and Dien Bien), which form the CHLV Triangle area with China and Laos, by examining

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Figure 1: Map of Son La, Lai Chau and Dien Bien Province

C H I N A

Jinshuihe
Ma Lu

Thang

Hekou

4D

Phong Tho
Lao Cai

4D

Lai Chau Sin Ho
Muong Te
Tam

12
70

Duong

L A O C A I
L A I C H A U

Muong Nhe
Tan Uyen

279

Muong
Tua

D I E N

Lay
Chua
Than Uyen

B I E N

Muong Cha

12

Quynh Nhai

279
32
6

Y E N B A I

L A O P D R

Tuan Giao

Muong La

Muong

Ang

32

Mai Son Industrial Zone
Muong BuMuong La Industrial Cluster

279

Thuan Chau
Dien Bien Phu

Thi Xa Industrial

Son La
Dien
Bac Yen

^ClusteS^rO N L A

Bien

Panghok

Tay

Dong

Trang

Phu Yen
Mai Son
Dien

Bien
Song Ma
Yen Chau

6

43

Sop Cop
Moc Chau

Moc Chau Industrial Cluster

43

to Hanoi

Source: Created by the editor.

the development of enterprises, the industrial sector and its potential and the cross-border movement of goods and people. The first section offers an overview on the development of the three provinces. The second, third and fourth sections examine the opportunities and challenges of each province. The fifth section discusses challenges facing these three provinces in order to integrate the west-northern region of Vietnam into the GMS market. The conclusion summarizes the challenges and opportunities for the three provinces and suggests policy implications.

1. OVERVIEW OF THE DEVELOPMENT OF THE THREE
WEST-NORTHERN PROVINCES

1.1. Historical Development

Grouping provinces/cities into regions/areas aims at activating “division of labor”

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Figure 2: Provinces in West-northern Vietnam

Source: http://www.nchmf.gov.vn/web/en-US/61/18/map/Default.aspx.

across provinces, diffusing the benefits from early developed provinces/cities, mainly large cities, to their neighbors. In addition, at some specific point of development, provinces may merge or separate to activate economies of scale and to concentrate limited resource investment.
Currently, there are two kinds of grouping provinces and cities in Vietnam. From the administrative dimension, the government has divided the country into three large regions: the northern region, the central region and the southern region. Within each of the three regions, there are subregions, such as the Hong River delta subregion and the northern midland and mountainous subregions of the northern region, the northern and central coastal subregions, the central highland subregion of the central region and the southeastern and the Mekong Delta subregions of the southern region.
From the economic dimension, Vietnam developed four key economic regions:
(i) the Northern Key Economic Eegion, (ii) the Central Key Economic Region, (iii) the Southern Key Economic Region and, recently, (iv) the Mekong Delta Key Economic Region. The rationale for establishing the key economic regions is to take advantage of international integration and trade promotion to fuel economic growth in some selected

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provinces/cities and to diffuse the development benefits to the peripheral regions.
Three prominent west-northern provinces (Son La, Lai Chau and Dien Bien) share a long and close historical development. They are members of the west-northern region, which is a part of the northern highland and mountainous sub-region above (Figure 1).
Located at the farthest extent of the west-northern region, these provinces are distant from development centers such as Hanoi (Vietnam), Bangkok (Thailand) or Kunming (China). Until 1904, this region was known as Son Lap province. In 1909, Lai Chau province was established by taking six districts from the north of Son La province. They (Lai Chau province and the new Son La province) were united under the new name of Son Lai province in 1948. Since 1952, this region experienced mergers and separations many times before becoming the three current provinces (Table 1). Today, Son La province (the largest province in the region in terms of area) has one city and 10 districts, Lai Chau province has one town and six districts and the newly created Dien Bien province has one city, one town and seven districts. The total area of this region is 32,806 km². Of the three, Son La province has the largest area of 14,147 km². The areas of Lai Chau province and of Dien Bien province are 9,068 km²and 9,562 km², respectively.

Table 1: Historical Development of Provinces

Chronology

Province formation

- Aug 23, 1904 Aug. 23, 1904
Son La Province Son La Province
Chau Thuan, Muong La, Mai Son, Chau Yen, Chau Moc, Phu Yen,ꢀ Tuan Giao,

Jun. 28,1909

Son La Province

Lai Chau Province

Chau Thuan, Muong La,Mai Son, Tuan Giao, Dien Bien, Chau Lai,Quynh

Son Lai Province

1948-52

Jan., 1952

Son La Province

Son La Province (Jun.
1 city and 10 districts
Lai Chau Province (Jun. 28, 1909)

Nov., 2003

New Lai Chau Province

Dien Bien Province

1 town 6 districts

1 city 1 town 7 districts

Source: Summarized by the author based on provinces survey documents.

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The provinces are connected to other provinces in Vietnam by national road (NR)
No. 6, NR No. 37 (via Son La province), NR No. 4D, NR No. 12, NR No. 32 (via Lai Chau province) and NR No. 6, NR No. 12 and NR No. 279 (via Dien Bien province). People can utilize waterways of the Da and Ma Rivers for high density and high volume cargo transportation as well as for passenger transportation. People can also access this region by air to Dien Bien airport, Na San airport (when it re-opens) and Lai Chau airport (to be constructed in the future).

ꢀ ꢀ ꢀ

1.2. Geographical Characteristics

This terrain is steep and rocky in the northwest-southeast mountainous area. Influenced by the Hoang Lien Mountains, the average height of this area is 1,200 m above sea level, while certain mountains are 3,000 m above sea level. Two large rivers in this area are the Ma River and the Da River. The Ma River begins its flow in the west-northern region. These two rivers are not only a source of livelihood for ethnic minorities, but also the major source of electricity generation for the country.
Sharing over 300 km of border with China and over 610 km of border with Laos,
Vietnam has established a number of border checkpoints to promote cross-border trade with the two countries. Recently, formal trade between these Vietnamese provinces and neighboring provinces of the above two countries centered mainly on two border crossings: Ma Lu Thang-Jinshuihe (with China) and Tay Trang-Panghok (with Laos).
The region is located between the two sections of the North-South Economic
Corridor (NSEC). These provinces can connect with the eastern section, known as the Kunming-Lao Cai-Hanoi-Hai Phong corridor, using NR No. 4D. The distance from Tam Duong town of Lai Chau province to Lao Cai province is about 80 km. To the west, the region can connect with Kunming-Bangkok corridor via Laos. On this section, the bridge crossing the Nam Oo river on NR No. 2E (Laos) will be completed soon, facilitating movement from provinces of the CHLV Triangle to the Kunming-Bangkok corridor.

1.3. Population and Minorities

The total population of the three provinces is 2.023 million, which accounts for 47.95% of the west-northern region’s population and 2.3% of the total population in

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Table 2: Population of the three provinces in 2011

Population
(Thousands)
512.3
Area (km²)
Population Density
(Persons/km²)
Dien Bien Lai Chau Son La West-northern Region Total Population
9,562.9 9,068.8
14,174.4 50,685.0
33,0957.6
53 43 79 83
265
391.2
1,119.4 4,218.8
87,840.0
Source: Calculated by the author based on GSO data.

Table 3: Major ethnic groups in Dien Bien, Son La and Lai Chau provinces

(Unit:%)

Ethnicity

Province (as of 2011)

Son La
55.00 18.00 12.00
8.40
Lai Chau
34.09 14.04 22.16
0.03
Dien Bien
37.99 18.42 34.80
0.14
Thai Kinh Hmong Viet-Muong Khmu Yao
1.89 1.82
1.90
13.53
3.30 1.07
Source: Summary from provincial statistical documents.

2011. The population density across three provinces is much lower than the average of the west-northern region and of the country (Table 2).
The three provinces together form the richest cultural region in Vietnam with 36 ethnic groups out of a total of over 54 ethnic groups settled in this area (Appendix 1). Among them, the five major groups include the Thai, the Hmong, the Khmu, the Yao and the Viet-Muong, which are close to the Kinh ethnically (Table 3).

2. THE DEVELOPMENT OF SON LA PROVINCE

2.1. Overview

Son La province, with a total area of over 14,174 km², is the third largest province/city in Vietnam. Among the three provinces, Son La is the largest one in terms of population. The population of Son La province is two times larger than that of Dien

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Bien province and about three times larger than that of Lai Chau province. This larger population allows the province to mobilize more labor for economic activities.
During the years 2006-2010, the provincial gross output of Son La province almost tripled, increasing from VND 5,519 billion (2006) to VND 14,566 billion (2010). By the end of 2011, its provincial gross output surpassed VND 19 trillion. The expansion of provincial gross output allowed the province to raise its per capita income from VND 5.3 million (2006) to VND 13.3 million in 2010. By the end of 2011, per capita income in Son La province increased to VND 17.0 million, which is equivalent to USD 851 per capita. Although the achievement of economic growth of Son La province was significant, the result was still lower than the national level (by the end of 2011, GDP per capita of Vietnam was USD 1,300).
The economic structure of Son La changed significantly toward greater contributions from the industrial and construction sectors. From 2006 to 2010, the share of the primary sector was reduced from 50.80% (2006) to less than 39.60% (2010). At the same time, the shares of the secondary and tertiary sectors increased from 15.78% and 33.41% (2006) to 22.10% and 38.28% (2010), respectively.
Though the contribution from the agricultural sector fell sharply, it still accounted for the largest proportion of provincial gross output. The contribution of the agricultural sector comes mainly from crops and plantation.
In the agricultural sector, the major products of the province included rice, corn, cassava and sugar cane. Son La province also produces tea, soya beans, longan and mangoes. The total land allocated for agricultural production was 261.48 thousand ha (2011). Nearly 30% of the total agricultural land area was allocated for the production of rice, corn, cassava and sugar cane (Table 4). The area of paddy field was gradually reduced due to the limitation of land for agriculture and the strategy to shift from agricultural crops to industrial crops with higher productivity. After five years, almost 10 thousand ha of land were reallocated to other crops. Nevertheless, increased productivity compensated for the reduction in the cultivated area so that total rice production in 2011 nearly reached that of 2006.
Son La province, endowed with a plateau area, also has the potential for large-scale cattle and poultry raising, providing, in turn, stock for processing industries such as dairy products. By the end of 2011, the cattle of Son La province included

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Table 4: Major Agriculture Products of Son La

Industry Paddy field Cassava Sugar cane Rice Corn Cassava Sugar cane
2006
57.59 17.99
2007
50.80 18.63
2008
45.52 23.71
2009
45.96 22.33
2010
44.59 24.64
2011
44.15 28.51
Area (1,000 ha)

4.19

4.00

3.37

3.28

3.27

4.21

Quantity
(1,000 tons)
160.85 463.51 200.97 182.52
148.81 504.76 210.63 208.01
148.35 506.64 279.01 172.73
152.81 514.24 267.94 175.04
147.00 417.41 295.11 174.66
155.76 506.73 351.45 249.43
Source: Summary from provincial reports provided during the field trip.

Table 5: Fishery and forests in Son La Province

2006
2.0
2007
2.5
2008
2.5
2009
2.5
2010
2.4
2011

2.4

Area

Water surface

(1,000 ha)

Natural forest

Reforestation Fishery (ton) Aquaculture (1,000 ton) Timber (1,000 m³) Wood (million ste)
562.7
20.3
748.0
3.3
52.0 52.0
567.0
21.8
803.0
4.1
51.8
906.8
572.4
22.1
695.0
4.0
562.9
24.1
662.0
4.3
602.2
23.8
691.0
4.6
609.7
24.0
704.0

4.9

Quantity

50.1

45.4

44.3

44.0

918.4 1,394.6 1,016.7 1,035.9
Note: 1) ste is the abbreviation of stere (measuring cordwood, firewood): 1 stere = 3.6 cubic meters. Source: Summary from the provincial statistics department data and reports.

170,000 buffaloes, 191,000 oxen, 523,000 pigs and 4.89 million poultry.
Da River and Ma River are not only important sources for irrigation, but also for the development of fisheries and aquaculture. The total water surface area for aquaculture production increased significantly, resulting in a production increase of 149% in six years (Table 5).
Son La province has a relatively large forestry sector, with over 634,000 ha
(2011). The total area of natural forest was 609.7 thousand ha, accounting for 96.2% of the total forest area, while reforestation was 23.98 thousand ha. Over the past years, reforestation programs provided jobs and secure incomes for many poor ethnic minority households in the province.

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Table 6: Enterprises in Three Provinces during the Period 2007-2009

Classified by labor
Total Enterprises

Year

Micro

Small Medium

Large

(1)=(2)+(3)+(4)+(5)

(2)

163 218
(3)
255 308
(4) 18 21
(5) 14 16
2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009 2007 2008 2009
450

563

Son La

653 283 377 521 327 402 468
260 117 133 226
98
139 152
350 160 235 285 214 239 287
24
3368
14 17
19
3647
10 12
Lai Chau Dien Bien
9,153
11,564 11,627
155,771 205,732 127,181 248,842 162,785
4,292 5,836 5,200
95,322
4,313 5,107 5,747
50,763 68,051 74,644
267 306 367
4,059 4,489 4,993
281 315 313
5,627 6,011 6,420
Northern midland and mountainous

Country Source: Enterprise Census, General Statistics Office.

ꢀ ꢀ ꢀ

2.2. The Development of Enterprises

Enterprises, especially those that are small and medium-sized, are major players in fostering economic growth. They tend to be located in places having favorable business environments, such as near ports and roads or with easy access to labor and financial services.
Compared with the number of enterprises in the region or in the country as a whole, those in Son La province account for quite a small proportion (Table 6).
By the year 2011, Son La province had 10 state-owned enterprises (SOEs). The non-state enterprises increased to 1,307, 2.58 times greater than that of 2006 in accordance with the updated data as of 2011, provided by Son La Provincial government. Among private enterprises, 464 were privately-owned, 456 were limited enterprises and 387 others were joint-stock enterprises. Within the first nine months of 2012, there were 82 newly established enterprises, of which 24 were privately-owned, 38 were limited and the remaining 20 were joint-stock enterprises. Son La province also attracted investment from eight foreign enterprises by the end of 2011.

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In general, the size of enterprises in Son La province was quite small: 90.43% were small and medium-sized enterprises (SMEs). The average amount of SOE capital was VND 16 billion. The size of enterprises in the private sector was much smaller. The average capital of a joint-stock enterprise was VND 7.5 billion, nearly half that of the SOE. Limited enterprises on average had VND 4.25 billion, while privately-owned enterprises were the smallest in size with an average capital of VND 2.69 billion (2011 data).
A large number of enterprises specialized in mining and industry (610), while the agricultural sector attracted only very limited investment (46). The service sector also attracted investment from a number of enterprises (540). By the end of 2011, enterprises in Son La province provided jobs for 28,841 people. Although Son La experienced some progress in attracting enterprises to invest, the number of enterprises in the province (1.16 enterprises per 1,000 people) was much lower than the country average (3.30 enterprises per 1,000 people). Therefore, the number of jobs provided was quite small compared with the supply of 684,000 laborers in the province at the same time.

2.3. The Industrial Sector and Industrial Potential

Natural conditions heavily influenced the industrial structure of Son La province, particularly with the potential development of the construction material industry and the electricity industry. According to some studies, the amount of limestone and clay in Son La is around 16,000,000 tons, the amount of nickel-bronze is 984,000 tons, while gold and talcum quantities are estimated at 23,000 tons. As shown in Table 7, the major

Table 7: Industrial Output Value of Son La Province

(Unit: VND billion)
Industry Coal
2006
5.42
2007
5.95
2008
18.99
2009
30.44
2010
26.83
2011
29.55

Metal ore

30.60

318.32 200.36
692.4

43.25

103.65

749.89 461.03 1,804.3
204.99
1,047.01
593.11
2,263.7
117.91
1,712.26 1,885.66
823.30 3,769.05
129.85
Limestone and others Food processing Total Industrial Output Value
522.60 363.94

1,059.3

2,968.3

-

Source: Summary from provincial documents and General Statistics Office data.