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Scoping Study for the Special Border

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Scoping Study for the Special Border INDONESIA-MALAYSIA-THAILAND GROWTH TRIANGLE SCOPING STUDY FOR THE SPECIAL BORDER ECONOMIC ZONE (SBEZ) IN THE INDONESIA-MALAYSIA-THAILAND GROWTH TRIANGLE (IMT-GT) SCOPING STUDY FOR THE SPECIAL BORDER ECONOMIC Zone (SBEZ) in the INDONESIA-MALAYSIA- THAILAND GROWTH TRIANGLE (IMT-GT) 15 May 2014 The views expressed in this publication 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 words for commercial purposes without the express, written consent of ADB. Contents Acknowledgments v Executive Summary vi I INTRODUCTION 1 1 Background and Coverage 3 1.1 Study Objective 3 1.2 Background 3 1.3 Activities Carried Out Under the Study 4 1.4 Report Structure 5 2 SBEZ Concept and Implementation Framework 7 2.1 SBEZ Concept 7 2.2 Motivation for Thai-Malaysian SBEZ 9 2.3 SBEZ Components 11 2.4 Roadmap 15 II BORDER AREA PROFILE 17 3 Characterization of Study Area 19 3.1 Subregional and Corridor Context 19 3.2 Thai-Malaysia Border Area 20 4 Regional Development Plans 22 4.1 Overview 22 4.2 Thailand’s Southern Region Development Plan 23 4.3 Thailand’s Cross-Border Investment and SEZ Incentives 25 4.4 Malaysia’s East Coast Economic Region Master Plan 27 4.5 Malaysia’s Northern Corridor Economic Region Program 28 4.6 Malaysia’s Investment and SEZ Incentives 29 4.7 Target Industries 30 III ASSESSMENT OF EACH BORDER CROSSING 35 5 Satun – Perlis Border Crossing 37 5.1 Profiles and Development Strategies 37 5.2 Wang Prachan – Wang Kelian Border Crossing Area 38 6 Songkhla – Perlis and Kedah Border Crossings 43 6.1 Profiles and Development Strategies 43 6.2 Sadao – Bukit Kayu Hitam Border Crossing Area 45 6.3 Padang Besar Border Crossing Area 50 6.4 Ban Prakob – Durian Burung Border Crossing Area 54 7 Yala – Perak Border Crossing 57 7.1 Profiles and Development Strategies 57 7.2 Betong - Pengkalan Hulu Border Crossing Area 59 iii iv CONTENTS 8 Narathiwat – Kelantan Border Crossings 62 8.1 Profiles and Development Strategies 62 8.2 Su Ngai Kolok - Rantau Panjang Border Crossing Area 66 8.3 Ban Buketa – Bukit Bunga Border Crossing Area 70 8.4 Takbai – Pengkalan Kubur Border Crossing Area 72 IV SUMMARY AND CONCLUSIONS 75 9 Comparative Border Crossing Ratings 77 9.1 SBEZ Ratings 77 9.2 Ranking with Commercial versus Welfare Preferences 79 10 Next Steps 81 References 82 Annexes 87 A Terms of Reference for Scoping Study 88 B Activities Carried Out 90 C List of Persons Met 95 A cknowledgments This report was prepared by Montague Lord (Consultant, ADB) and Pawat Tangtrongjita (Consultant, ADB). The study was supervised by Alfredo Perdiguero (Principal Regional Cooperation Specialist, ADB) and Gary Krishnan (Country Specialist, ADB) and financed under ADB’s Technical Assistance on “Institutional Development for Enhanced Subregional Cooperation in the aSEA Region” (RETA 6462). The authors are grateful to the members of the IMT-GT Special Border Economic Zones Special Implementation Task Force for guidance in the scope and coverage of this report. In carrying out the field work on the Malaysian side of the border, they acknowledge the support of the Centre for IMT-GT Subregional Cooperation (CIMT) and the Economic Planning Unit (EPU) of the Prime Minister’s Department of the Government of Malaysia for their arrangements and guidance for the field work. Likewise, the Office of the National Economic and Social Development Board (NESDB) of the Royal Thai Government provided strong support to the consulting team’s field work on the Thai side of the border. Special thanks are also due to the Governor of Narathiwat; Perlis State Economic Planning Unit; Northern Corridor Implementaion Authority; Jabathan Perancangan Bandar and Desa (JPBD); East Coast Economic Region Development Council (ECER); Unit Perancang Ekonomic Negeri (UPEN); Jabatan Kerja Raya Malaysia (JKR); Kementerian Kerja Raja (KKR); Jabatan Pembangunan Persekutuan Kelantan (JPPK); State Economic Development Corporation Halal Park; and each of the chambers of commerce, state and provincial government agencies, border customs authorities, and businesspersons located in the provinces and states along the Thai- Malaysian border who provided valuable inputs to the study. v Executive Summary Report Objective: This report provides a review and analysis of the findings from the scoping study on the proposed Malaysian–Thailand Special Border Economic Zone (SBEZ). The coverage of the study is guided by the recommendations of the IMT-GT Special Implementation Task Force on the Establishment of a Special Border Economic Zone (hereafter TF-SBEZ) at its meeting in Penang, Malaysia on 22 November 2013. At that time, the TF-SBEZ determined that that present study should be a stand-alone study, comprehensive in nature and cover in-depth all the SBEZ components for each of the eight border crossing areas in the Thai-Malaysian border, including linkages to Indonesia. Based on those findings, the TF-SBEZ requested that the present study make recommendations to the Task Force on the possible location(s) of the SBEZ. The study is part of a broader project that intends to support the establishment of an SBEZ that will help to attract investors in productive activities that promote subregional value chains in order to stimulate cross-border trade and investment, serve as a catalyst to commerce along the IMT-GT corridors and help to substantially improve the social and economic welfare of the population along the border provinces. The study was carried out between 10 February 2014 and 15 May 2014. Methodology and Roadmap: Each border crossing has been assessed on the basis of the following components, details of which are presented in the main body of this report: (a) special economic zone (SEZ) potential; (b) cross-border value chains; (c) transport and logistics; (d) socio-economic development strategy for the area; (e) SME development and business development services; and (f) linkages to Indonesia. The proposed SBEZ is best viewed as incremental levels of collaboration between Malaysia, Thailand and Indonesia. Level 1 would cover the establishment of SBEZ facilities and supporting activities on either or both sides of the border; Level 2 would involve development of cross-border value chains and hard and soft infrastructure supporting the SBEZ; and Level 3 would consist of collaboration in joint SBEZ facilities and supporting activities. This stepwise approach reflects international good practices for the development of cross-border SEZs in Europe, North America and Asia. It ensures that actions on either side of the border move from informal to formal mechanisms of collaboration, thereby providing effective mechanisms for achieving long-term goals for the operation of a joint SBEZ. Opportunities at Each Border Crossing Area: There are considerable differences among the bordering Thai provinces and Malaysian states in terms of geography, demographics, development levels, comparative advantages of industries, infrastructure, and potential sector- or industry-level collaboration. Figure S1 summarizes possible areas of collaboration at each border crossing and it reflects the detailed analysis of Part III in this report, where ratings are presented for each of the eight border crossings. Ratings: The ratings of the assessment are summarized visually in Figures S2 and S3. The results show that there are two border crossing areas with the highest ratings: The first is the Su-ngai Kolok – Rantau Panjang in Narathiwat Province of Thailand; the second is the Ban Prakob – Durian Burung border crossing area in Kedah State of Malaysia and Songkhla Province of Thailand. However, they reflect considerable differences in the valuation of parameters for each of the components. Ban Prakob – Durian Burung border crossing has new modern customs facility on both sides, a four lane highway that is currently being completed on the Thai side, and an excellent roadways on the Malaysian side of the border. The area around the border on the Thai side has been designated for farmland and natural preserves, and there could therefore be sensitivity on the part of the local population to the establishment of an SEZ in the border area. Development of part of the SBEZ could, however, be located farther inland, which might eliminate those possible drawbacks. EXECUTIVE SUMMARY vii Figure S1 Summary Opportunities at Thai-Malaysian Border Crossing Areas Wang Prachan (Thailand) – Sadao (Thailand) – Bukit Buketa (Thailand) and Bukit Takbai (Thailand) – Wang Kelian (Malaysia Kayu Hitam (Malaysia) Bunga (Malaysian) Border Pengkalan Kubur Border Crossing Area: Border Crossing Area: Crossing Area: Second (Malaysian) Border Crossing Enhance existing Level 1 Develop diversified heavy bridge construction and Area: Construction of type SBEZ to Level 2/3 zone industry activities in new Thai CIQ complex will bridge and associated CIQ for joint border commercial Malaysia’s
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