Who will gain or lose from the new Laos highway
from Thailand to China?
By Jon Fernquest |
The impact of the new road to China from Thailand via Laos was the focus of an article in this week's Bangkok Post Perspective.
Chiang Rai as a whole is set to benefit from the new road, becoming a transportation hub for the region. Farmers in northern Thailand, however, may be negatively effected by low cost agricultural imports from China.
Here is the article in full:
Shaking up the neighbourhood
A new road through Laos is changing the way Thailand relates to China, write SONGPOL KAOPATUMTIP and SIRIPORN SACHAMUNEEWONGSESunday May 04, 2008
Despite the absence of a crucial new bridge at the Thai-Lao border, the recent launch of the North-South Corridor of the Asian Development Bank-funded Great Asian Highway is already creating a lot of optimism among Thai businessmen wishing to bolster trade with China and neighbouring countries. But questions are emerging as well with regard to future social, economic and geopolitical costs of the new roadway.
The Asian Development Bank (ADB) has supported the development of transportation routes linking China, Burma, Laos, Vietnam, Thailand and Cambodia since the Greater Mekong Subregion (GMS) was established in 1992. Route 9 connecting Thailand, Laos and Vietnam has been completed. A stretch of Route 3 from the southern Chinese border village of Boten to the Lao border town of Houei Xai, opposite the northern Thai border town of Chiang Khong in Chiang Rai province, was officially opened on March 31. (See map)
The journey from Boten to Houei Xai on the old mostly dirt road took as long as two days. With the new roadway, the trip takes only five to six hours. For its part, Thailand is planning several infrastructure projects, including a new bridge linking Chiang Khong with Houei Xai. Once completed, the bridge will connect Kunming, the capital of southwestern Chinese province of Yunnan, with Bangkok via a 1,855-kilometre highway, which will be connected to the road network in Malaysia and Singapore.
Acknowledging the importance of this new trade route, the Thai-Chinese Chamber of Commerce (TCCC) has urged Thai businessmen to tap into this new potential for economic growth.
"Chiang Rai will benefit the most in terms of trade, investment and tourism," said TCCC chairman Tanakorn Seriburi. "It can be the hub for Chinese tourists, who will not only travel in Thailand but around the region."
He foresees greater Thai-Chinese joint investment in long-term projects, including food processing and gem and jewelry business. A northern industrial park may also be set up with investors from China, he told a seminar in Bangkok in March.
In this regard, said Tanakorn, Thailand should promote the learning of Mandarin Chinese as a second language as it will help foster closer relations between the two countries.
"China is a fast-growing economy and its people are going abroad to further their studies and broaden their visions," said Tanakorn. "This is a new China that we must deal with."
As a matter of fact, the value of trade between China and Thailand has been increasing over the years. According to records of the Information and Communication Technology Centre and the Customs Department, the value of trade in goods between Thailand and China was 816 billion baht back in 2005.
With the value of imported items from China almost reaching 448 billion baht by the end of 2005 and exceeding 367 billion baht in exports from Thailand the same year, Thailand incurred a trade deficit with China of 81.5 billion baht in 2005.
Interestingly, by the end of 2007, the trade value between China and Thailand had exceeded a trillion baht.
However, with imports of 564 billion baht coming in from China and over 510 billion of exported items taking off from Thailand in 2007, the trade deficit for Thailand had decreased from that in 2005, but was still at a noteworthy 53 billion baht. (See chart)
The main export items from Thailand have been automatic data processing machines, rubber, polymers, refined fuels, crude oil, chemicals products, rice and tapioca products, whereas the top imported items from China have been computer parts and accessories, electrical machinery, iron and steel products and other metal ores and scraps, household appliances, chemicals, fertiliser and pesticides, fabrics and manufactured articles.
Roads to change
Professor Sompop Manarungsan, an economist at the Faculty of Economics, Chulalongkorn University, considers that in economic terms, the new Route 3 will be beneficial in at least three ways.
Firstly, it will encourage market expansion across the borders, considering the improved logistical framework. "Up to now, the main mode for transporting goods in the region has been via the Mekong River," he says, noting that vegetables from China are shipped along the river into Thailand, whereas exports from Thailand are shipped to Guangdong in China, from where they are transported to Kunming and other cities in Yunnan. "With the new road, cost and time incurred on logistics will be reduced in favour of door-to-door logistics."
Secondly, the development will also boost investments in the region, he said, noting that Chinese investors have already started acquiring land in Laos, on lease terms of 99 years, for commercial and real estate projects, as well as for building new entertainment complexes and casinos. "Investors from Korea, Singapore, Malaysia and Japan are already giving more attention to the area, which was initially considered a marginal area with few business opportunities, but is now more accessible," said Prof Sompop.
Thirdly, the road link will allow for more opportunities in the services sector. For example, tourists who initially travelled along the Mekong River to experience the inland destinations of the region would enjoy the improved transportation, and considering how the area is still exotic, tourism will gain momentum, he said.
Fourthly, such opportunities will not be equally offered for all the parties involved. Thailand and China, for instance, would enjoy more gains as compared to Laos, where impacts on the environmental, social and cultural fronts will also have to be faced, he added.
Thai traders with business partners in the northern or eastern parts of China, however, say the new highway will not give them any logistic advantage.
Samruay Chaiputhi, who has been importing agricultural chemical products from China for the past 20 years, said he would continue to ship the goods from Shanghai to Bangkok Port. "Transporting these chemicals by land is impractical as it involves many customs checks and procedures," he said. "Damage may occur if the products are loaded and unloaded several times along the way."
In his opinion, the new highway will mainly promote trade, investment and tourism between the southern Chinese provinces of Yunnan and Sichuan and other countries in the region.
All GMS countries should harmonise their customs procedures and settle the issue of revenue sharing from the fees collected for the use of the new highway and bridges spanning the Mekong River, he added.
New look for Laos
Even before the completion of Route 3, China has already overtaken Thailand and Vietnam as the biggest investor in Laos. Most of that investment has come in the agribusiness industry, in particular rubber.
Rubber plantations have mushroomed across the land-locked country in recent years to meet China's growing demand for rubber, mainly driven by its booming automobile industry. Before that, China had been involved in mining, hydropower and other resource-related projects to propel its industrialisation.
So far, major Thai investments in Laos have been in contract farming, international logistics, garment manufacturing and hydropower generation, according to Prof Sompop. In China, Thai firms have invested in hotels, agriculture-related businesses and international trade.
In fact, the value of Thai-Lao trade has been on the rise for the past three years - from about 40 billion baht in 2005 to 61.5 billion baht in 2007.
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However, since the exports from Thailand exceed the imports from Laos, the trade surplus is enjoyed by Thailand. For example, in 2007, imports from Laos were over 16 billion baht and exports from Thailand were over 45 billion baht, which makes the trade surplus for Thailand nearly 29 billion baht. (See chart)
Main items exported from Thailand to Laos include refined fuels, iron and steel and their products, motor cars and accessories, machinery, woven fabrics, chemical products, plastic products, beauty products and beverages. Main items imported from Laos into Thailand are metal ores and scraps, fuels, wood, vegetables, coal, fruits, stranded wires and cables and machinery.
Dr Sompop said Thailand and Laos should develop a cooperation programme that would permit workers from Laos to work in Thailand with more ease, and at the same time, permit Thai workers to take up more opportunities to work in Laos. "This particularly applies to the agricultural sector, since there is a lot of unused land with potential for agricultural development in Laos. This would, in turn, benefit both countries resulting in a win-win situation," he said.
Regionwide, Thailand should be able to benefit from this linkage because at present, it is a centre that provides road links between many old and new member countries of the Association of Southeast Asian Nations (Asean). Many areas in neighbouring Laos, Burma and Cambodia are land-locked, he added.
Cross-border crime
Another matter that will have to be tackled by respective governments is international crime, such as human and drug trafficking which will become easier with this new mode of transportation, Prof Sompop said, adding that it would be helpful to have sub-regional cooperation to ensure a positive outcome of the development while keeping adverse impacts to a minimum.
The establishment of casinos, which already exist at the Chinese-Lao border, would require added efforts in crime suppression. Likewise, extra measures would be needed to check on human and drug trafficking, and to protect forests that might be encroached for agricultural purposes.
In this respect, intra-regional cooperation that gears for sustainable development is crucial. The Thai government itself must have an action plan for managing this new development, said the professor.
And last, but not least, the academic said Thailand must address economic impacts on local sectors as goods and people move freely across borders.
"With an influx of cheap fruits and vegetables from China, small-scale farmers in northern Thailand will be affected. These farmers will, therefore, have to utilise their land more effectively, for example, by planting more short-lived crops," he said.
Several academics have already voiced concern over the impact of the China-Thailand free trade deal on agricultural produce, which took effect in October 2003.
For example, data from the International Trade Study Centre of the University of Thai Chamber of Commerce (ITSC-UCC) shows that Thailand exported 7,031.97 million baht worth of vegetables to China while it imported 1,203.4 million baht worth from China during the first six months of 2006.
Despite the trade surplus, many Thai vegetable farmers suffered because more than 99 percent of the total value of exports was cassava and its products. China imports Thai cassava to produce alternative fuel, animal feed and other products.
"If we consider other vegetables, we are losing," said ITSC-UCC director Aat Pisanwanich. "For example in 2005, we exported only 13 million baht worth of fresh vegetables and imported about 77 million baht. We exported dried vegetables (excluding dried longan) worth 600,000 baht while importing about 600 million baht."
Hardest hit are northern Thai garlic farmers who have suffered greatly from the flood of cheap garlic from China during the past four years. A study released in March by researchers from Kasetsart University in Bangkok shows that a large number of garlic farmers in northern Thailand have quit because they could not compete with cheaper garlic from China.
Dr Decharat Sukkamnerd, head of the research team, called for a review of the China-Thailand free trade agreement to evaluate the impact on Thai farmers. Future agreements, he added, must be studied more thoroughly.
Cultural aspects
According to Mr Suraphan Boonyamanop, the Thai consul-general in Kunming, the new highway will contribute to stronger Thai-Chinese friendship and cooperation.
While many experts have looked at new trade and investment opportunities, Mr Suraphan said both countries should also strive for greater cooperation in the fields of education, research and development, and cultural exchange.
In education, an increasing number of Chinese students are attending colleges and universities in Thailand, and vice versa. Nine universities in Kunming already have a four-year Bachelors degree programme on the Thai language. Other courses conducted in Thai involve tourism, hospitality and business administration.
Several Thai and Chinese universities already have exchange programmes for both students and teachers. Students who undertake these programmes will study in China or Thailand after completing the first two years in their respective countries.
China has also sought cooperation with Thailand to develop its rice and rubber cultivation. Yunnan is also interested in planting mango, jackfruit and longan, which are popular among Chinese consumers, he added.
Mr Suraphan noted that China has already enhanced its image and presence in Thailand through the promotion of Chinese language study in Thai schools and universities. "Confucius institutes have been set up in various Thai schools, where Chinese language courses are offered to Thai students with free textbooks."
In addition to trade and investment, China will also gain new strategic footholds via access to the Andaman Sea, the Gulf of Thailand, and various ports in Cambodia. "For Thailand, what this brings will really depend on how we can tap into new opportunities," said the consul-general.
"Our relations with China are good in all aspects," he added. "Look at Chinese tourists and you see how happy they are in Thailand."
If a new bridge linking Chiang Khong with Houei Xai is constructed, more tourists can travel by land from Yunnan to northern Thailand via Route 3. Just an 8-10 hours drive from Yunnan, they will be in Chiang Rai by early afternoon, and have dinner in Bangkok. This scenario is already happening between Vietnam and Laos, thanks to the opening two years ago of the Hai Van Tunnel on Vietnam's national Highway 1 linking the East-West corridor with the central seaport of Danang.
Until the Chiang Khong-Houei Xai bridge is built, Chinese tourists and goods destined for Thailand through Laos must be ferried across the Mekong River. Northern Thailand's trade with Yunnan will continue to rely largely on shipping up and down the Mekong, with goods taking anywhere from 10 to 15 days to travel.
This is the second part of a series on the recent launch of the North-South Corridor of the Great Asian Highway. The first part was published on 13 April 2008.
(Source: Bangkok Post, Perspective, 04-05-08, SONGPOL KAOPATUMTIP and SIRIPORN SACHAMUNEEWONGSE, temp-link)
Vocabulary:
Asian Development Bank (ADB) - an international organistion that funds large development projects in Asia
a trade deficit - a country's imports greater than exports
incurred a trade deficit - country imported more than it exported
a trade surplus - a country's exports greater than imports
a corridor - a strip of land connecting one country to another
optimism - feeling positive about what will happen in the future
bolster trade - increase trade
geopolitical - the effect of geography on politics
Greater Mekong Subregion (GMS) - organisation for cooperation between the countries located along the Mekong River (China, Laos, Burma, Thailand, Cambodia)
tap into Y - start using resource X
tap into this new potential for economic growth -
food processing - cleaning, cutting, and packaging food for sale in stores
relations - contacts and connections between two groups (governments, companies, NGOs, international organisations, universities)
foster closer relations - help two groups know each other better and work together more
broaden their visions - change the way they view the world, go beyond the limits of their culture and economy (by studying abroad and traveling)
polymers - a chemical and material used in the production of many goods
metal ores - metal mixed with dirt and rock mined from the earth, then processed into metal
logistics - transportation and storage of goods, from where they are produced to stores where they are bought by consumers
logistical framework - a system for transporting and storing goods
cost and time incurred on logistics - the length of time spent transporting goods (delay) and the costs of transporting them (fuel, labour, warehousing)
door-to-door logistics - when goods are transported directly from seller to buyer (in this case by truck along the new highway, instead of being shipped in China by truck to a boat, transported by the Mekong River to Chiang Saen in Thailand, and then shipped by truck to another destination in Thailand)
marginal area - small and not very important
more accessible - easier to go there and use its resources (for example, use agricultural land for growing export crops)
momentum - continuing to move even though no longer pushed
tourism will gain momentum - amount of tourism will increase (permanently)
fronts - an important situation or field of activity (a front is where two sides meet to fight a war)
impacts on the environmental, social and cultural fronts - changes in the environment, society and culture that it causes
an advantage - something that puts you in a better position than other people
give a logistic advantage - something that allows you to move goods between locations more quickly at lower cost
practical - effective and sucessful in real situations (plans that can be put into action)
impractical - not practical
customs - the government agency that controls the flow of goods into and out of the country (checking for illegal goods and collecting tariffs and taxes on imports)
customs checks - government checks of goods coming into the country
harmonise their customs procedures -
settle the issue of revenue sharing from the fees collected -
plantations - very large farms growing large amounts of crops (coffee, sugar, rubber) and employing many usually low paid labourers
plantations have mushroomed - many plantations been started (they have popped up all over the country like mushrooms)
land-locked - has no coast, no access to the sea
hydropower - using the force of water flowing in rivers create (generate) electricity
propel - drives, causes to develop
propel its industrialisation - have been important in the development of industrialisation
contract farming - when a company hires a farmer to grow crops, usually for a guaranteed price
a win-win situation - a situation when both sides win (no loser)
a linkage - a connection between two things
provides road links between - connects two places by road
tackled - solved a problem
adverse impacts - negative effects
encroached - start using land that you do not own yourself
influx - inflows, flows into the country of goods
utilise their land more effectively -
concern - worrying about a situation
voiced concern over - said they were worrying about a situation
a review of the China-Thailand free trade agreement -
evaluate Y - study and consider, to make a judgement about how good or bad y is
evaluate the impact on Thai farmers - study to discover how much of a positive or negative effect there has been on Thai farmers
undertake - do
a foothold - a strong or favourable position from which further advances can be made
gain new strategic footholds - start doing businesses that might develop into sucessful businesses in the future
access to Y - allowed to use Y or go to Y
tap into new opportunities - trying new business opportunities (rather than just repeating what you have always done)
ferried across the Mekong River - moved across the river by boat (ferry)
