GMS BIZ Network Forum6-10 September 2010

Mekong Institute Khon kaen Thailand

Mr. Oudet Souvannavong Vice-President Lao National Chamber of Commerce and Industry,

Secretary General of the GMS Business Forum

ScopeScope

GMS Infrastructure Connectivity Cross- Border Transport Agreement

(CBTA) Status of CBTA implementation Assessment of GMS Economic Corridors SME Business Networking in the GMS

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GMS GMS CorridorsCorridors

GMS GMS Corridors Corridors

RoadRoadConnectivityConnectivity

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GMS GMS ConnectivityConnectivity

Road Transport Road Transport NetworkNetwork

19921992

20062006

2015 2015 (committed)(committed)

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The GMS Cross-Border Transport The GMS Cross-Border Transport Agreement (CBTA)Agreement (CBTA)

What is the CBTA? Multilateral agreement ratified by all six GMS

countries Purpose is to eliminate non-physical barriers

to cross-border transport in the GMS Includes references to existing international

conventions (such as the KYOTO)

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The GMS Cross-Border Transport The GMS Cross-Border Transport Agreement (CBTA) (cont.)Agreement (CBTA) (cont.)

Covers in one document all the relevant aspects of cross-border transport facilitation, which includes: Facilitation of cross border movement of goods Single-stop/single-window inspection Harmonization/integration of systems Exchange of traffic rights Provision for transit traffic Cross-border movement of persons

Has 20 implementing annexes and protocols that applies to selected and mutually agreed routes and points of entry and exit in the six countries.

Objectives of CBTAObjectives of CBTA Facilitation of border crossing formalities (single

window and single stop customs inspection, coordinating of hours of operation; and exchange of advance information and clearance)

Facilitate cross-border movement of people (multi-entry visa, recognition of driver license)

Facilitate cross-border movement of goods (regional transit regime, phyto-sanitary and veterinary inspection)

Exchange of traffic rights Requirements for admittance of road vehicles Institutional Arrangements

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Ruili – Muse

Mohan – Boten

Veune Kham – Dong KralorHat Lek – Cham Yeam

Mukdahan – Savannakhet

Lao-Bao – Dansavanh

Aranyaprathet – Poipet

Bavet – Moc Bai

Hekou – Lao Cai

Myawaddy – Mae Sot

Mae Sai – Tachilek

Houayxay – Chiang Khong

Nam Phao – Cau Treo

Chongmek – Wang Tao

Nongkhai – Thanaleng

Geographic Coverage Geographic Coverage of CBTAof CBTA

PLAN: BY 2010 FULL IMPLEMENTATION

Status of CBTA ImplementationStatus of CBTA Implementation All GMS countries signed 20 Annexes and

Protocols of CBTA. PRC, Cambodia, Lao PDR and Vietnam signed

and ratified all 20 Annexes and Protocols of CBTA.

Thailand Ratified 11 Annexes and protocols, while Myanmar will ratify all of the Annexes and Protocols when it is ready to implement CBTA.

CBTA implementation very slow:- GMS Leaders in 2008 asked to expedite CBTA implementation to facilitate cross-border trade, investment and tourism in the GMS.

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Status of CBTA ImplementationStatus of CBTA Implementation Single-Window Inspection(SWI) being implemented

at Savannakhet (Lao PDR) and Mukdahan (Thailand) border checkpoints, and at Hekou (PRC)-Laokai (Vietnam) border checkpoints.

Single-Stop Inspection (SSI) being implemented at Dansavanh (Lao PDR) and Lao Bao (Vietnam) border checkpoints.

Tripartite Exchange of traffic rights along the East-West Economic Corridor to commence on 11 June 2009.

GMS Customs Transit System (CTS) and GMS temporary transport permit in place along the East-West Corridor but not widely used by operators, especially in Thailand due high cost/high guarantee deposit required by Board of Trade of Thailand

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Key Implementation Issues of CBTAKey Implementation Issues of CBTA Ratification of the annexes and protocols Capacity building at national and border levels Establishment of required border infrastructure Development of ICT/MIS for efficient border management Passage of new legislation to establish various transport

facilitation regimes Continue to strengthen goodwill and trust among GMS

countries

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Assessment of GMS Economic Corridors - NSECAssessment of GMS Economic Corridors - NSEC

Recent expansion of Southern China industrial production supply chains has increased the traffic on the corridors Especially between the Pearl River Delta – Nanning - Ping Xiang –

Lang son – Hanoi and further down to Hochiminh and Bangkok.

Assessment of GMS Economic Assessment of GMS Economic Corridors - NSECCorridors - NSEC

Traffics on the routes between Kumning-Mohan-Boten-Hueisai-Chian Khong and Kunming-Hekou-Lao Cai - Hanoi have increased but with a slower path. Road infrastructure in the Lao part that have narrow turns and peak

slopes that are not favorable for the transport of 40 foots containers. Mekong River crossing is opening only five days a week and during few

hours. Using the ferry Chinese operators have to on load and upload twice losing one day each time.

In all border crossing point CTS systems are not up to date yet despite e-documentation being applied in certain Chinese and Vietnam border point.

Operators are mostly concerned about the coordination of CTS working hours between China and Vietnam/Laos as there is time difference, and about the timeliness of CTS working hours that in practice is less than 5 hours a day.

Assessment of GMS Economic Assessment of GMS Economic Corridors-EWECCorridors-EWEC

The EWEC has weak link to market, industrial and population demand areas. In fact EWEC is going from nowhere to nowhere.

Assessment of GMS Economic Assessment of GMS Economic Corridors-EWECCorridors-EWEC

Under the CBTA, EWEC is a specific route which forbids going outside the corridor.

Transport registration and insurance/guarantee fees further impacted on cost of transportation along the corridor.

The CTS single window inspection at Dansavanh-Laobao and the inspection at the Mekong Friendship Bridge have improved the transportation time between Danang to Mukdaharn.

Nevertheless, the traffic along the EWEC is still low and could be increased if the corridors has extended link to industrial zones and markets.

AssessmeAssessment of GMS nt of GMS Economic Economic Corridors-Corridors-

SECSEC

The SEC has potential links between Thailand and seaports in Cambodia and South Vietnam.

Assessment of GMS Economic Assessment of GMS Economic Corridors-SECCorridors-SEC

In Cambodia, road infrastructures are poor and the CTS system is not developed. It is since recently possible to do a transit in bond all

the way across Cambodia, from Poipet to Bavet, although a special and rather expensive license is required and truck manifest declaration for purpose of bonding forward to ISD is not permitted.

There are requirements to have original copies of documents for transit at all in country checkpoints and for bonded transfer to ICD.

Despite those constraints, the traffic between Thailand to Phnom Penh and Sihanouk Ville through the Aranyanprathet – Poipet border check point is increasing.

Assessment of GMS Economic Assessment of GMS Economic CorridorsCorridors

Very little public information is provided on GMS CTS system.

Local operators do not know about the CBTA protocols and other CTS regulations.

Local operators lack expertise and technical skills and corporate management for operating in the economic corridors.

Local operators need to upgrade themselves to standard requirements to be able to operate in the economic corridors.

Characteristic Problems of SME in Characteristic Problems of SME in the GMS– the GMS–

relative to their sizerelative to their size SME can play a key role in triggering and sustaining

economic growth and equitable development in developing countries

SMEs are often unable to capture market opportunities which require: Large production quantities Homogeneous standards; and Regular supply.

SMEs experience difficulties in achieving economies of scale in the purchase of inputs such as: Equipments Raw materials Access to Finance Consulting services, etc

Characteristic Problems of SME in Characteristic Problems of SME in the GMS – the GMS –

relative to their sizerelative to their size Small size also constitute a significant hindrance to the

internal management functions, which are the core of the enterprise dynamism such as: Training Market intelligence Logistics; and Technology Innovation.

Small scale prevent the achievement of specialized and effective internal division of labor, which fosters cumulative improvements in productive capacity and innovation.

Because of the continuous fierce struggle to preserve their small profit margin, SME are often locked in routines and are unable to innovate their

products; and process beyond the boundaries of their enterprises to capture

new market opportunities.

The Enabling Business The Enabling Business Environment Impact on SME Environment Impact on SME

Business - FactorsBusiness - Factors Enterprise registration Legal and Regulatory Framework Accounting and Finance Tax Systems Availability of Credit for SME Labor Laws and regulation Non Tariff Barriers and Measures Monopolies and cartels Macro-economic stability (inflation, commodity

price increase, etc.)

SME Business Networking in the SME Business Networking in the GMS GMS

GMS SMEs can address the problems related to their size and improve competitive position though Business Networking.

Business Networking refers to a group of SMEs that cooperate on a joint development project by complementing each other and specializing in order to overcome common problems, achieve collective efficiency and conquer new markets beyond their individual reach.

There are “Clusters” that indicates a sector and geographical concentration of enterprises i.e. specialized suppliers of raw materials; or a pool of specialized skills.

Vertical and horizontal cooperation is made along a Value Chain or a Supply Chain.

SME Business Networking in the SME Business Networking in the GMS GMS

Networking is made through HORIZONTAL COOPERATION between SMEs occupying the same position in the value chain. SME can collectively achieve optimal scale in the use of machinery and SME can pool together their production capacities to satisfy large-scale

order. Business Networking can also be made through VERTICAL

COOPERATION with other SMEs as well as Large-scale enterprises along the transport and logistic supply chain. SMEs can specialize on their core business and give way to an external

division of labor. Inter-enterprise cooperation gives rise to a collective learning space

(invisible college), ○ where ideas are exchanged and developed , and ○ knowledge shared in a collective attempt to improve product quality and occupy

more profitable market segments.

Clustering and Networking of GMS Clustering and Networking of GMS Transport and Logistics OperatorsTransport and Logistics Operators• Clustering of SME’s transport and

logistic operators in the GMS is promoted for operating in the GMS corridors.

• There are 4 clusters Northern Cluster 1 (Yunnan-

Myanmar-Thailand-Laos) Northern Cluster 2 (Yunnan,

Quangxi, Vietnam) East West Cluster (Vietnam,

Laos, Thailand) South Cluster (Vietnam,

Cambodia, Laos, Thailand)

Clustering and Networking of GMS Clustering and Networking of GMS Transport and Logistics OperatorsTransport and Logistics OperatorsB2B Network transport and logistics operators is

established in each clusters though horizontal or vertical cooperation

Set a “Charter of Standards” covering safety, community responsibility, driving hours, environment, etc.

Training of operators (SME managers) and drivers on the charter standards and CBTA

SME Banks Credit to Network Members for improving standards and increasing fleets

Support from Government and Development Partners provided on capacity building development to B2B Network