Strategic corridors for trade in the region

By SASITHORN ONGDEE
THE NATION
Published on October 7, 2009

The Southern Economic Corridor would increase its importance as a transportation route for fabrics, textiles and garments, textile-makers in Thailand and Vietnam said in a survey conducted by the Japan External Trade Organisation.

Cambodia, Laos and Burma are highlighted as production bases for the apparel and garment, commodities, agriculture-related and processing as well as the automobile and electrical-appliance industries that might be shifted from Thailand and Vietnam if connectivity in the Mekong region is completed, according to companies in the Mekong region.

This is part of their strategy for further improvement of connectivity inside and beyond the Mekong region surveyed by Jetro.

Jetro director Masaaki Toma told a logistics seminar last month that the Jetro survey was aimed at grasping the business needs and strategies of Japanese and non-Japanese companies in the Mekong sub-region to identify necessary issues for further promotion of investment and industrial development.

Further development as a textile and garment industries corridor would be promoted through an appropriate division of labour among Thailand, Cambodia and Vietnam.

"Currently, we already transport fabrics from Bangkok to Phnom Penh via road. In the future, it's expected that most of the sea transportation of fabrics and textiles would be substituted by road transportation from Bangkok to Ho Chi Minh City," textiles-makers in Thailand said in the survey.

Further increases in the transactions of both materials and parts and final products would be facilitated through improved connectivity among three consumption bases - Bangkok, Phnom Penh and Ho Chi Minh.

"If the cost of land transportation is decreased to a level that is 10 to 20 per cent higher than sea transportation, we would consider substitution from sea to land transportation. Currently, sea transportation from Bangkok to Ho Chi Minh takes more than one week by consolidated 40-foot container, but land transportation would be faster," said auto-parts makers in Thailand.

"We have high expectations for the improvement of a land road linking through Cia Mep-Thi Vai Basin, Ho Chi Minh City and Phnom Penh, with a view to facilitating the import of products and materials," said a motorcycle-maker in Cambodia.

"The improvement of the bridge over the Mekong River at Neak Lueang is highly anticipated," the textile-maker in Thailand and motorbike-maker in Cambodia said in the survey.

According to the survey, Japan's foreign direct investment to China, Asean and the Mekong region has been on an upturn trend since 2000. Japan's FDI to China and Asean each was more than US$6 billion (Bt202 billion), and to the Mekong region more than $3 billion.

Following the survey, if the road linking Bangkok and Rangoon were constructed, production would shift from Thailand and Vietnam to Cambodia, Laos and Burma where access to the labour market is much easier for apparel and garment companies.

By utilising advantaged primary commodities and the good environment in Cambodia and Laos, further development of agriculture-related, timber and processing industries is expected, Toma said.

If the logistics infrastructure, both soft and hard, were sufficiently improved, auto-parts makers in especially labour-intensive companies could start production where access to the labour market is easier.

There is the possibility for expansion, upgrading and diversification of the motorcycle industry, including localisation of the production process in Cambodia and Laos.

Thailand and Vietnam are two large production bases. The possibility of exporting from Vietnam depends on the degree of progress in local procurement.

Greater Bangkok and the Eastern Seaboard are the major locations for auto and auto-parts makers such as Toyota, Mitsubishi, Honda, Hino, Matsuda, Bridgestone, Ford and GM, as well as electrical appliance and machinery makers such as Mitsubishi, Panasonic, Daikin and Yunmar.
Greater Hanoi is a main location for automobile and auto parts and electrical-appliance makers.
However, the hard infrastructure such as sea ports, roads (East-West Economic Corridor and Southern Economic Corridor) inside Vietnam and industrial railways as well as soft infrastructure regarding customs clearance, cross-border transportation and human resources should be improved, the respondents in the Mekong requested region.

The survey was conducted from July to September by interviewing 103 companies in Thailand, Vietnam, Cambodia, Laos, Burma and Singapore. The interviewees were in industries such as automobiles and parts, electrical appliances and parts, textiles and garments, food processing, wood processing, chemicals, steel, tourism, trading, finance and logistics.