economics

June 22, 2010

China bridges last Mekong gaps

Filed under: Uncategorized — ktetaichinh @ 7:20 pm
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http://www.atimes.com/atimes/China/LF18Ad02.html
Over the river, into the woods
Both Asian Highway 3 and Route 2W are expected to replace much of the current riverine shipping down the Mekong, including from ports near Jinghong in China to the Thai river port of Chiang Saen. Dominated by Chinese river vessels, goods can take three days or more to transit, depending on water levels.

The route is also sometimes closed when the river’s depth drops below levels considered safe for navigation. This occurred earlier this year after a severe drought in southwestern China caused record low water levels on the Mekong. There is further concern in Thailand and Laos that Chinese dams built on the upper reaches of the Mekong may restrict water flows and contribute to low levels. China has denied that the dams are adversely affecting the river’s depth.

For the moment, some freight shippers still prefer the river route because it skirts Laos’ notoriously complicated and corrupt customs procedures. These and other restrictive regulations, including multiple tariffs applied on goods transported along the various roads connecting China and Southeast Asia across Laos, will need to be resolved before road routes are seen by traders as more cost competitive. Some Thai business leaders and development officials have suggested this could be remedied by a single stop inspection system for goods transported through Laos.

The Lao government, however, may be wary of waving transit fees and customs duties, which it sees as a key economic benefit of the new roads. This will change, however, as the Association of Southeast Asian Nations (ASEAN) increases pressure on its member states to reduce tariffs in line with both the ASEAN Free Trade Agreement (AFTA) and the ASEAN-China Free Trade Area, which will come into force for Laos in 2015. Laos is expected to have reduced tariffs to AFTA acceptable levels of between 0-5% by 2015.

Accurate trade statistics for Laos are scarce. Informal trades and an inefficient customs and statistics-keeping administration skews the figures that are available. Regardless, the Lao government seems to expect that new, more efficient trade links will lead to expanded trade and investment which together with an economic development plan focused on natural resource exploitation will offset loses from reduced tariffs.

Still, some fear that without effective regulation the new routes will also result in an unsustainable influx of cheaply produced Chinese goods, low-priced agricultural products and big waves of economic migrants. Rights advocates and development workers already say greater efforts are required to ensure people living in northwestern Laos also benefit from the roads and to mitigate the potential negative social impacts of accelerated travel and trade.

There are already reports about land grabbing along the main new route, as influential business people obtain territory near the Asia Highway 3 or launch new businesses alongside it. The road will also open previously closed areas to human trafficking syndicates, communicable diseases such as HIV/AIDS and possible over-exploitation of the surrounding forests and wildlife resources from Thai and Chinese business interests, activist groups warn.

A related concern is a possible surge of inward Chinese migration. Some have already arrived in Laos as workers on the new roads and many have stayed on to open shops and guesthouses catering mainly to other Chinese. Certain Lao towns, especially Oudomxay and Laung Nam Tha, have recently developed a distinct Chinese character, stoking resentment among some local residents.

While China and Thailand will definitely benefit from the expanded trade, Laos may ultimately lose out because many of the goods transported along the route will be destined for wealthier destinations in Thailand, China and Vietnam. Truck drivers may only stop in Laos for food, gas and rest.

For Thailand, the risks are a rapid increase in economic migrants from China and even greater competition from cheaper Chinese-made goods and agricultural products. Thai politicians have complained that a free trade agreement with China has put pressure on Thai garlic farmers who can’t compete on price. Some observers have therefore speculated that Thai foot-dragging on the construction of the Chiang Khong-Huay Xai bridge has had more to do with putting the brakes on Chinese economic inroads than official indifference.

Others in Thailand believe that increased trade and investment with China will bring net-net economic benefits. Either way, it seems certain that when the new Mekong bridges in Laos and other road links are finally completed, China’s influence in Southeast Asia, through trade, investment and migration, is only set to grow.

Brian McCartan is a Bangkok-based freelance journalist. He may be reached at brianpm@comcast.net.

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