Greater Mekong Subregion

Business Blooms

Improved transport links have eased the way for trade and business development for both domestic and foreign investors in the PRC’s Yunnan Province

By Tsukasa Maekawa, (tmaekawa@adb.org)
Principal External Relations Specialist

The biggest market for cut-flowers produced in Kunming is Southeast Asia

The cut-flower industry is flourishing in Kunming, the provincial capital of Yunnan in the People’s Republic of China (PRC).

“Our biggest market is Southeast Asia,” says Pienne Lam, Vice General Manager of Jin Yuan Flowery Industry Ltd. “We are waiting for the completion of the North-South Economic Corridor (NSEC) because we could then ship our products— cut-flowers—to Thailand by a land route.”

As one of the leading cut-flower producers/ exporters in Kunming, the company air freights 2–3 tons of cut flowers daily to Thailand and Hong Kong, China. Products are also flown via Thailand or Hong Kong, China to the Republic of Korea, Japan, and other Asian countries, and to Russia, the Middle East, Europe, and the United States.

Some flowers are transported by land to Viet Nam. “There are not enough flights, and we would like to cut freight costs,” says Ms. Lam.

The hopes for industrial enterprises are high both in Yunnan and in neighboring Lao People’s Democratic Republic (Lao PDR), Myanmar, and Viet Nam—and countries beyond—for increased trade and tourism once the main road links between the southern PRC and neighboring countries are completed.

Under the Greater Mekong Subregion Economic Cooperation Program (GMS Program), assisted by the Asian Development Bank (ADB), the 2,000- kilometer road link between Kunming and Bangkok, Thailand, is being upgraded.

The cut-flower industry in Kunming is creating new jobs

Given the good road network from Bangkok to Singapore and Kunming to Beijing, the NSEC will reduce transport costs from the PRC capital to the tip of the Malay Peninsula; improve the ease of movement of people, vehicles, and goods; and expand trade between the PRC and the Mekong Region and beyond.

The major portions of the NSEC in the PRC and Thailand have already been completed. A remaining section in the PRC toward the Lao PDR border will be completed in 2006, and a section in Lao PDR is due to be finished by the end of 2007. In addition, another road link is planned between Kunming and the port city of Haiphong in Viet Nam, which includes an expressway from Hanoi to Lao Cai that would be completed by 2012.

Once the Kunming-Haiphong road link is completed, trucks can carry container cargo in one day. “There will be a dramatic increase in traffic flows between Kunming and the bordering countries when the road links are completed,” said Yin Yonglin, Chief of Yunnan’s Division of International Trade and Economic Affairs.

Along with the main road links, many feeder roads will be improved, allowing farmers to more easily bring their produce to markets in major cities.

Top

Flowers: an industry with lots of promise

Tapping International Markets

“Farmers were producing only vegetables in Kunming before as they did not know how to grow flowers,” says Ms. Lam. Ten years ago, she says, the company thought that the mild and dry climate might be suitable for growing flowers. It provided farmers with seeds, equipment, and the necessary skills to grow roses, lilies, carnations, and other flowers. “Now we can sell them at international markets,” she says.

The company’s exports have since expanded rapidly: in 2005, the company expects to ship 1 billion yuan ($120 million) worth of flowers from 700 million yuan in 2004, and 500 million yuan in 2003.

“We are very hopeful that the flower industry will boom further in the next several years as the quality of products improves and better road links reduce transportation costs,” says Ms. Lam. The company’s business now has 170 farming households and 5,000 people involved in Kunming.

As the PRC economy grows, incomes increase, and more people are able to afford flowers, the company will consider expanding its business to the domestic PRC market.

Growing flowers is one of 39 leading industries in Yunnan: the others include tobacco, minerals, nonferrous metals, chemicals, electric power, medicines, foods, agriculture, and tourism. Yunnan Copper Industry (Group) Import/Export Corporation, the third largest copper company in the PRC, is one of the companies that hopes to expand its shipment route when the NSEC is completed.

In addition to producing copper for domestic consumption, the company exports silver and gold to Thailand via the ports of Fengcheng and Zhanjiang in neighboring provinces east of Yunnan.

“Obviously, the completion of the Corridor will provide an important option for transporting silver and gold,” said Wang Yu Yun, one of the company’s managers.

Top

Local farmers are being trained in growing flowers

Yunnan Reaps Economic Rewards

The copper and flower industries are only two of many major industries that have been supporting the high economic growth of Yunnan Province. Fueled by exports and strong domestic consumption, the province has been showing an 8–10% annual economic growth rate since 1992, when the GMS Program started. Before 1992, trade had been expanding moderately. The entry of the PRC into the World Trade Organization in late 2001 has also helped boost trade.

Yunnan’s overall trade has been steadily expanding from $2 billion in 2001 to more than $3 billion in 2004. Its trade with three border countries—Lao PDR, Myanmar, and Viet Nam—has especially soared: trade with the Lao PDR shot up 75%; trade with Myanmar rose 15% in the first 11 months of 2004 against a year earlier; and trade with Viet Nam jumped 48% in the same period.

Foreign direct investment in Yunnan has been increasing, especially in the areas of agriculture and manufacturing. “Yunnan is open to foreign direct investment. It has simplified approval procedures, created a system to deal with business disputes with foreign investors, and created a better environment for them,” says Bao Wentao, Deputy Director of Yunnan Province’s Division of Foreign Investment Administration.

One unique foreign investment has been made by a Thai diamond processing company owned by a Belgian businessman. Kunming Pyramid Diamond Processing Co., which was established in Kunming in 1995, has been exporting polished diamonds back to Thailand, and to Belgium.

“We are now planning to tap the PRC market. The PRC has huge potential as people are getting wealthier and can afford diamonds,” says General Manager Daniel Gaspar.

Mr. Gaspar says abundant cheap but quality labor, a good access road to an international airport, regular flights to the major markets, and good services provided by the local government for foreign investors encourage them to stay in Kunming.

Go back to brochure