Greater Mekong Subregion

Corridor Lifts Hopes, Incomes

Incomes are being boosted and opportunities increased as the road links making up the East-West Economic Corridor near completion

By Tsukasa Maekawa, (tmaekawa)
Principal External Relations Specialist

Better roads are good for everyone

Mr. Alo, in his 60s, stands smiling in front of a local market in the southeastern town of Sepon in the Lao People’s Democratic Republic (Lao PDR) after selling almost all the sweet potatoes he carried from his farm some 12 kilometers (km) away.

“The road was so rugged and bumpy before that I was never able to bring my sweet potatoes from my farm,” he says. “Now I come here twice a month to earn kip 20,000–50,000 ($2–$5) each time.”

The proceeds from the sale are an important secondary income for Mr. Alo. He also grows rice, but his family consumes most of it.

Mr. Alo and his family, including grandchildren, leave their house in an ethnic village while it is still dark. They pull two wagons for several hours to the front of a local market as Mr. Alo does not want to pay for a slot inside.

His regular visits to the market were made possible more than a year ago after the road was rehabilitated under the Greater Mekong Subregion Economic Cooperation Program (GMS Program). The road is a section of the East-West Economic Corridor (EWEC), a pioneering project to develop an economic corridor in the GMS.

With the rehabilitation of the narrow and dilapidated National Road 9—described as a “moon surface” by a long-term resident—and its transformation into an all-weather highway, the local market has expanded significantly over the past couple of years.

The market houses hundreds of small familyowned shops selling not only clothes and consumer goods but also vegetables, fish, and other fresh products. A 16-year-old student selling vegetables grown in her small garden says, “I come here to open my shop twice a week after school to earn money for my family.”

The EWEC stretches coast to coast from Da Nang to Mawlamyine, linking Viet Nam, Lao PDR, Thailand, and Myanmar. It is a flagship project of the GMS Program that the Asian Development Bank (ADB), in partnership with governments and other international development agencies, is promoting. It is a pioneering initiative for economic corridor development.

The 1,500-km road link is the most advanced of several planned corridors crisscrossing the GMS.

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A Savannakhet weaving company exports high-quality fabrics to Japan

Attracting Foreign Investment

The EWEC not only helps improve the lives of the poor residing along the highway but also vitalizes local business and attracts foreign investors in the Lao PDR.

A 1-hour drive from the Sepon market is the gold and copper producer, Lane Xang Minerals Limited, a joint venture with an Australian company. The Melbourne-based metals producer employs 5,500 people, of whom 3,000 local people are working for the construction of the gold and copper mine.

For its part, the Government of the Lao PDR views it as a “win-win” project. The Government expects to receive significant taxes and royalties from the mine’s operations.

Lane Xang Minerals Limited’s schedule is on track. After it started gold production in 2003, the company has been producing 140,000–166,000 ounces (oz) annually. It expects to boost gold production to 220,000 oz in 2005. It started copper production in mid-March 2005. In the next 5 years, it expects to boost the annual production to 400,000 oz of gold and 100,000 tons of copper.

Underpinning the showcase operations is the transport infrastructure. “The EWEC has made it easier for us to come to this area to invest. With the old road, it would have been difficult to do this business,” said Mick Wilkes, General Manager of Lane Xang Minerals Limited’s Sepon operations.

Moreover, once Lane Xang Minerals Limited starts exporting copper to its major Asian markets— such as People’s Republic of China, India, and Japan—it will need ready access to ports. Major bottlenecks to ports in Thailand and Viet Nam will have been eased with a new bridge across the Mekong between Mukdahan in Thailand and Savannakhet in the Lao PDR, and a tunnel through the Hai Van Pass near Da Nang, Viet Nam—projects that are also being undertaken as part of the EWEC.

The bridge is scheduled to be completed in 2006, while the tunnel was officially opened in June 2005.

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An ethnic minority woman uses natural dyes in her weaving

Serving the Local Community

Benefits are also spilling over to the local community. Lao PDR citizens comprise 85% of the workforce of Lane Xang Minerals Limited. Many, working as drivers, electricians, or maintenance personnel, are developing the skills and confidence to start their own small businesses.

A community program sponsored by the company includes helping farmers diversify from unsustainable slash-and-burn agriculture toward cash crops and mulberry trees to support a fledgling silk industry.

Another program has trained 72 women in 10 villages in the art of weaving and dyeing. Currently, their products are sent via the EWEC to be sold in the Lao PDR capital of Vientiane, and Savannakhet.

People in Savannakhet hope the GMS Program will boost trade and local business. Savannakhet— the Lao PDR’s most populous province with 14% of the total population—is already achieving economic growth 1–2% faster than the national rate of 6%.

The pace of change will accelerate with the completion of the bridge over the Mekong River. The $75 million bridge—plus an upgraded airport in Savannakhet and improved highway—is expected to bring major changes to the town and the province.

The bridge, a joint undertaking of the Lao PDR and Thailand, is being financed by the Japan Bank for International Cooperation. The Savannakhet airport, which may be upgraded to handle international flights, is planned to be shared by the Lao PDR and Thailand. The airport will strengthen regional air and tourism links.

Savannakhet officials hope that better transport links will bring more investors to lay the basis for more diversified economic activity in the country.

Increasing Expectations of More Business

For the small but growing number of Lao PDR entrepreneurs, change in the form of expanded markets is clearly welcome.

Lahasin Indigo is a Savannakhet-based weaving company that uses natural dyes and locally grown cotton to make high-quality fabrics for export to Japan in collaboration with Japanese designers.

The business involves 1,000 households in six nearby villages that grow cotton and indigo. The cotton is spun by people in ethnic minority villages who are experienced in traditional handspinning.

Currently, 90% of the products are shipped to Japan after being transported by land from Savannakhet to Mukdahan on the other side of the Mekong River, and then to Bangkok.

“Shipping through the Da Nang Port is not yet viable,” says Songbandith Nhotmanhkhong, Director of Lahasin Indigo. “But once the EWEC is fully completed, with the easing of border crossing formalities and export clearance procedures at the Da Nang Port, we would like to seriously consider using Route 9 because it should provide a shortcut to Japan.”

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