Catalog

	Table of Contents
p. 36 of 39 BACK | NEXT The Record Chairman’s Message Board of Directors' Report 2005 in Figures Management Board of Directors Operations in 2005 East and Central Asia Mekong The Pacific South Asia Southeast Asia

Mekong

Cambodia, Lao People’s Democratic Republic, Myanmar, Thailand, Viet Nam

Regional Perspective

The Mekong River has always connected the diverse peoples living in its watersheds, a geographic constant in the face of trade links often broken in the past by conflict. The countries sharing its watersheds, however, are now securing lasting ties amid growing economic prosperity.

Poverty in the Mekong countries has declined markedly since 1990, when the incidence was close to 50%. Recent estimates show national poverty levels ranging from 9.8% in Thailand to 34.7% in Cambodia. Despite this reduction, poverty remains a major development challenge.

In 2005, most Mekong countries grew strongly despite high oil prices and the economic fallout from avian flu.

Major transport routes are being built to form the base of the subregion’s economic corridors that link production, trade, and investments

Cambodia registered remarkable growth estimated at 8.4% in 2005, buoyed mainly by considerably stronger agricultural production. New government legislation is expected to have far-reaching, positive implications for Cambodia’s private sector and for growth throughout the economy.

The Law on Commercial Enterprises, which took effect recently, eases business start-up by substantially reducing the time and cost to register. Similarly helpful to private businesses, the Law on Secured Transactions is likely to reduce lending costs and increase bank intermediation, and the Law on Concessions should improve the environment for private participation in infrastructure projects. Both are before the National Assembly awaiting approval.

Cambodia’s financial sector has made significant progress since the Financial Sector Cluster program began in 2001, with greater financial stability, increased financial services, and indications of growing confidence in the sector.

The Lao PDR grew strongly in 2005, following on healthy expansion in recent years that helped lower poverty figures. The country is also making progress toward the income and non-income MDGs. Inflation slowed to 7.2% in 2005, while the trade and current account balances remained in deficit.

Thailand posted growth of 4.5% in 2005, helped by the favorable performance of the export sector and with the effect of the December 2004 tsunami and drought subsiding in the second half of the year. The country’s fiscal situation remained solid, while business confidence remained strong.

Viet Nam, a net exporter of oil, actually benefited from the oil price rises. Oil prices aside, the country was also spurred by an improving business environment. Standout sectors included strong manufacturing, a diverse agricultural base little influenced by avian flu, and buoyant hotel and restaurant businesses, which grew by 15% during the year, thanks to a surge in tourism. A solid expansion of private enterprise also boosted growth.

In Myanmar, ADB continues to monitor economic developments, but a reliable assessment remains to be made, depending on the availability of timely and reliable data.

Regional Cooperation

The Greater Mekong Subregion Economic Cooperation Program (GMS Program) was established in 1992 with ADB support. It promotes cooperation in nine sectors—transportation, energy, telecommunications, human resource development, tourism, environment, trade, investment, and agriculture—and provides a means for GMS members to reduce poverty. Member countries—Cambodia, PRC, Lao PDR, Myanmar, Thailand, and Viet Nam—have made steady progress toward greater connectivity and improved competitiveness, resulting in an increased sense of community in the Mekong subregion. Initiatives aimed at addressing shared concerns, such as those related to sustainable management of shared natural resources and tackling health and social issues, are also contributing to a more equitable and prosperous subregion.

The GMS Program entered a new phase in 2005 as work on several economic transport corridors passed milestones. Hundreds of kilometers of newly paved roads, easier border crossings, and agreements to expand trade are boosting livelihoods around the subregion. By streamlining cross-border transport arrangements; laying down modern roads, telecommunications, and power links; and promoting tourism and investment, GMS members are reducing poverty.

In 2005, five GMS loans and grants amounting to $56 million and 24 technical assistance grants totaling $39.2 million (including cofinancing) were approved. Between 1992 and December 2005, ADB approved loans totaling $1.8 billion and technical assistance grants amounting to $67 million under the GMS Program.

GMS Summit and Other Events

The Second GMS Summit of Leaders was held in Kunming in July 2005. The successful conclusion of the summit saw the issuance of the Kunming Declaration: A Stronger GMS Partnership for Common Prosperity, which embodied the subregional leaders’ strong commitment to the GMS Program, underscoring the need for concerted effort to achieve the MDGs. The Biodiversity Corridors Conservation Initiative, launched by the GMS Ministers of Environment in May 2005, was an important legacy of the summit.

Initiatives in the social and environment sectors were also pursued more vigorously. These include the prevention and control of infectious diseases, training of civil servants under the Phnom Penh Plan for Development Management, and the Core Environment Program.

The 13th GMS Ministers’ Meeting, held in Vientiane in December 2004, welcomed the inclusion of the Guangxi Zhuang Autonomous Region of the PRC in the GMS Program. Guangxi began participating in GMS Program activities in 2005 and, during the year, ADB assisted a study of how Guangxi could more rapidly link with the rest of the GMS.

Economic Corridors Boost Economies

Under the GMS Program, the Mekong countries are simplifying customs procedures to speed up border crossings

The Tomb of Emperor Tu Duc in Hue, Viet Nam, is one of the many tourist attractions in the GMS, where tourist arrivals totaled nearly 20 million in 2005

Reflective of the progress in 2005 on the projects under way are the major transport routes that form the base of the GMS economic corridors—the strategic concentrations of infrastructure development linked to production, trade, and investment. The transport corridors are at the core of the 11 flagship programs of the GMS Program. The three major economic corridors—the east-west, north-south, and southern corridors—will provide the foundation for significantly higher cross-border economic activity.

Along the newly upgraded 240-km highway between Phnom Penh and Ho Chi Minh City, business is booming. Traffic increased rapidly once the road improvements were made.

Progress on the East-West Economic Corridor is indeed impressive. It stretches nearly 1,500 km from the Andaman Sea in the west to the South China Sea in the east. At Sepon, Savannakhet province, on the East-West Economic Corridor, an Australian mining company has made substantial investments. The development has provided employment and other forms of livelihood to the benefit of local villages.

Easier Border Crossings

The GMS Program is helping reduce nonphysical barriers to the cross-border movement of people and goods through the implementation of the Cross-Border Transport Agreement. Formulated under the auspices of ADB technical assistance, the agreement is a multilateral instrument designed to be adopted by all GMS members. It covers in one document all the relevant aspects of cross-border transport facilitation including single-stop, single-window inspection; crossborder movement of people; transit traffic regime; and exchange of commercial traffic rights.

In 2005, the GMS Program began implementing the agreement at the Lao PDR–Viet Nam border of Dansavanh–Lao Bao. Implementation will commence in 2006 at the borders of Bavet-Moc Bai, along the Phnom Penh–Ho Chi Minh City highway; at Mukdahan–Savannakhet along the East-West Economic Corridor; and at Aranyaprathet–Poipet between Thailand and Cambodia. Trade is already on the rise in many parts of the subregion.

Promoting Tourism, Telecoms

ADB is coordinating with its development partners to help poultry farmers control avian flu

To boost tourism, the GMS countries in 2005 launched the long-term GMS Tourism Sector Strategy, which aims to promote the subregion as a single destination. They have begun to relax visa regimes, upgrade airports, start training programs, and step up marketing efforts. Tourist arrivals in the six countries in 2005 totaled nearly 20 million, and these are expected to soar to 30 million by 2010.

In the telecommunications sector, meanwhile, feasibility studies have been undertaken for establishing a subregional network. Fiber-optic cable links are planned for the missing portions of a backbone that will interconnect national networks in the subregion. Cooperation will also focus on constructing an information superhighway network that will enhance the range of services and applications based on subregional network facilities.

Warding Off Avian Influenza

To help stem the avian influenza threat in Asia and the Pacific, ADB has committed to another subregional initiative to encourage cooperation on infectious diseases. A $30 million ADF grant, approved in 2005, will assist Cambodia, Lao PDR, and Viet Nam in controlling the spread of avian flu and other infectious diseases among vulnerable groups. ADB committed $18 million in 2005 for Viet Nam, which was at the center of the avian flu outbreak in 2005.

Safeguarding the Environment

To ensure that the GMS Program proceeds along an environmentally sustainable path, the member countries endorsed in 2005 the implementation of the Core Environment Program, including the Biodiversity Conservation Corridors Initiative. ADB approved its largest-ever regional technical assistance—about $25 million—to support the initiative, which aims at environmental sustainability and social equity in the Mekong Subregion toward increasing its development potential, performance, and impact.

Initiative Protects Cambodia’s Great Lake

The Tonle Sap supports one of the most productive fisheries in the world and supplies protein to a majority of Cambodians Centuries ago, Cambodia’s inhabitants mastered the seasonal ebb and flow of Southeast Asia’s largest freshwater lake, maximizing rice production and making possible the wonder of the Angkor Kingdom. Today, many Cambodians rely on the Tonle Sap for fish to feed their families and on its monsoon-fed waters to irrigate their rice fields. Under its Tonle Sap Initiative, ADB is helping the Cambodian government put in place a plan to protect the rich natural resource that sustains so much of the nation. Central to the initiative is a phased sequence of core loans and grants that will put in place an integrated and basin-wide approach to dealing with its problems. The special characteristics of the Tonle Sap Basin derive from the 100- km long Tonle Sap River, which runs into the Mekong River farther south at the capital, Phnom Penh. During the rainy season, the heavy flow of the Mekong forces the Tonle Sap River to reverse flow and head north, filling the lake. This causes it to swell from around 2,500 square kilometers to as much as 16,000 square kilometers. Fish, birds, mammals, and plants thrive in this hydrological phenomenon. The Tonle Sap supports one of the most productive fisheries in the world and provides most Cambodians with their main source of protein. Its land, water, and biotic resources directly benefit 40% of the population of provinces adjoining the lake and shore up food security and employment elsewhere. The lake is also of global significance for biodiversity conservation. Overexploitation of fisheries and wildlife, conversion of the flooded forest to agriculture, and collection of wood for fuel are threats to this balance. Widespread deforestation in the watershed is destroying habitats, impairing water and soil quality, and increasing siltation rates. Cambodia designated the Tonle Sap a multiple-use protected area in 1993. The United Nations declared it a biosphere reserve in 1997. In 2003, ADB finalized the Tonle Sap Basin Strategy, giving geographical focus to its country strategy and program for 2005–2009 and its annual updates. The development objectives are to foster, promote, and facilitate pro-poor sustainable growth, access to assets, and management of natural resources and the environment. Threats to the lake must be considered from the perspective of the basin as a whole, but everything cannot be tackled at the same time. Interventions work from core areas of the lake to its upper catchments over an 8-year period, repeating this cycle as may be needed to allow the accomplishments and lessons learned to be incorporated into long-term protection for the complex ecosystem. As part of the initiative, in 2005, ADB approved a grant for $18 million that will help provide safe drinking water to more than 1 million people living around the Tonle Sap River Basin. The grant will help fund a project that will provide rural water supply and sanitation facilities to about 1,760 villages in five provinces around the basin. It will also improve sanitation for about 720,000 rural people, train communities to take responsibility for the facilities, and conduct health and hygiene awareness outreach.

ADB Assistance

Helped by an ADB investment of about $800 million in 2005, the Mekong countries continued to focus on speeding up social and economic development as well as reducing poverty in the subregion. Assistance to these countries focused on providing the infrastructure needed to boost economic growth and to reduce poverty, always in cooperation with member governments and development partners. Transport and energy-related projects accounted for over three quarters of lending.

Health Contracts Widen Access to Care

Maternal care is improving and use of public services is rising in clinics run by NGOs A relatively low life expectancy, coupled with high maternal mortality rate and greater vulnerability to contract HIV/AIDS, calls for extensive and innovative efforts to significantly improve the health status of the Cambodian people. The poor in Cambodia, when in need of medical attention, may selftreat, call traditional healers, and even flee before they ever seek advice from government-run clinics. “When I saw the health staff come to my village ... I took my little baby with me and hid in the bushes behind the village,” says one mother in the Memut district of Kampong Cham province. salaries were raised to levels high enough to get staff to dedicate 100% of their time to the public system A government program that contracts private organizations to run and upgrade public health services is changing that. Widespread success since the program was begun in 1996, under a loan now completed, has convinced officials to expand contracting from 5 to 10 of the country’s 76 districts. The second phase, ongoing in 2005, was funded with a $20 million ADB loan under the Health Sector Support project and is due for completion in 2007. Under the contracting system, use of public services has risen, particularly among the poor. Average out-of-pocket health costs have plunged by over $30 per person forthe bottom half of the population in some project districts. NGOs attract people in need of care with cleaner clinics; predictable, professional, and respectful service; and successful treatment. They use enforceable contracts, financial incentives, user fees, and achievable goals to motivate staff. Overall care has improved for numerous reasons, says HealthNet International, one of the contracted NGOs. Of critical importance was an end to private practice among public workers. Salaries were so low in the government clinics—$10–30 per month—that health workers had to seek other income. Many openly sold their services outside of the health centers and earned 10 times more than their official salaries. Salaries were raised to levels high enough to get staff to dedicate 100% of their time to the public system. Doctors and district managers settled for salaries between $120 and $180 per month.

Cambodia: Tonle Sap Initiative

A new bridge across the Mekong at Mukdahan to Khanthabuly will lessen dependence on ferries

During 2005, three loans/grants amounting to $43 million were approved for Cambodia, including two exclusive grant assistance projects for rural water supply and sanitation ($18 million) as well as sustainable livelihood in the Tonle Sap Basin ($15 million). The third project, amounting to $10 million in an ADF loan, was approved for a financial sector program for the development of a market-based financial system.

The Tonle Sap Initiative has made good progress toward reversing threats to Southeast Asia’s largest freshwater lake. Cambodians also continued to find better health care in efficient clinics run by NGOs under new funding in a long-running project.

The non-lending program (consisting of 14 technical assistance activities), based on resources from the Technical Assistance Special Fund, Japan Special Fund, and other sources, amounted to $7.62 million during 2005, which included technical assistance for project preparation as well as capacity building.

The 2005–2009 country strategy and program for Cambodia was endorsed by the Board. A notable feature of its preparation was the joint process undertaken with World Bank, United Kingdom’s Department for International Development, and United Nations agencies concerned.

LAO PDR: Hydropower

In April 2005, ADB approved a $20 million public sector loan, a private sector loan of up to $50 million, and a political risk guarantee of up to $50 million for the Nam Theun 2 Hydroelectric Project. These were ADB’s first private sector loan and first such guarantee in the Lao PDR. It was also the second public-private partnership in the Lao PDR power sector. Approval of the project was a breakthrough in the Mekong subregion, making it a public-private partnership model. It is part of an international effort to supply 1,070 megawatts of power to the Thai and Lao PDR markets.

A worker in a factory in the Lao Bao commercial area in the Lao PDR

During 2005, ADB also approved a $10 million ADF grant for the Lao PDR to help provide safe and reliable water supplies. The quality and reliability of water supply services will be improved in about 12 small towns in the country’s northern and central regions by developing new water sources and constructing optimalsized water supply systems.

Complementing the loans and grants for the Lao PDR are seven technical assistance grants amounting to $3.0 million, which focused on project preparation and capacity development in priority areas.

Myanmar

ADB continued to monitor economic development in Myanmar during 2005. An operational strategy will be formulated when appropriate. The last loan and technical assistance projects for Myanmar were approved in 1986 and 1987, respectively.

Thailand: A New Era

Thailand’s economy and relationship with ADB are entering a new era

The opening of the Thailand Resident Mission in 2005 marked a new chapter in the country’s long-standing relationship with ADB. Discussions with the government on a partnership framework are ongoing to define areas of collaboration on national and regional programs.

ADB’s work in the Mekong countries focuses on laying the infrastructure needed to boost economic growth and to reduce poverty

As a middle-income country, Thailand recognizes the critical role of infrastructure for sustainable economic growth and increased competitiveness. ADB is prepared to work closely with the government to support its “megaprojects” infrastructure investment program.

Consistent with the government’s efforts to increase the size, depth, and liquidity of Thailand’s capital market, ADB issued a debut 4 billion baht ($102.5 million), 5-year bond in the country’s domestic bond market in May 2005.

Thailand has always been an integral partner of ADB in the GMS Program. Additionally, new opportunities are being explored for expanding Thailand’s role as a regional development partner. ADB and Thailand are involved in a number of initiatives to promote further development of Asian bond markets. Collaboration will strengthen cooperation and deepen economic integration across the region.

No new loans have been made to Thailand since 2000. However, seven technical assistance grants amounting to $3.35 million were approved in 2005. These included three tsunami-related technical assistance operations to assist in post-tsunami support activities. Another technical assistance—Infrastructure Investment Advisory Assistance to the Public Debt Management Office of Thailand—aims to assist the government in evaluating various mechanisms and options for integrating the urban mass rail transport system in Bangkok.

Cooperation on Dam Generates Power

The Nam Theun 2 project illustrates the potential for tapping private sector strengths through partnership with public sector groups Construction of the Nam Theun 2 hydroelectric dam, so far the largest foreign investment in the Lao PDR, has started. It is also one of the largest GMS projects and exemplifies the benefits not only of regional cooperation in the Mekong but also of the potential for tapping private sector strengths through partnership with public sector groups. Thailand will buy up to 95% of the 1,070 megawatts to be generated, and the Lao PDR government will use the dividends, taxes, and royalties for its development program. With funding from 27 international institutions—including public and private sector loans and a political risk guarantee from ADB— the Nam Theun 2 Power Company Limited will build the project, the total base cost of which is estimated at $1.25 billion. Consultations leading up to the project were broad, deep, and frequent. The people living near the project began providing inputs to planning in 1996, and were consulted in several hundred public meetings and information exchanges throughout the area. Planners also held consultations in Bangkok, Tokyo, Paris, Washington DC, and Vientiane with international groups concerned about the project, whose views were taken into account in the design. Environmental concerns were also clearly established. For example, with funding from the company, the project will help preserve the Nakai Nam Theun National Protected Area, one of Southeast Asia’s few remaining intact tropical rainforests. It also features a program for transparent monitoring and evaluation, including the publication of performance evaluations, progress reports, and data monitoring. Furthermore, the obligations of the company relating to social and environmental mitigation or compensatory measures are detailed in the safeguard documents and clearly set out in binding agreements.

Viet Nam: Powering Up

Demand for electricity in Viet Nam has grown by at least 15% per year in the last 10 years, but supply has not always kept pace

In 2005, ADB approved $577.7 million in loans, $26.5 million in grants, and $12.3 million in technical assistance, for a total of $616.5 million. A $95.0 million loan and grant package approved in November 2005 will improve 1,200 km of roads and help boost economic growth in the central provinces. It will rehabilitate roads and, in selected rural districts, raise them to all-weather condition. The improved roads will increase the efficiency with which people can move and goods can be traded, and the project will help improve access to markets, jobs, and social services.

Viet Nam will also be a beneficiary of a loan ($27.9 million) and grant package ($10.1 million) totaling $38.0 million to strengthen the country’s preventive health system. Specifically, the project will help combat communicable and emerging lifestyle diseases.

Non-lending assistance in Viet Nam, consisting of 20 technical assistance grants amounting to $12.3 million for 2005, constituted an important element toward project preparation as well as capacity building.

An OCR loan for $360 million, approved in December 2005, will construct and expand power transmission lines and substations in the northern part of the country. The project will improve reliability, remove transmission bottlenecks, reduce transmission losses, and promote more efficient use of power plants. Demand for electricity in Viet Nam has grown by about 15% per year in the last 10 years, but supply has not always kept pace.

Back East and Central Asia	Next The Pacific