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Shifting Trade Into High Gear
East–West Corridor (Route 9 connecting Lao PDR and Viet Nam) (1999)
Savan Park, Savannakhet Province—Just 5 years back, transporting goods through the Lao People’s Democratic Republic (Lao PDR) to Viet Nam was a long slog over cracked asphalt. Trucks formed a bumper-to-bumper caravan, dodging potholes all the way. Hard rains would turn parts of the route into a muddy creek.
“Some stretches were completely under water. The potholes were huge,” said Thongsay Duangprachan, a trucker and member of the Savannakhet Association of Road Transportation Operators. “Traveling to Viet Nam took a day or more.”
A massive improvement project by ADB and the Government of Lao PDR has reduced travel time to a mere 3 hours. Formerly a nightmare for traders, the road locally known as Route 9 is now a relative breeze, thanks to roughly 130 kilometers of ADB-supported highway improvements.
This has brought a major influx of investment to Savannakhet, a province linked to Thailand by an international bridge that marks the start of Route 9. This once-rugged path is now a key passageway along the ADB-supported East–West Corridor running straight across mainland Southeast Asia from Myanmar to Viet Nam.
Strengthening this trade route has inspired a flood of investment into Savannakhet, which has long stagnated in poverty. In 2006, soon after the road was completed, foreign investment in Savannakhet hit a record high of $422 million. This compares to $100 million in foreign investment in the 7 years prior to 2003.
The province had only received around $100 million throughout the entire span of 1996 to 2003.
The growth of industry and cross-border trade is bringing good, steady jobs to these rice-farming flatlands. Investors once scared off by this run-down trade route are currently building factories in a “special economic zone” just off the improved corridor.
Called Savan Park, the site is luring factories that will provide upwards of 5,000 jobs by 2015. Support from ADB has paid for the training of Lao officials to manage the zone and promote its attractions to foreigner investors.
“Investors usually think of Lao PDR only for its natural resources, like hydropower. We’re still considered handicapped compared to our neighbors,” said Thongsay Sayavongkhamdy, the Savan-Seno Special Economic Zone Authority’s vice governor. “We’ve been so underdeveloped that this province sends a lot of illegal workers into Thailand,” he said. “That’s not ideal. We want them working here.”
From farms to factories
Three years ago, the economic zone was a thick jungle used by locals to dump garbage. Today, it is a 40-hectare plot of flat earth where an industrial park is taking shape.
Though building is still in progress, the zone has already locked in construction of an Indonesian instant noodle plant, a Japanese biodiesel operation, and 14 other factories. Once full, it will contain 25 facilities that could employ more than 15,000 workers.
Three other zones, which promise tax incentives and quick customs turnaround times, will eventually open in the province. Constructing the zones has created jobs for villagers struggling to get by on small farms.
“I heard about all this from my neighbors, showed up, and asked for a job here,” said Poun Ketsouliyan, a 34-year-old farmer helping build the zone’s customs checkpoints. He is paid about $150 per month, which is covering expenses during his rice farm’s dry season.
“I’m happy to have work even though I’m away from my family,” he said. “My rice farming is doing really badly this year for lack of rain.”
Investors must still contend with one of Lao PDR’s key dilemmas: a populace heavily reliant on farming, and largely unskilled for other work. But most operations will set aside funds to train workers, said Tee Chee Seng, a Malaysian working as the zone’s project development manager.
“Lao PDR is still a farming country. Most people don’t have any experience in advanced industries,” he said. “These companies know they’ll need to train these workers. We’re in talks with a Swiss diamond company that plans to set up a school for processing diamonds here.”
Trade in the express lane
Beyond modernizing the crumbling route, ADB has also helped untangle the bureaucracy that once slowed down trade into Lao PDR.
Truckers shuttling electronics, produce, and other goods through Savannakhet Province used to board a ferry crisscrossing the Mekong River from Thailand. The two countries are now linked by a “Friendship Bridge” completed in 2007.
But even after the bridge opened, traders faced a 3-hour wait to clear customs and inspections. The process, newly streamlined, now takes about 30 minutes.
ADB has trained customs officials to operate scanners, a new computer network, and state-of-the-art scales. The number of trucks passing through this key checkpoint has since doubled to about 200 per day, said Keosoumboun Duangphotisanh, deputy head of the Thai–Lao checkpoint.
“We used to waste so much time,” Keosoumboun said. “We have so much extra traffic now that our staff has doubled to 85. But they’ve needed lots of training. You can’t just bring in modern equipment and expect that they’ll know how to use it.”
More trade into the province means more odd jobs for Lao locals living near the border. Vilaysak Kothsombaht, 27, pockets $4 each time he unloads pallets and trucks them into Savannakhet city.
“I normally repair cell phones and sell barbecue, but I like the extra work,” said Vilaysak, taking a break from stacking crates filled with sports drinks. “I’m putting aside some cash for bills and for my parents.”
Beyond Savannakhet, restaurants, guesthouses, and small shops have sprung up along the route. The corridor, just a dirt road in the 1970s, and later paved by the former Soviet Union, is finally giving Lao villagers access to much-needed services and jobs.
“This route goes all through Southeast Asia, but I think of Lao PDR as the route’s heart,” said Thongsay, the Savannakhet trucker. “Everyone along the road benefits.”