Expressway to Boost Vietnam-Lao-Thailand Economic Ties

Vietnam, Laos and Thailand have licensed 1,200 trucks (400 for each country) to exchange goods via the border gate along the East West Economic Corridor. Recently, the Japanese government has announced that it will provide capital to build an expressway network connecting Thailand, Cambodia and Vietnam. The project is expected to open opportunities for Vietnam to boost trade ties with sub-Mekong Delta region countries.

 

The Japanese government will join hands with Thailand to set up a taskforce specialising in compiling a financial and legal framework for the construction of a highway linking Thailand, Cambodia and Vietnam. Japan plans to provide a $67-billion loan for the project. The road will run from HCM City to Cambodia’s Phnom Penh and Thailand’s Bangkok and to Indian Ocean in Southeast of Thailand. This is an important part in the plan aimed to double the Southeast Asian region’s GDP growth by 2020 under the pledge of the Japanese Prime Minister Taro Aso in April this year. Meanwhile, for the first time in history, freight trucks of Thailand and Vietnam are able to enter into one another's territories for the first time to deliver and pick up goods, after the three countries officially introduced a system on traffic exchange rights and put into operation goods transit customs system between the nations on June 10. The East West Economic Corridor, part of the trans-Asian express project, runs from Vietnam’s central Danang city to Savannakhet in Laos to Thailand. The Asian Development Bank (ADB) has supported the corridor through the US$57-million loan in 1999, mainly focusing on capital supply for building and upgrading roads in Vietnam and Laos. Meanwhile, the ADB has also helped the US$1-million project to help the sub-Mekong Delta region to complete the southern sea economic corridor which links Thailand, Cambodia and Vietnam via sea ports.

 

These projects contribute to promote goods exchange in the sub-Mekong Delta region. Therefore, Vietnamese exporters consider neighbouring countries potential markets for export increase while they see sharp drop in their traditional markets. A study showed that more than 50 per cent of population in Cambodia has low demand for goods. Their first concern is about design and prices. Currently, Vietnamese products exported to Cambodia are construction materials, fertilizers, food and consumer goods. Last year, bilateral trade between Vietnam and Cambodia reached only US$1.7 billion. Director of the International Trade Directorate at the Cambodian Ministry of Commerce said, the bilateral trade agreement and visa entry exemption agreement between the two sides helped to boost Vietnam-Cambodia trade turnover in the first quarter of this year and can reach US$2 billion in the year. However, Vietnamese goods imported into Cambodia have to fiercely compete with goods from China and Thailand which are dominating the Cambodian market. On the other hands, Vietnamese firms’ operation in Cambodia remains weak as they have not yet built a firm distribution network.

 

In 2008, trade turnover between Thailand and Vietnam reached US$6.2 billion, up 31 per cent on-year. The two nations aim to raise the figure to US$10 billion in 2010. Thailand is among the first nations to enter Vietnam since Vietnam opened. Thailand now stands 8th among foreign direct investors in Vietnam with a total investment of US$5.6 billion. However, investment and trade ties between Vietnam and Thailand do not match their potentials. Therefore, road projects linking regional countries will be a factor to boost the investment and trade cooperation.