GMS BIZ Network Forum 6-10 September 2010 Mekong Institute Khon kaen Thailand

1. GMS BIZ Network Forum6-10 September 2010Mekong Institute Khonkaen Thailand Mr. OudetSouvannavong Vice-President Lao National Chamber of Commerce and Industry, Secretary General of the GMS Business Forum GMS Cross Border Transport Agreement (CBTA) and Logistic Network in the GMS: procedures and Initial Implementation

2. Scope • GMS Infrastructure Connectivity • Cross- Border Transport Agreement (CBTA) • Status of CBTA implementation • Assessment of GMS Economic Corridors • SME Business Networking in the GMS

3. GMS Corridors

4. GMS Corridors RoadConnectivity

5. GMS Connectivity Road Transport Network 1992 2006 2015 (committed)

6. The GMS Cross-Border Transport Agreement (CBTA) • What is the CBTA? • Multilateral agreement ratified by all six GMS countries • Purpose is to eliminate non-physical barriers to cross-border transport in the GMS • Includes references to existing international conventions (such as the KYOTO)

7. The GMS Cross-Border Transport Agreement (CBTA) (cont.) • Covers in one document all the relevant aspects of cross-border transport facilitation, which includes: • Facilitation of cross border movement of goods • Single-stop/single-window inspection • Harmonization/integration of systems • Exchange of traffic rights • Provision for transit traffic • Cross-border movement of persons • Has 20 implementing annexes and protocols that applies to selected and mutually agreed routes and points of entry and exit in the six countries.

8. Objectives of CBTA • Facilitation of border crossing formalities (single window and single stop customs inspection, coordinating of hours of operation; and exchange of advance information and clearance) • Facilitate cross-border movement of people (multi-entry visa, recognition of driver license) • Facilitate cross-border movement of goods (regional transit regime, phyto-sanitary and veterinary inspection) • Exchange of traffic rights • Requirements for admittance of road vehicles • Institutional Arrangements

9. PLAN: BY 2010 FULL IMPLEMENTATION Mukdahan – Savannakhet Lao-Bao – Dansavanh Aranyaprathet – Poipet Bavet – Moc Bai Hekou – Lao Cai Myawaddy – Mae Sot Mae Sai – Tachilek Chongmek – Wang Tao Houayxay – Chiang Khong Nam Phao – Cau Treo Nongkhai – Thanaleng Mohan – Boten Hat Lek – Cham Yeam Veune Kham – Dong Kralor Ruili – Muse Geographic Coverage of CBTA

10. Status of CBTA Implementation • All GMS countries signed 20 Annexes and Protocols of CBTA. • PRC, Cambodia, Lao PDR and Vietnam signed and ratified all 20 Annexes and Protocols of CBTA. • Thailand Ratified 11 Annexes and protocols, while Myanmar will ratify all of the Annexes and Protocols when it is ready to implement CBTA. • CBTA implementation very slow:- GMS Leaders in 2008 asked to expedite CBTA implementation to facilitate cross-border trade, investment and tourism in the GMS.

11. Status of CBTA Implementation • Single-Window Inspection(SWI) being implemented at Savannakhet (Lao PDR) and Mukdahan (Thailand) border checkpoints, and at Hekou (PRC)-Laokai (Vietnam) border checkpoints. • Single-Stop Inspection (SSI) being implemented at Dansavanh (Lao PDR) and Lao Bao (Vietnam) border checkpoints. • Tripartite Exchange of traffic rights along the East-West Economic Corridor to commence on 11 June 2009. • GMS Customs Transit System (CTS) and GMS temporary transport permit in place along the East-West Corridor but not widely used by operators, especially in Thailand due high cost/high guarantee deposit required by Board of Trade of Thailand

12. Key Implementation Issues of CBTA • Ratification of the annexes and protocols • Capacity building at national and border levels • Establishment of required border infrastructure • Development of ICT/MIS for efficient border management • Passage of new legislation to establish various transport facilitation regimes • Continue to strengthen goodwill and trust among GMS countries

13. Assessment of GMS Economic Corridors - NSEC • Recent expansion of Southern China industrial production supply chains has increased the traffic on the corridors • Especially between the Pearl River Delta – Nanning- Ping Xiang – Lang son – Hanoi and further down to Hochiminh and Bangkok.

14. Assessment of GMS Economic Corridors - NSEC • Traffics on the routes between Kumning-Mohan-Boten-Hueisai-Chian Khong and Kunming-Hekou-Lao Cai - Hanoi have increased but with a slower path. • Road infrastructure in the Lao part that have narrow turns and peak slopes that are not favorable for the transport of 40 foots containers. • Mekong River crossing is opening only five days a week and during few hours. Using the ferry Chinese operators have to on load and upload twice losing one day each time. • In all border crossing point CTS systems are not up to date yet despite e-documentation being applied in certain Chinese and Vietnam border point. • Operators are mostly concerned about the coordination of CTS working hours between China and Vietnam/Laos as there is time difference, and about the timeliness of CTS working hours that in practice is less than 5 hours a day.

15. Assessment of GMS Economic Corridors-EWEC • The EWEC has weak link to market, industrial and population demand areas. In fact EWEC is going from nowhere to nowhere.

16. Assessment of GMS Economic Corridors-EWEC • Under the CBTA, EWEC is a specific route which forbids going outside the corridor. • Transport registration and insurance/guarantee fees further impacted on cost of transportation along the corridor. • The CTS single window inspection at Dansavanh-Laobao and the inspection at the Mekong Friendship Bridge have improved the transportation time between Danang to Mukdaharn. • Nevertheless, the traffic along the EWEC is still low and could be increased if the corridors has extended link to industrial zones and markets.

17. Assessment of GMS Economic Corridors-SEC • The SEC has potential links between Thailand and seaports in Cambodia and South Vietnam.

18. Assessment of GMS Economic Corridors-SEC • In Cambodia, road infrastructures are poor and the CTS system is not developed. • It is since recently possible to do a transit in bond all the way across Cambodia, from Poipet to Bavet, although a special and rather expensive license is required and truck manifest declaration for purpose of bonding forward to ISD is not permitted. • There are requirements to have original copies of documents for transit at all in country checkpoints and for bonded transfer to ICD. • Despite those constraints, the traffic between Thailand to Phnom Penh and Sihanouk Ville through the Aranyanprathet – Poipet border check point is increasing.

19. Assessment of GMS Economic Corridors • Very little public information is provided on GMS CTS system. • Local operators do not know about the CBTA protocols and other CTS regulations. • Local operators lack expertise and technical skills and corporate management for operating in the economic corridors. • Local operators need to upgrade themselves to standard requirements to be able to operate in the economic corridors.

20. Characteristic Problems of SME in the GMS– relative to their size • SME can play a key role in triggering and sustaining economic growth and equitable development in developing countries • SMEs are often unable to capture market opportunities which require: • Large production quantities • Homogeneous standards; and • Regular supply. • SMEs experience difficulties in achieving economies of scale in the purchase of inputs such as: • Equipments • Raw materials • Access to Finance • Consulting services, etc

21. Characteristic Problems of SME in the GMS – relative to their size • Small size also constitute a significant hindrance to the internal management functions, which are the core of the enterprise dynamism such as: • Training • Market intelligence • Logistics; and • Technology Innovation. • Small scale prevent the achievement of specialized and effective internal division of labor, which fosters cumulative improvements in productive capacity and innovation. • Because of the continuous fierce struggle to preserve their small profit margin, • SME are often locked in routines and are unable to innovate their products; and • process beyond the boundaries of their enterprises to capture new market opportunities.

22. The Enabling Business Environment Impact on SME Business - Factors • Enterprise registration • Legal and Regulatory Framework • Accounting and Finance • Tax Systems • Availability of Credit for SME • Labor Laws and regulation • Non Tariff Barriers and Measures • Monopolies and cartels • Macro-economic stability (inflation, commodity price increase, etc.)

23. SME Business Networking in the GMS • GMS SMEs can address the problems related to their size and improve competitive position though Business Networking. • Business Networking refers to a group of SMEs that cooperate on a joint development project by complementing each other and specializing in order to overcome common problems, achieve collective efficiency and conquer new markets beyond their individual reach. • There are “Clusters” that indicates a sector and geographical concentration of enterprises i.e. specialized suppliers of raw materials; or a pool of specialized skills. • Vertical and horizontal cooperation is made along a Value Chain or a Supply Chain.

24. SME Business Networking in the GMS • Networking is made through HORIZONTAL COOPERATION between SMEs occupying the same position in the value chain. • SME can collectively achieve optimal scale in the use of machinery and • SME can pool together their production capacities to satisfy large-scale order. • Business Networking can also be made through VERTICAL COOPERATION with other SMEs as well as Large-scale enterprises along the transport and logistic supply chain. • SMEs can specialize on their core business and give way to an external division of labor. • Inter-enterprise cooperation gives rise to a collective learning space (invisible college), • where ideas are exchanged and developed , and • knowledge shared in a collective attempt to improve product quality and occupy more profitable market segments.

25. Clustering and Networking of GMS Transport and Logistics Operators • Clustering of SME’s transport and logistic operators in the GMS is promoted for operating in the GMS corridors. • There are 4 clusters • Northern Cluster 1 (Yunnan-Myanmar-Thailand-Laos) • Northern Cluster 2 (Yunnan, Quangxi, Vietnam) • East West Cluster (Vietnam, Laos, Thailand) • South Cluster (Vietnam, Cambodia, Laos, Thailand)

26. Clustering and Networking of GMS Transport and Logistics Operators • B2B Network transport and logistics operators is established in each clusters though horizontal or vertical cooperation • Set a “Charter of Standards” covering safety, community responsibility, driving hours, environment, etc. • Training of operators (SME managers) and drivers on the charter standards and CBTA • SME Banks Credit to Network Members for improving standards and increasing fleets • Support from Government and Development Partners provided on capacity building development to B2B Network

27. Thank You