GSM North south Economic Corridor, Flagship initiative



The flagship initiative for the North-South Economic Corridor directly supports

three of the five strategic thrusts of the Greater Mekong subregion strategic framework:

(i) strengthening infrastructure linkages through a multisectoral approach, (ii) facilitating

cross-border trade and investment, and (iii) enhancing private sector participation in

development and improving its competitiveness. The goal is to develop a highly efficient

transport system, which allows goods and people to circulate or move around the

subregion without significant impediment or excessive cost/delay. Improvement in the

transportation network will promote economic growth and regional development,

thereby reducing poverty.

In an effort to improve intraregional transport and maximize benefits, GMS

countries have begun to adopt a holistic approach to development, in the form of

economic corridors. Investments in priority infrastructure sectors such as transport,

energy, telecommunications, and tourism, will focus on the same geographic space to

maximize development impact while minimizing development costs. This flagship

initiative will also involve careful planning and management of policy and regulatory and

infrastructure initiatives in support of selected business opportunities.

Two different routes along the north-south axis are involved in the North-South

Economic Corridor initiative: (i) the Kunming-Chiang Rai-Bangkok via Lao PDR and

Myanmar route, and (ii) Kunming-Hanoi-Haiphong route. These major routes, together

with the existing Highway No. 1 running from the northern to the southern part of Viet

Nam and the Southern Economic Corridor that links Bangkok to Ho Chi Minh City, form

a large 'loop' or 'ring road' that covers the major cities and towns of the GMS. The North-

South Economic Corridor will, therefore, play a critical role in providing Yunnan Province

and northern Lao PDR access to important seaports. The North-South Corridor

intersects the East-West Corridor at key 'junction points' in Thailand and Viet Nam.

Potential market coverage is extensive, given the excellent state of the existing road

network from Singapore via Malaysia to Chiang Rai, and from Kunming to Beijing. The

North-South Corridor also includes a riverine component as a result of agreement

among PRC, Lao PDR, Myanmar and Thailand to cooperate on the joint use of the

Upper Mekong River.

Flagship Objectives

The objectives of the North-South Economic Corridor flagship initiative are: (i) to

facilitate trade and development between and among Cambodia, Lao PDR, Myanmar,

Thailand, Viet Nam, and Yunnan Province, PRC; (ii) to reduce transport costs in the

project influence area, and move goods and passengers more efficiently; and (iii) to

reduce poverty, support development of rural and border areas, increase earnings of

low-income groups, provide employment opportunities for women, and promote tourism

in its influence area.

GMS Flagship Initiative



Key Components

Fifteen (15) projects form the North-South Economic Corridor initiative:

Core Transport

a) Chiang Rai-Kunming via Lao PDR Road Improvement Project

b) Chiang Rai-Kunming via Myanmar Road Improvement Project

c) Huay Goan (Nan)-Phak Bang (Lao PDR)-Udom Chai-Boten-Chiang Rung

(PRC)-Kunming Road Improvement Project

d) Kunming-Hanoi-Haiphong Expressway Project

e) Kunming-Jinhong-Boten-Luang Prabang-Vientiane-Pakse-Stung Treng-

Phnom Penh-Sihanukville Road Improvement Project

f) Railway Development Project

g) Air Transport Development Project

h) Lancang/Mekong River Inland Waterway Project

i) Cross-border facilitation in the movement of goods and people

Other Infrastructure

j) Electric Power Grid Development Project

k) Promotion of regional energy cooperation arrangements

l) Telecommunications Backbone Development Project

m) Mekong Tourism Project

n) Preinvestment Study for the North-South Economic Corridor

o) Establishment of a special border economic zone in Chiang Rai Province,


Most of these projects are included in GMS forums and working group work

programs, and are in varying stages of development.

The North-South Economic Corridor initiative requires road, rail, water transport,

and air transport linkages. The first two road component projects, the Chiang Rai-

Kunming via Lao PDR and via Myanmar, are considered high-priority. Upgrading of large

sections of this connection in the PRC territory is either completed or underway.

Sections in Thailand are in good condition, while sections in Myanmar have been

upgraded by the Myanmar Government with some private sector participation. The

section in Lao PDR from Boten to Houayxay will be improved with loan assistance from

ADB and the Governments of PRC and Thailand in the amount of about US$30 million

each. An alternative north-south road connection originating from Nan in Thailand has

been proposed by the Government of Thailand as part of the ASEAN-Mekong Basin

Development Cooperation (AMBDC), and is included in this flagship initiative. For the

Kunming-Hanoi-Haiphong Corridor, which is another high priority GMS transport project,

ADB technical assistance is under way to (i) examine the viability of improvements in

roads, railways, or inland waterways and recommend appropriate transport mode, and

(ii) carry out a feasibility study for the selected transport mode. The projects for the

selected transport mode are included in ADB's indicative lending pipeline to Viet Nam in


GMS Flagship Initiative



Three railway projects are included in this flagship initiative, one of which forms

part of the priority routing of the ASEAN-initiated Singapore-Kunming Rail Link Project.

The other two are railway projects to connect Thailand with Yunnan Province through

Lao PDR and have been proposed by the Government of Thailand as part of the

AMBDC initiative. The three projects have a combined estimated cost of US$2.1 billion.

Lao PDR has proposed the inclusion of projects to improve Louang Namtha and

Houayxay airports in the North-South Economic Corridor flagship program. These

projects will allow the two airports in the northern part of Lao PDR to accommodate

medium-size aircraft.

At the suggestion of the PRC, a separate component concerning developments

related to the Upper Lancang/Mekong River Commercial Navigation Agreement, which

was signed by PRC, Lao PDR, Myanmar, and Thailand in April 2000, has been

proposed to form part of the North-South Flagship Initiative. Subcomponents include

international navigation and related issues, as well as training.

Equally important in developing this economic corridor are the 'soft' aspects –

that is, policies and regulations that play a vital role in determining the form, level, and

use of infrastructure investments. In this regard, a separate flagship initiative on

Facilitating Cross-border Trade and Investment is included in the GMS Strategic

Framework. As with other GMS economic corridor initiatives, implementing a crossborder

land transport facilitation agreement is integral to North-South Economic Corridor

development. This is expected to simplify customs procedures, facilitate cross-border

travel, and minimize the need for transshipment, among many other advantages.

A preinvestment study for the North-South Economic Corridor will be prepared in

2004/2005 to determine the feasibility of creating a viable economic corridor, and to

identify priority projects, policies, institutions, and financing needed to realize the

potential benefits of better transportation linkages. The North-South Corridor Initiative

also includes recommendations from a study prepared by the Government of Thailand to

establish a special border economic zone in Chiang Rai Province. Under this study, a

framework for development for the next 20 years (2002-2021) has been developed,

involving 35 programs and 112 projects.

Power transmission interconnection options are also included in the North-South

Economic Corridor flagship initiative. These form part of the Regional Power

Interconnection and Power Trade Arrangements Flagship Initiative. Five options are

situated in the North-South Economic Corridor: (i) the 500-kilovolt (kV) transmission line

interconnection project to connect Na Bon in Lao PDR and Udon Thani in Thailand, (ii)

two 500 kV transmission lines from the Tasang Hydropower Project in Myanmar to Mae

Moh and Tha Tako in Thailand, (iii) 500 kV direct current interconnection projects from

the Jinghong Hydropower Project in Yunnan Province, PRC to Thailand, (iv) the 230-kV

transmission line from Malutang in Yunnan Province to Soc Son in Viet Nam, and (v)

110 kV transmission lines from Yunnan to northern provinces in Lao PDR. Three

proposals from PRC for power interconnection arrangements involve PRC, Lao PDR,

and Thailand.

Developing fiber optic transmission links is also part of the Telecommunications

Backbone Flagship Initiative of the North South Economic Corridor. Telecommunications

GMS Flagship Initiative



Backbone Project – Phase I has largely been completed. Development of the

Telecommunications Backbone Project - Phase II and possible provision of basic

services in the rural areas using the Information and Communications Technology is

currently under considerations.

Tourism holds promising potentials in the North-South Economic Corridor. For

this reason, some projects and activities under the GMS Tourism Development Flagship

Initiative will be designed to directly impact on tourism potentials of this Corridor.

Initiatives identified by the Yunnan Provincial Government to develop tourism

infrastructure in Yunnan Province as well as a cross-border visa policy study have been


Sequencing Priorities

The five participating governments will soon develop and agree on a sequencing

and prioritization strategy for all components of the flagship initiative. For the Kunming-

Chiang Rai road connection, developing the missing link in Lao PDR, including a bridge

crossing the Mekong River from Chiang Khong in Thailand to Houayxay in Lao PDR, is

of highest priority. The financial and technical arrangements for this subproject were

agreed upon in 2002, enabling construction to begin in 2003 and to be completed by

2006/2007. Upgrading of the road and railway components of the Kunming-Haiphong

Transport Corridor is scheduled to commence in 2005-2007. The Cross-Border Land

Transport Facilitation Agreement, including the annexes and protocols, is expected to be

finalized and signed by 2005.

Project Financing

Estimated total cost of projects and initiatives, which have cost estimates, is not

less than US$4.5 billion. The amount excludes projects already included in other flagship

programs (telecommunication, energy and tourism), as well as cost of the railway

subprojects that form part of the Singapore-Kunming Rail Link. Certain major initiatives

are also not included, such as economic activities expected to be established by the

private sector. Of the US$4.5 billion, an estimated US$2.8 billion in financing has been

identified, mostly from the ADB tentative investment pipeline and some funds committed

by the governments concerned. The project has a financing gap of some US$1.7 billion.

There are several major potential sources of funding for the various proposals:

(i) governments, (ii) multilateral development agencies and international lending

agencies, (iii) foreign and local direct private investment, (iv) international private equity

funds, and (v) international and domestic capital markets. Public sector funds are

expected to play a key role in project financing, particularly in the early development

stage. Several of those projects will be financed under the Ayeyarwady-Chao Phraya-

Mekong Economic Cooperation Strategy.

The five participating governments will have to shoulder a significant share of the

development costs, especially in the case of policy and program formulation and

implementation, and institutional development. In several cases, implementation of

various programs and institutions will require multicountry support; and cost sharing will

have to be established on a case-by-case basis in line with expected benefits.

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