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    Southeast Asia
     Jan 23, 2008
Roadblocks on the Great Asian Highway
By Brian McCartan

LUANG NAM THA, Laos - The North-South Corridor of the Asian Development Bank-funded (ADB) Great Asian Highway is nearly fully paved. But as the last kilometers are completed, questions are arising about the future social, economic and even geopolitical costs of the new roadway, and with them new hitches are emerging.

The North-South Corridor Project has been a part of the ADB's development agenda since 1993 and aims at better linking the economies of China, Myanmar, Laos, Vietnam, Thailand and Cambodia. The portion of the road known as Highway 3, which runs through northwestern Laos and connects China and

Thailand, is expected to cost US$95.8 million and is being financed with a loan from the ADB, along with funds from the Chinese, Thai and Lao governments.

The completed sections of the road have gone from being little more than a dirt track a few years ago to a two-lane road complete with concrete shoulders, drainage and concrete bridges. The journey from the Lao border town of Huai Xai to the southwestern Chinese border village of Boten situated in southwestern Yunnan province took as long as two days on the old mostly dirt road depending on weather conditions. The new roadway has shortened that trip to a trade-promoting five to six hours.

The route was expected to be completed in 2007, but damage to the road from floods during the 2006 rainy season pushed the completion date into 2008. While the road is now passable all year, there are still sections, some of several kilometers in length, which remain unfinished and largely dirt, although graded in anticipation of surfacing.

Missing link
Construction of the Thai-built portion of the road has lagged behind that of the Chinese section, but some well-placed observers contend this is because the Thai section is "much better constructed". They indicated that the Chinese side was built faster because of engineering shortcuts which in future could make that section of the road less durable.

The bigger and more significant hitch is the lack of progress on a bridge scheduled to be built across the Mekong River connecting the Thai town of Chiang Khong with its cross-border neighbor of Huay Xai in Laos. The Chinese and Thai governments earlier agreed to build the bridge and share the estimated US$33 million dollar cost of the project, but little, if any, work has yet been done.

The Thai cabinet approved the project in February 2007 with an expected completion date in 2011, but many Chiang Khong residents remain skeptical that that timeline will be kept because successive Thai governments since the late 1980s have similarly promised to undertake the project. The only thing that has occurred since the most recent announcement has been steep hikes in land prices, they say.

Thai border disputes with Laos, the 1997-98 Asian financial crisis, political indifference in Bangkok and a general reluctance on the part of Thai investors has kept the project on a slow simmer. China meanwhile is keen to develop land-locked Yunnan province through the creation of trade links with Southeast Asia, including access to Thailand's sea ports. While Thailand may benefit broadly from a new link with China, there are some that fear a flood of cheap Chinese products will bankrupt northern Thai farmers.

Those fears came to life with the implementation of the so-called "early harvest" provision of the recently agreed Thailand-China free trade agreement, which resulted in a flood of cheap Chinese agriculture goods. The last, incomplete link to Laos represents a significant barrier to efficient trade between the two countries and some venture that is the reason for Thai foot-dragging on the bridge. Bangkok may also be using the bridge as a bargaining chip for trade negotiations with Beijing, since the Chinese appear considerably more eager to complete the route.

Until the bridge is constructed, Highway 3 will remain a road less traveled. Currently Chinese goods destined for Thailand must be ferried across the Mekong River between Chiang Khong and Huay Xai and many shippers have expressed their concerns that the ferry costs and Lao customs duties are too expensive. Chinese traders also complain about the long time required for Lao customs procedures and inspections.

Although Laos is under pressure to eliminate its transit taxes, the cash-strapped communist government is loath to do so. In part, that's because China and Thailand seem set to benefit disproportionately from the completed roadway. Currently, 95% of China-Thailand trade is conducted through shipping up and down the Mekong, with goods taking anywhere from 10 to 15 days to travel.

The water route currently suffers from frequent problems of inadequate levels to keep large cargo barges afloat, a sticky situation which is expected to increase when more of China's planned dams on the river's upper reaches go online in the coming years. The economic benefits of the roadway to Laos, meanwhile, are less clear.

Road wary
While the roadway is expected to bring in more business opportunities through increased market access to both China and Thailand, including for the country's growing agribusiness and tourism sectors, the Lao government appears more geared to increase state revenues through the collection of transit fees and taxes on goods that arrive at its borders - although it is under growing pressure from the Association of Southeast Asian Nations to embed new costs on already stunted intra-regional trade.

According to people involved in the tourism industry in northwestern Laos, while Western tourists are arriving in Luang Nam Tha in increasing numbers, tourists from neighboring Thailand and China often only pass through Laos on their way to Boten on the Chinese border where there is a large casino and market. Chinese tourists who do travel south of the casino often see Luang Nam Tha as only a convenient place to have lunch on the way to Luang Prabang or Vientiane, the industry sources say.
In addition to reaping less economic benefits, Laos will also likely have to deal with disproportionate social and environmental costs, people monitoring the project say. Without proper control mechanisms in place, the region's opening will disproportionately benefit government-connected business groups while displacing a large number of the non-ethnic Lao groups who currently inhabit the area.

A 2002 ADB report estimated that 2,502 people or 502 households might have to be relocated due to the road project - though some monitoring groups put that figure much higher. Although resettlement plans were drafted by the ADB to compensate for the loss of houses, land, rice granaries and shops, it is not clear that the funds are truly reaching the people who have been most affected.

In one major resettlement, the original Lao inhabitants of Boten village at the border with China have been moved a kilometer or more down the road to make way for the construction of a Chinese-owned casino, hotel and rows of shop houses. Resettled villagers have complained that the new relocation site lacks services and the land set aside is smaller and less fertile than their repossessed original land.

Others gripe about rampant land grabbing of plots adjacent to the new road by government-connected traders and businessmen who have established shops and other businesses on the newly prime real estate. Lack of proper land deeds and a court system that is inadequately equipped to handle land disputes means there is little or no recourse for displaced locals.

That legal vacuum has also paved the way for a growing influx of Chinese migrants, many of whom first arrived to work on the road and who have since settled to set up shops and other businesses along the road. Along certain stretches of the roadway, Chinese migrants have established whole new villages, a development that is stirring local resentment among those who have been resettled to less fertile and less lucrative land plots.

At the same time, various rights groups worry the once remote area's rapid opening will increase the local and largely impoverished population's exposure to the dangers of HIV/AIDS, human traffickers and the possibility of overexploitation by Thai and Chinese business interests of the surrounding forests and wildlife resources.

While the ADB's original hopes that the route would reduce transport costs for the movement of vehicles, goods and people and promote faster economic growth, as the road nears completion, the cost-benefit breakdown of the project for the local population is still very much in doubt.

Brian McCartan is a Thailand-based freelance journalist. He may be contacted through brianpm@comcast.net.

(Copyright 2008 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

China rubber demand stretches Laos (Dec 19, '07)

Regional race for Laos' riches (Aug 30, '07)

Trans-Asian Highway gains traction (Apr 22, '06)

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