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Economy

Laos at the center of Mekong action

Toshifumi Yoshida, managing director of Lao Nissin SMT, a joint venture with a Laotian logistics company, has established cross-border transport networks. (Photo by Tamaki Kyozuka)

BANGKOK -- Laos, a landlocked country that shares borders with five others, is poised to become the center of a logistics network that spans the Mekong region in Southeast Asia. Trucks registered in Laos can travel freely from Thailand to Vietnam without special permits or moving cargoes from one vehicle to another. The unexpected beneficiary? Japanese logistics company Nissin.

     At 6:00 p.m. in Bangkok, motorcycle parts are loaded into a container and onto a Nissin truck for the first leg of a two-and-a-half-day journey -- a 10-hour drive to Savannakhet in southwestern Laos. Once in Laos, the truck heads north and then east along National Highway 12 until it reaches the border town of Naphao near the Vietnamese town of Cha Lo -- where it spends the night. After a morning customs inspection, the parts are sent on to their final destination, a motorcycle plant in the capital, Hanoi. Having completed the haul, the truck reverses course, bringing assembled bikes to Bangkok.

The border crossing between Daensavanh in Laos and Lao Bao in Vietnam sees a lot of traffic. (Photo by Tamaki Kyozuka)

     That may sound like a marathon, but it is a sprint compared to how things are usually done with goods traveling internationally by road. Typically, cargoes must be unloaded at the border and loaded onto a new truck, with a fresh driver, because driver's licenses are good for only one country.  In addition to the delay, with every transfer comes the risk cargo will be damaged.

     But bilateral deals Laos has with three of its neighbors -- Thailand, Vietnam and Cambodia -- let Laotian drivers make the run from start to finish. "We can reduce shipping time and cost by around 40%," said Toshifumi Yoshida, Managing Director of Lao Nissin SMT, a joint venture with a Laotian logistics company.

     A 1999 agreement between Laos and Thailand allows licenses and vehicles to be used in both countries without restrictions. A similar agreement was struck between Laos and Vietnam in 2009. This web of deals has allowed Lao Nissin to grow. The effects are visible well beyond the transport industry. At CentralPlaza Udonthani, a Thai shopping mall some 50km from the Laotian capital of Vientiane, cars with Laotian plates fill the parking garages. There are even signs in Laotian. For many Laotians, shopping in Thailand has become routine.

Keep rolling

At the moment, freer movement of goods depends on these piecemeal bilateral arrangements. But when the Cross-Border Transportation Agreement (CBTA) being hammered out by six countries in the region, including China, takes effect "the logistics business in the Mekong region will change significantly," said Seiya Sukegawa, Senior Coordinator for South East Asia of the Japan External Trade Organization.

     Laos, Vietnam, Cambodia and China have already ratified the agreement, while Thailand and Myanmar have yet to give the green light. The prospects for ratification in Myanmar are particularly cloudy.

     The CBTA has many people excited, but there is much work to do on the physical links between the countries. The East-West Economic Corridor, which stretches from Myawaddy in Myanmar's eastern state of Kayin through Laos and on to the central Vietnamese city of Hue, is more theoretical than real. The road on the Myanmar side is poor, with only one lane of traffic that changes direction depending on the day.

     The main route passing through Laos is very rough over more than half its length, which takes nearly four hours to traverse because trucks have to crawl along to avoid breaking an axle.

     Even if the roads are improved and the CBTA is implemented smoothly, there will not be much change without improvements on the operational side, such as simplifying customs procedures when transporting goods from Bangkok to Phnom Penh. The physical distance can be covered in about a day, but paperwork on place-of-origin certificates for items being shipped to the Cambodian capital can take a week to clear.

     "As long as there are complex customs procedures especially in developing countries, it is difficult to see the flow of goods suddenly increasing," said Tomonao Iwasaki, general manager of Yusen Logistics (Thailand)'s Mekong logistics group.

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