Fourth GMS Economic Corridors Forum (ECF-4): 5.b Session1-Business Needs & Strategies in the Mekong Subregion_JETRO

7/31/2019 Fourth GMS Economic Corridors Forum (ECF-4): 5.b Session1-Business Needs & Strategies in the Mekong Subregion_JETRO

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JETROs SURVEY ON

BUSINESS NEEDS AND STRATEGIES

IN THE MEKONG SUB-REGION 2012

(major points of the interim report)

June 28th, 2012

Hideyasu Tamura

AMEICC Secretariat/JETRO Bangkok


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Objective :Follow-up to Survey on the business needs and strategies in Mekong region

(August to October 2009, JETRO) and discussions in the Mekong-Japan Industry

and Government Dialogues, conduct survey on the most up-dated

needs/strategies of Japanese and local companies operating in the Mekong sub-region.

In this regard, coverage of the survey was mainly the i) members of Mekong-

Japan Industry and government dialogue and ii) companies which JETRO

interviewed during the previous survey in 2009.

The survey in 2012 focused mainly on the changes from 2009, in terms of

both business operation/strategies and improvement of soft- and hard-infrastructures.

Time period: March 20th to June 1st, 2012

Method: Interview to individual companies (for some companies, response toquestionnaires)

Number of companies responded to the survey: 190In Mekong sub-region---146

(Cambodia: 24, Lao PDR: 13, Myanmar: 21, Thailand: 40, Vietnam: 48)

In Singapore and Japan--- 44(Regional headquarters in Singapore and Kuala Lumpur: 10, Members of the

Mekong-Japan Industry and Government Dialogue in Japan:14, Servicessectors in Japan:20) 2

Overview of the survey in 2012


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Upon the expansion of business operations in the Mekong sub-region

(e.g., exportation to global market), prioritization of development

plans/projects based on business needs is necessary.

On hard infrastructures, i) development of key seaports (e.g., Lach

Huyen, Cai Mep-Thi Vai and Vung Ang in Viet Nam and Dawei in

Myanmar), ii) connecting road to such seaports (e.g., completion of

Neak Leoung bridge) and iii) stable supply of electricity, are prioritized

projects from business viewpoint.

Trade/logistics facilitation, especially i) reduction of face-to-face

communication with custom officers through introduction of e-customs,

ii) enhanced utilization of FTAs through simplified ROO-related

procedures and iii) implementation/improvement of CBTA (extension

to GMS capitals) are strongly needed.

In order to achieve above-mentioned improvements, human resources

development in terms of both government and private sectors should

be further enhanced.

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Key findings and recommendations:


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Chapter-I. Overall Business

Needs and Strategies in theMekong sub-region

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Summary of Chapter-I

Among 146 companies responded to the survey, 81 (55%) haveexpanded their operationsin these 3 years either in the form of

Newly established investments (e.g., new factories/facilities/production processes)

Expanding/up-grading existing operations, including shift from abroad

Enhanced trade both intra-region and to the outside

Especially, operations in Cambodia (parts manufacturers) and Lao

PDR (garment) have been expanding remarkably, including newlyestablished investments.

While many manufacturing companies regard it efficient to concentrate

the production operation in one place, they are facing the necessity todiversify the prospective risks (e.g., natural disasters, macroeconomicinstability).

In general, both local (especially, Thai) and Japanese companies expect

expansion ofoperation in Cambodia in the short-term (within a few

years) and Myanmar with a bit longer time frame.

Expanded operation between 2009 and 2012

Perspective for the future


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(Reference) Enhanced production network involving CLM

- Design final products

(apparel)- Produce fabrics/textiles andexport to Cambodia

-Cut/sew/finish

in Lao PDRand/orCambodia

Export to overseas (e.g., Japan,Korea) by using AJCEP, AKFTA

Bangkok

- Produce semi-

finished parts inCambodia, andexport to Thailand,Malaysia

Bangkok

- Produce and export core parts to

other ASEAN countries byAFTA/to India, China throughThailand-India, ASEAN-ChinaFTA

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Chapter-II. Trade and logistics

facilitation

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Summary of Chapter-II

Among 146 companies, 39 regard custom procedures were improvedin these 3 years, through

Introduction ofAuthorized Economic Operator (AEO) or green-lane system(especially in Viet Nam)

Speed-up in obtaining import/export licensing (especially in Myanmar)Enhanced mutual understanding between custom authorities and companies.

At the same time, 55 found no specific improvement . These companiespointed out bottlenecks such asProblems in e-customs(e.g., i) systems shut down frequently, ii) face-to-faceprocedures still remain (especially in Viet Nam) and iii) insufficient introduction in thelocal provinces (especially in Cambodia and Lao PDR))

Burdensome procedures (e.g., i) lack ofsingle stop inspection along EWEC and SEC,ii) requirement of original documents (especially in Viet Nam))

Misclassification of HS code (necessity for introducing advance ruling system)

Necessity oflonger operation at border customs (e.g., 24 hours operation, out-of-regular office hours operation)

Unexpected costs through requirement of unofficial custom clearance fees(e.g., Cambodia, Viet Nam and Lao PDR)

Custom procedures


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Cross border transportation agreement (CBTA)

FTA utilization

While ATIGA and EPAs with Japan are frequently utilized, several

companies already started to use FTAs such as ASEAN-China and

ASEAN-India.

In further enhancing the FTA utilization, following bottlenecks were found;Cumbersome procedures in obtaining Certificate of Origin (COO) (e.g., i) longertime in the issuance procedures, ii) inspection in factories by issuing authorities (especially

Viet Nam))

Rules of origin (e.g., i) different ROO across various FTAs, ii) stringent ROO underASEAN-India FTA)

Issues related to tariffs (e.g., i) difference in classification/understanding of HS code,ii) insufficient tariff reductionincluding those caused by reciprocity under ATIGA and

ASEAN-China).

CBTA is utilized in carrying both cargos and passengers (tourism).However, business sectors request further improvements such as;

Deregulate limitation of transportation inside each country (triple license)

Ratification/implementation of CBTA i) by Myanmar, and ii) along SouthernEconomic Corridor especially between Cambodia and Thailand

Increased number of permissions for cargo transportation.


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Chapter-III. Development of hard

infrastructures

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Summary of Chapter-III

On East-West Economic Corridor (EWEC), business sectors strongly needImprovement ofroad condition on EWEC (especially in Lao PDR and Myanmar)

Development ofseaports in Viet Nam (e.g., Lach Huyen and Vung Ang) andEasier access to such seaports through enhanced road connection.

On Southern Economic Corridor (SEC), business sectors regard fulfillment

of missing links is necessary, especially,Development ofDawei seaport and related infrastructures (e.g., road linkage to

Thailand, industrial estates, trade/transport facilitation)Completion ofNeak Leoung bridge andDevelopment ofCai-Mep Thi Vai seaport and easier access from HCMC.

Enhanced electricity supplythrough appropriate shared responsibilityamong relevant government agencies and private companies is strongly

needed in CLMV countries.

In addition, projects such as i) development ofnew SEZ (e.g., Thilawa), ii)

improvement ofkey airports in CLMV countries, should be given priority.

Hard Infrastructures on Economic Corridors

Other Hard Infrastructures


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Improvement of roadcondition/spec

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HARDINFRASTRUCTURES-1: EAST-WEST ECONOMIC CORRIDOR

-Improvement of road condition/spec ofEWEC (especially Lao part), along with

streetlights is essential for smoother

transportation.[auto maker in Thailand, logistics company in

Viet Nam, finance company in Viet Nam]

-Considering the future possibility incarrying cargos between Yangon, Thilawa

SEZ and Bangkok, improvement of EWEC

inside Myanmar, as well as stable

transportation at Mae Sot-Myawaddy

border point would be important.[auto parts maker and textile maker in TH,

logistics company in MM]

- In order to make Thilawa project useful,cold storage at the seaport should be

equipped (processed food companies in TH)

-Although the Third Mekong Bridge wasopened, short-cut route cannot be used

as a logistics route, since the customs

and transshipment facilities are not well

developed at Lao-Viet Nam border.[logistics companies in VN and TH]

Development of seaports

in Viet Nam

-Development ofLach Huyen seaport,as well as improvement of connectivity

with Hanoi (e.g., new National Route #5)

is essentially important for manufacturers

in North Viet Nam.[auto parts makers, E&E makers in VN]

-Development ofVung Ang seaport,along with connecting route, especially at

the mountainous part of National Route 12

of Lao PDR is important in order to

facilitate exportation of agriculture &

forestry products in Lao.[food processing company in Lao, logistics

company in VN, logistics company in TH]

New requests/proposals

-Ifrailway from Vientiane to Bangkokcould be used for cargo carriage, it

would be useful for lowering

transportation costs.[garment manufacturers in Lao]

-Development of National Route18 of Lao PDR to Da Nang

seaport would be beneficial for

sectors such as agro-business,

tourism and mining.

[trading company and agro-businesscompany in Lao]


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JETRO conducted the research on the trilateral transportation through the ThirdMekong Bridge from Bangkok to Hanoi in March 2012. Comparison with the route

through the East-West Economic Corridor via the Second Mekong Bridge is asfollows;

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(Ref.) JETROS Research on a trilateral transportation (Bangkok-

Hanoi) through Third Mekong Bridge

(Comparison)

449km 595km -146km

40.7km/h 42.7km/h +2.0km/h

11:02 13:52 -2:50

5:54 2:28 +3:26

1:30 0:30 +1:00

Total Distance (Bangkok - Hanoi)Via 3rd Bridge 1,429kmVia 2nd Bridge 1,575km

Despite shorter distance, it is more costly and took longer lead time. Shorter custom clearance will be

expected by introducing Transit procedure under CBTA at the Third Bridge. Improvement of logistics

infrastructure, development of human resources, promotion of the single stop / single window and

extension of operating hours at the customs will contribute to the attractive business environment.

H 2 S E C


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Improvement of roadcondition/spec

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HARDINFRASTRUCTURES-2: SOUTHERN ECONOMIC CORRIDOR

-Improvement of road condition of SEC,including i) construction ofNeak Leoung

bridge and ii) development ofring-road

around Phnom Penh should be

expedited.[motorbike makers in KHM and VN, logistics

company in VN, trading company in TH,garment companies in KHM and VN, etc]

New requests/proposals-Responding to the increasing

number of cargo vessels navigating

through Mekong river to HCM , It

need to eliminate bottlenecks at Cho

Gao Canal such as narrow canal

width, too low for navigating under

bridge [logistics company in VietNam]

-Maintenance/ re-connectingof the current railway betweenBangkok, Phnom Penh and Ho

Chi Minh City would be helpful to

convey bulky products

[paper manufacturer in Malaysia]

-Access route to Cai Mep-Thi Bai

seaport should be further improved.[trading company and logistics companies in

VN]

Development of Dawei seaportand related infrastructures

-If Thailand and Myanmar governments

seriously support the establishment of

material industries in Dawei, including

development of seaport and its road

linkage to Thailand, as well as

trade/transport facilitation, it would

result in a remarkable re-allocation of

industries.[trading companies, steel maker, developer,

chemical maker in TH]

-Considering that automobile

industries in India would grow fast,

Dawei project would have a significant

meaning in realizing mutual

complementation between India and

Thailand.[auto company in TH]

-In order for Myanmar industries to reap

the benefit from Dawei project,

enhanced connectivity between Yangon

and Daweiwould be necessary.[E&E manufacturer in MM


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Chapter-IV. Development of

potential industries and service

sectors in Mekong sub-region

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Summary of Chapter-IV

Business sectors pointed out potential of CLM countries, especially i) partsindustries in Cambodia and ii) garment industry (Yangon area) and material

industry (Dawei) in Myanmar.While manufacturing sectors investment in Mekong sub-region has been

increasing, several companies pointed out that agro-based industries are stillimportant especially in CLM countries.

Necessity ofappropriate industrial policy (especially, automobile industry inViet Nam) was also pointed out.

Both Japanese and local service industries (e.g., distribution, retail, finance,telecommunication) are interested in enhancing the operation across theMekong sub-region.At the same time, service providers face bottlenecks such as i) licensing

procedures, and ii) stringent regulations (e,g., foreign capital ratio, store size).

Many companies face the necessity of i) basic human resources developmentin Cambodia, Lao and Myanmar, and ii) appropriately responding to the hikeof labor cost in Thailand and Viet Nam through advancement of industriesand improved productivity.

Potential industries and appropriate policy

Further development of service industries

Necessity to appropriately address issues on labor/HRD

Documents

Fourth GMS Economic Corridors Forum (ECF-4): 5.b Session1-Business Needs & Strategies in the Mekong Subregion_JETRO