Symposium for Developing the North-South Economic Corridor Kunming, Yunnan Province, People's Republic of China 19-20 May

2011 Parallel Session II Kunming-Hanoi-Haiphong and Nanning-Hanoi Subcorridors Excellencies, Distinguished Participants, Ladies and Gentlemen: I have the honor to present the report of Parallel Session II on the Kunming-Hanoi-. Haiphong and the Nanning-Hanoi Subcorridors of the North-South Economic Corridor (NSEC) which was chaired by myself and co-chaired by Mr. Arjun Goswami, Director, Regional Cooperation and Operations Coordination of the Southeast Asia Department of the Asian Development Bank. The session was attended by around 50 participants composed of GMS senior officials from central government agencies, provincial authorities, representatives of the private sector, and staff of the Asian Development Bank. Perspectives from NSEC provinces were presented by Guangxi from the People's Republic of China (PRC), and Lao Cai, Phu Tho and Hai Phong provinces from Viet Nam. These provinces constitute a good sample of provinces along the NSEC subcorridors in Viet Nam. Lao Cai is a border province, while Hai Phong is the international gateway to the sea in the north of Viet Nam. Phu Tho is a "transit" province located between Lao Cai and Hai Phong. Perspectives from the private sector were presented by Hercules Logistics of Guangxi, Enterprise Development Foundation, Viet Nam Chamber of Commerce and Industry, and Tekhill Holding, Inc. of Shanghai, PRC. The presentations were both interesting and substantive, and we had a lively discussion on the key issues raised during the session. To save time, I will only summarize the main themes and ideas that were brought up in our session. Benefits of NSEC Development and Role of Provincial Authorities The provinces in the two subcorridors recognize the opportunities and potential benefits from the development of NSEC in terms of increased trade flows, investment, employment and overall economic growth. Accordingly, they have a clear commitment to NSEC's development and are prepared to perform an important role in promoting such development. Activities/Projects for Development of the Subcorridors We are not starting from zero. Many initiatives have been taken by the provinces along the subcorridors and their respective governments to facilitate the development of the subcorridors. Examples are the construction of a highway from Hanoi to Lao Cai and upgrading of Hanoi-Lao Cai railway; development of projects along the subcorridor such as the transit area and industrial park in Phu Tho; construction of the Ha Noi-Hai Phong highway and airport improvement in Hai Phong; upgrading and construction of transport infrastructure that connects Guangxi to Viet Nam; and streamlining of operations of Nanning Customs.

Cross Border Cooperation and Cross Border Economic Zones There was an extensive discussion of the merits of cross border economic zones (CBEZ) compared to industrial parks in promoting economic corridor development. It was clarified that the two are not mutually exclusive, e.g., an industrial park could be developed within a CBEZ. The CBEZs proposed to be established between the PRC and Viet Nam is an effort to pilot the scheme in the GMS, which could be replicated in other parts of the GMS if successful. Establishment of CBEZs requires cooperation and coordination which are consistent with the spirit of subregional cooperation in the GMS. It was proposed that the Ministry of Planning and Investment (MPI) of Viet Nam prepare a master plan for the development of the provinces along NSEC in the country, so that these provinces could be guided in preparing and implementing their respective development plans. Problems and Constraints The problems and constraints mentioned by the provinces include: (i) cumbersome customs and transit clearance system; (ii) lack of infrastructure and facilities such as roads, warehouse facilities and electricity; (iii) lack of funds for financing capital projects and financing for small and medium enterprises; (iv) weak inter-provincial coordination; and (v) human resource constraints in some areas (e.g., in business management, marketing, finance). The problems cited by Hercules Logistics are similar to those brought up in the plenary session yesterday morning. They include: (i) differences in customs clearance and related policies of NSEC countries; (ii) lack of harmonized logistics standards; (iii) shortage of skilled personnel; (iv) lack of convenient system of financial settlement; and (v) lack of practical logistics coordination mechanism and logistics association among the GMS countries. Recommendations The following were recommended by the provinces during the session to facilitate NSEC development: Speed up the implementation of approved projects (e.g., roads especially the Noi Bai-Lao Cai highway, railways , ports and waterways). Governments of Viet Nam and the PRC to agree on a legal framework for NSEC cooperation as a foundation for implementation by local governments. Strengthen cooperation in HR training, environmental protection and use of advanced technology. Border provinces to collaborate to harmonize customs, trade and immigration policies, immigration procedures (e.g., at Lao Cai international border checkpoint). Improve and expand capacity for road and rail transport from Hanoi to Lao Cai. ADB to consider supporting the development of infrastructure to improve connectivity with surrounding areas to ensure desirable spill-over effects, and providing financial and technical support for the planning of inter-provincial cooperation initiatives along NSEC. Establish information sharing mechanism among provinces along NSEC and between the government and the business sector.

Expedite the implementation of trade and transport facilitation measures. The recommendations of private sector representatives included:

Accelerate infrastructure development in the GMS and enhance the efficiency and reduce the cost of logistics. Integrate the development of inland and coastal economies of GMS by enabling the seamless access of overland transport in the subregion. Establish a logistics cooperation and coordination mechanism led by GMS governments, remove administrative barriers, and improve the policy environment for logistics development. Establish a regional logistics association or chamber of commerce for GMS; in this connection, speed up the establishment of a GMS Freight and Transport Association (FRETA). Accelerate the development of logistics technologies, and upgrade logistics services and management. Organize training courses to enhance capacity for private enterprises especially for SMEs. Establish funds to support and encourage enterprises to innovate and apply advanced technology to enhance productivity. Encourage financial support to SMEs (e.g., through an SME fund, venture investment fund) Facilitate the adoption of electronic means of providing customs clearance. Interconnect and integrate the development of NSEC, EWEC and SEC.

Mechanisms for Coordination and Networking The need for a coordinating mechanism in the development of NSEC was raised in the presentation several times. In this regard, the organization of a task force or committee composed of provincial authorities, representatives of concerned central agencies and the private sector was proposed. The activities of the task force or committee could include: Compiling and prioritizing the requirements of the provinces along NSEC;. Resolving central-local and public-private coordination issues; Coordinating provincial initiatives for developing NSEC; Identifying actions to resolve issues that arise in implementing the Strategy and Action Plan for NSEC development (NSEC SAP) which could be based on monitoring and evaluation reports; Increasing the involvement of local authorities and communities, and expanding the participation of the private sector in economic corridor development; Mobilizing technical and financial resources for NSEC development; and Collecting relevant information and indicators from the provinces, the private sector and central agencies for monitoring the implementation of the NSEC SAP.

Excellencies, Distinguished Participants, Ladies and Gentlemen: I would like to end this report by thanking all the presenters in the session for their well-prepared and comprehensive but concise presentations, which have contributed to our

productive and substantive discussions. I would also like to thank my Co-Chair, Mr. Goswami for stimulating our discussion, and all the other participants for their patience, interest and attention. I hope that our session will contribute, even in a small way, to the resolutions of the issues that we have discussed and move us a step closer to transforming the north-south transport corridor into an economic corridor for the mutual benefit of our people. Thank you.