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Viewing cable 07VIENTIANE524, NEW TRANSPORTATION ARTERIES AND TRADE INITIATIVES

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Reference ID Created Released Classification Origin
07VIENTIANE524 2007-06-25 08:51 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Vientiane
VZCZCXRO4641
RR RUEHCHI RUEHDT RUEHHM
DE RUEHVN #0524/01 1760851
ZNR UUUUU ZZH
R 250851Z JUN 07
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1347
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RHHMUNA/CDR USPACOM HONOLULU HI
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 03 VIENTIANE 000524 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS 
STATE FOR INL/AAE 
PACOM FOR POLAD 
PACOM FOR JIATFW 
 
E.O. 12958: N/A 
TAGS: EAID ECIN ELTN ETRD KCRM KHIV LA PGOV SNAR
TH, VM, XC 
SUBJECT: NEW TRANSPORTATION ARTERIES AND TRADE INITIATIVES 
AID LAOS' DEVELOPMENT AND ILLICIT TRAFFICKING ALIKE 
 
REF: A. VIENTIANE 259 
     B. VIENTIANE 257 
 
1.  (SBU) Summary.  New highways and trade initiatives may 
boost Laos' growth but will provide greater opportunities for 
illicit trafficking as well.  With the opening of a 
Savannakhet, Laos-Mukdahan, Thailand bridge, the East-West 
Economic Corridor (EWEC) that transects southern Laos is now 
complete from Da Nang, Vietnam to Bangkok, Thailand.  The new 
China-Thailand Highway that will connect Yunnan Province to 
central Thailand via northwestern Laos is also nearly 
complete.  Both of these transportation arteries will provide 
badly needed capacity to Laos' austere transportation 
network.  Regional trade agreements, such as the ASEAN Single 
Window Initiative (ASWI),  will provide a welcome relief for 
shippers who currently have to contend with a multitude of 
customs procedures and forms just to move cargo a few hundred 
miles but across several borders.  Unfortunately, 
improvements designed to facilitate trade can also facilitate 
illicit trafficking.  The Government of Laos (GOL) is well 
aware of the potential pitfalls and is urgently seeking 
assistance to develop the country's capacity to control its 
own borders.  Laos wants the benefits of trade but would like 
to avoid the downside that could come with it.  The new 
transportation corridors and trade initiatives are regional, 
making it almost impossible for Laos to solve border control 
issues on its own.  Regional and domestic interagency 
cooperation will be critical.  Laos is already the transit 
route of choice for traffickers in mainland Southeast Asia; 
if its law enforcement capacity remains below the regional 
standard, the region will suffer the consequences.  End 
Summary. 
 
The New Mukdahan-Savannahket Bridge 
 
2.  (U) The bridge between the provincial capitals of 
Savannakhet, Laos and Mukdahan, Thailand opened in January, 
completing the roadway spine of the EWEC from the Burmese 
border with Thailand to Da Nang, Vietnam.  Only the final leg 
of the EWEC through Burma to the Andaman Sea remains 
unfinished.  The drive from Da Nang to Savannakhet can be 
completed in nine hours; the trip from the bridge on to 
Bangkok or the Thai port of Lam Chabang would take slightly 
less. 
 
3.  (SBU) Laos is not the destination for the majority of 
vehicles crossing the new span.  Thailand and 
Vietnam--larger, more efficient, and better developed--will 
be the primary beneficiaries of the new highway.  Hindering 
Lao aspirations is a lack of competitiveness; Vietnam enjoys 
a substantial advantage in labor productivity, so much so 
that Lao roads are often built by Vietnamese workers, and 
Laos' weak educational system produces graduates whose skills 
pale in comparison to their Thai counterparts.  In addition, 
Laos, with its small population, outmoded economy, and 
landlocked location has never been the magnet for foreign 
direct investment that its neighbors have. 
 
4.  (U) Lao officials, however, remain optimistic that their 
country will share in the benefits of the EWEC.  Laos has set 
aside two large tracts of land to serve as special economic 
zones, one at Dene Savan, Savannakhet Province, adjacent to 
the Vietnamese border, and another at Xeno, just north of the 
new bridge.  The Ministry of Commerce expects industrial 
development in the special economic zones to commence in less 
than two years. 
 
5.  (U) These free trade zones are exempt from import or 
export duties, and customs procedures can be completed within 
the zones, facilitating rapid passage at border checkpoints. 
Once the zones are developed, the current flow of 200 to 300 
vehicles per day across the bridge may increase to thousands. 
 Small businesses servicing the transportation sector have 
already opened along the highway, including roadside stops 
that provide fuel, food, lodging, and entertainment for 
truckers hauling heavy cargoes and Thai tourist buses bound 
for Vietnam's beaches. 
 
The China-Thailand Highway 
 
6.  (U) Construction work on the new China-Thailand highway 
is nearing completion.  Once the road is complete, the drive 
 
VIENTIANE 00000524  002 OF 003 
 
 
from the Chinese border at Boten (in Laos' Luang Namtha 
Province) to the Thai border at Houay Xai (in Laos' Bokeo 
Province) will take only four to five hours.  From Houay Xai, 
Bangkok is less than twelve hours away.  The fact the road is 
not yet 100% complete has not prevented Chinese entrepreneurs 
or Thai trucking firms from using it.  Vehicles bearing 
Chinese license plates can be seen more and more throughout 
Luang Namtha and Bokeo Provinces.  The highway also 
intersects the road to the Burmese border at Xieng Kok (along 
the Mekong River), approximately four hours to the west.  The 
GOL has announced that it is planning new spans across the 
Mekong at both Houay Xai and Xieng Kok, facilitating much 
easier travel within the Green Triangle (intersection of 
China, Burma, and Laos) and Golden Triangle (intersection of 
Thailand, Burma, and Laos) regions. 
 
7.  (U) The GOL has established a special economic zone at 
Boten similar to those in Savannakhet.  Unlike the southern 
zones, Boten is already being developed.  Chinese firms have 
moved quickly to invest in tobacco, rubber, and casino 
projects, and the northern end of the highway in Laos is 
taking on a boomtown aura.  Smaller Chinese traders are also 
an increasingly visible presence in Luang Namtha, Udomxay, 
Houay Xai, and Xaignabouri Provinces. 
 
New Trade Initiatives 
 
8.  (U) The new transportation arteries are only one 
component of a broader effort to promote trade in the region. 
 New agreements promise to lower duties and ease customs 
procedures for companies doing business in Laos, which 
already has a bilateral agreement with Vietnam and 
hopes to have one with Thailand in the not too distant 
future.  When the ASWI is fully implemented, which according 
to the GOL will occur here in 2012, it will be a further step 
forward toward regional integration.  Under the ASWI, 
shippers can complete all of the necessary customs procedures 
in the country of origin, and will not have to worry about 
any additional customs formalities until the goods arrive at 
the final destination.  A central database will allow customs 
officials in any participating country to access information 
on any shipment transiting their borders.  The initiative is 
aimed at ending the burden on shippers and speed cargoes by 
streamlining paperwork and eliminating the need for 
inspections at every border.  For the majority of 
containerized cargoes, this will mean a streamlined 
documentation process and only one inspection for a shipment 
between any two ASEAN members. 
 
Looming Problems 
 
9.  (SBU) However, GOL law enforcement agencies are concerned 
that the measures designed to facilitate trade and 
development may also assist illicit traffickers.  More 
vehicles on faster highways, combined with fewer inspections, 
will make the work of interdicting the flow of trafficked 
humans, illegal drugs, and precursor chemicals very difficult 
throughout the region.  Under the ASWI, the GOL will reduce 
the number of agencies responsible for border controls from 
ten to three:  Customs, Immigration, and Agriculture.  In 
addition to making drug and human trafficking easier, the 
streamlined procedures could lead to more trade in illegal 
timber, un-inspected poultry, weapons, cash, forged 
documents, and cultural relics.  Savannakhet already has 
problems with trafficking in persons and drugs; the opening 
of the new bridge is likely to further aggravate both.  With 
the increased traffic comes another concern, the spread of 
HIV/AIDS.  The Golden Triangle/Green Triangle regions of Laos 
are potentially more vulnerable, and HIV/AIDS could become a 
serious issue in northwestern Laos once the China-Thailand 
highway is complete. 
 
10.  (SBU) Comment.  The GOL continues to reiterate its 
request to donors for assistance to build the law enforcement 
capacity it will need to meet the challenges intrinsic to 
growing trade.  What Lao Customs officials need most are 
basic contraband inspection equipment and training in their 
use.  China has announced that it will provide $19 million in 
loans to fund five container x-ray machines at key points of 
entry such as Boten and Savannakhet, but the machines will be 
expensive to operate and maintain, and are probably not 
appropriate for Laos' current border control infrastructure. 
 
VIENTIANE 00000524  003 OF 003 
 
 
Even under the best circumstances, this is a task Laos cannot 
undertake successfully without greater regional cooperation; 
regional trafficking issues will require regional solutions. 
End Comment. 
MCGEEHAN