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Mukdahan makes its mark

Special economic zones in northeastern province and neighbouring Laos hold key to revival of interest in East-West Economic Corridor.

Essilor Lao Co Ltd, the local unit of the French producer of ophthalmic lenses and optical equipment, is a major tenant in the Savan-Seno SEZ. It produces around 15 million lenses per year for export to a distribution centre in Thailand for its customers worldwide. Photo: Krit Phromsakla Na Sakolnakorn

The Mukdahan Special Economic Zone in northeastern Thailand will utilise the East-West Economic Corridor (EWEC) or R9 to connect with the Savan-Seno SEZ in a move that could revitalise the underused route.

The brainchild of the Asian Development Bank (ADB), the EWEC is a 1,320-kilometre road link connecting Mawlamyine port in western Myanmar with the Thai provinces of Tak, Sukhothai, Phitsanulok, Phetchabun, Khon Kaen, Kalasin and Mukdahan, the Lao province of Savannakhet, and Quang Tri and Thau Thien-Hue provinces of Vietnam before finishing at Danang on the east.

The project first came to light in 1998 and opened in 2006 but economic activity along the route has been far lower than expected because of a lack of infrastructure support and competition from other more popular routes.

But recent developments at the Mukdahan SEZ suggest that activity along the road could increase.

"Mukdahan will use our strength which is its geographical location with the advantage of connections with neighbouring countries, not only to Laos, but also to Danang in the south of Vietnam which is only 157 kilometres away via the EWEC," said Mukdahan governor Sorasit Ritsorakrai.

"Not to mention that the province is located in the middle of the EWEC which is also connected to Mawlamyine in Myanmar," he told a recent seminar on regional connectivity held by Post Today and APM Asset Pro Management in Mukdahan and Savannakhet.

The Mukdahan SEZ spans three districts -- Muang, Wan Yai, and Don Tan -- with an area of 578.5 sq km on the Mekong River. The second Thai-Lao Friendship Bridge is the main link between Mukdahan and Savannakhet.

The Mukdahan and Mae Sot SEZs are Thailand's gateways to the EWEC and both are pursuing more cooperation with other centres to increase activity along the route.

Mukdahan has been positioned as a twin city with Savannakhet, as well as with Quang Tri in Vietnam and Chongzuo in Guangxi Zhuang Autonomous Region of China. They regularly exchange information and expertise on health, education and other social issues.

Savannakhet, the second-largest city in Laos with an estimated population of 120,000, is located along the Mekong and is famous for its old French colonial architecture.

Located in the south of Guangxi Zhuang Autonomous Region along the Vietnamese border, Chongzuo is mountainous with numerous karst formations similar to Vietnam's Ha Long Bay. It is home to one of China's largest Zhuang populations, an ethnic group that is considered the largest minority in China.

Mr Sorasit noted that border trade in Mukdahan was increasing every year and reached 135 billion baht last year, the highest in the Northeast and up from 100 billion in 2012.

The Board of Investment has designated Mukdahan as a One Start, One Stop Investment Centre to reduce red tape. The province has also received additional funds to expand electricity and water utility services, drainage and transport infrastructure. Cabinet approval is being sought to build the province's first airport, while a four-lane highway connecting the province to the EWEC will take about three years to complete.

Work is also expected to start soon on the environmental impact assessment for a 365km double-track railway connecting Khon Kaen, Yasothon and Mukdahan. The State Railway of Thailand has also begun expropriating the land that will be needed.

The Mukdahan SEZ has been operating for two years land sales are increasing. The province has set an aside additional area to support expansion if expected demand growth warrants it.

The government has put up two parts of the zone for auction between June 2 and the end of July this year. Rental rates start at 24,000 baht per rai per year.

Mr Sorasit said Mukdahan did not see the Savan Seno SEZ in Laos, established 10 years ago, as competition but as a partner that could easily be connected via the EWEC.

Thanachote Chotebunyasak, vice-president of the Mukdahan Chamber of Commerce, also expressed optimism about the future of the EWEC.

"Japan has been trying to make this route happen because it wants its products that are being made in the region to be sent out to the world market along a route that has over 10 SEZs connected to it," he said.

"The value of border trade here could reach 200 billion baht in the coming years while hundreds and thousands of containers will pass along this route in the future to form a supply chain that connects more than 10 SEZs."

The high-speed railway, once construction is finished in 2024, will greatly reduce logistics costs in the province. Currently, it costs between 120,000 and 150,000 baht to drive a container from Mukdahan to China, and 75,000 baht more on the return leg if the container is filled with goods.

He believes the Vietnamese government sees a need to push for expanded port facilities to transform Danang into another Singapore as a maritime logistics hub.

"The only way to ship products out is through Laem Chabang [port in Chon Buri] while the rest go out via the Sadao border crossing in Thailand to the port in Penang (Malaysia) which contributes to growth in Sadao and Penang more than expansion in Danang," said Mr Thanachote.

With shipping from Singapore and Malaysia costing 57,000 and 67,000 baht per container respectively, Thailand's cost of 120,000 baht hampers competitiveness, but Mr Thanachote believes better railway connections will narrow the gap.

"If Thailand does not speed up its development of connectivity then our logistics cost will be uncompetitive and we will simply end up once again as a manufacturer and exporter," he said. "The problem with Thailand is that we do not use our strength and we expect things to be done easily, which means that the county is not going anywhere."

Businesses that are up and coming in Mukdahan include hotels which have a combined 5,000 rooms, logistics, and retail as Big C, Tesco Lotus and Makro have invested in the province, resulting in 200 million baht in retail sales per year.

Tee Chee Seng, general manager of Savan Pacifica Development located in Savan Park, said the SEZs in Laos were another option for investors because Laos as a least-developed nation still enjoys low import tariffs in the EU under the Generalised System of Preferences.

The Savan-Seno SEZ is only nine km from the second Friendship Bridge and 5km from Savannakhet Airport. The government is currently working on a one-stop service that will allow Savan Park to issue a business licence within just five working days.

Targeted industries for the Savan-Seno SEZ are automotive and aerospace parts, electronic and agricultural products which could represent as opportunities for Thai investors because there is still plenty of land for farming, he added.

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