Private sector to build Laos transshipment centre

Vientiane, Laos

BY year's end, a new Asean facility will start to take shape in Laos, hurtling this landlocked state into one of the frontlines for transshipment linking the two big markets of Asean and China.

But this Asean project is not like many of the other Asean infrastructure projects which are led by governments of member states. It is in fact spearheaded by businessmen from across the region.

"This will expedite the actualisation of the connectivity plan that Asean has," said Robert Yap, executive chairman of YCH Group and also one of the 30 businessmen that make up the Asean Business Advisory Council (ABAC) in an interview with media.

On Tuesday, nine months since a landmark agreement to deepen regional integration was inked, business leaders and government officials at the 28th and 29th Asean summits here took stock of the steps taken to turn that vision into reality.

The summits are the first since the Asean Community was established last Dec 31. The Community is based on three blueprints the grouping has set out in terms of economic, social and security integration.

Not only did businessmen unveil concrete plans to turn Laos into a transshipment hub, more symbolic ones were undertaken by governments to further deepen economic, social and security ties within the region.

Two blueprints on Asean-wide connectivity and narrowing the development gap among members were launched on Tuesday.

In addition, the ten leaders decisively pulled the regional bloc into non-traditional security territory by signing on Tuesday a declaration on strengthening humanitarian and disaster relief in the region.

The Master Plan on Asean Connectivity 2025 will focus on five areas to facilitate transport, technological, state-level and people-to-people ties. These areas are: sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence and people mobility.

The Initiative for Asean Integration Work Plan III was also launched on Tuesday. It looks to narrow the development gap among members so as to enhance the region's competitiveness and support implementation of the Asean Community.

The leaders also signed the "One Asean, One Response" pact at Tuesday's summit. It aims to coordinate the bloc's responses to disasters within and outside of the region.

But Asean has also been often labelled a "talk shop" by observers as aspirations from its leaders often fall by the wayside.

However, plans by ABAC to turn Laos into a transshipment hub were treated with cautious optimism by economists The Business Times spoke to, as they are undertaken by business leaders with clear deliverables in sight.

The plan involves looking at having "one or two" transport facilities in the country, said ABAC's Singaporean representatives on Tuesday. The council is made up of three businessmen from each of the 10 Asean states.

ABAC will be submitting these plans to Asean leaders. Structure of the facility will take shape by the end of this year and is expected to be operational next year, the Singaporean members said.

Through this plan, they expect to create a hub-and-spoke model for the flow of goods in the region. Small goods from Thailand or China, for example, can be trucked or flown to the Laotian hub and consolidated into larger packages for sea shipment out of Vietnam's Da Nang.

The value of the expected investment was not provided, but they said that the size of one facility will be "six to seven football fields".

The plan does not only look to strengthen transport linkages. It also aims to facilitate technological transfer, and spur the review of cross-border administrative work -- all key components of Asean's connectivity.

Economists said that this plan can tap into Laos' geographical potential, thus speeding up its development and ensuring regional unity.

"Creating a logistics hub in Laos would unleash tremendous economic potential on mainland Asean. A logistics hub in Laos would not only strengthen ties with China, but it would also encourage greater trade within Asean," said Frederic Neumann, HSBC's co-head of Asian economic research.

It also has an added benefit of strengthening ties with China, the region's largest external trading partner.

Over US$345.4 billion was traded between Asean and China in 2015, according to latest figures from Asean. This is 15.2 per cent of total Asean trade if including intra-Asean trade.

Locations in south-eastern and northern Laos are being considered for the facilities, the Singaporean ABAC representatives said. These locations can benefit from strong links within Asean, and from its proximity to China, a major trading partner of the region.

But Dr Yap is quick to point out that only Asean companies are involved in this plan.

There are no plans to attract Chinese investments or companies yet, though the business leaders intend to approach international organisations including the Asian Infrastructure Investment Bank for aid.

In due time, however, this plan in Laos is expected to boost trade within the larger region, said Dr Neumann.

"Even if China isn't directly involved in the project, it will likely welcome the greater connectivity to Asean economies, which would build on its strategy of extending China's economic ties across the continent."