Economic corridors are meant to attract investment and generate economic activities along a region, usually with the aim toward development. They are meant to provide two fundamental attributes for development: lower distribution costs and improved land supply for economic activities. However, physical links and logistics facilitation must be in place in the corridors for them to achieve these aims. Therefore, the GMS adopted the CBTA and the economic corridor development strategy. We move now to examine a range of studies that attempt to estimate and quantify the benefits of these programs and the associated trade facilitation developments.

A study of the SEC's impact on Cambodia conducted by the Mekong Institute found an increase in living standards of those along the corridor (Phyrum, Sothy, and Horn 2007). The study reported improved access to healthcare, education, and markets as well as the development of additional public service facilities. It also reported an improvement in trade routes and reduced trade costs at cross-border points.9 The tourism sector was said to have added more than 560,000 jobs in light of the SEC, representing over 8% of total employment in 2004. The authors of the study also estimated that this sector added almost 5 percentage points to GDP in direct economic activity and another 10.5% in indirect.

The Japan International Cooperation Agency (JICA), along with the ALMEC Corporation, has undertaken a series of studies on cross border infrastructure. Phase 2 was conducted in 2007 and focused on the GMS (JICA 2007). The study estimated expected regional GDP growth as a result of the cross-border transport initiatives, including the CBTA and the three original economic corridors. Under varying assumptions the study estimated that potential GDP growth in each country ranges from 0.2% in the PRC, under relatively conservative assumptions on road development, to an almost threefold increase for Lao PDR under more ambitious assumptions.

A 2006 Japan External Trade Organization (JETRO) study found that with improvements in the land transport network of Thailand, Lao PDR, and Viet Nam, including completion of the Second Mekong International Bridge linking Lao PDR and Thailand (part of the EWEC), transit times could be reduced by 25% (JETRO 2005). These findings were based on surveys of Japanese firms operating in the region.

Banomyong (2007) analyzed the impact of the NSEC on logistics in the GMS region. He found major improvements in both time savings and shipping costs with the full implementation of the economic corridor. The projected reduction in shipping costs varies between 17% and 60%. Time savings estimates are in a tighter range, averaging under 40%. The author states that while the NSEC may lead to substantial savings, the institutional framework is still weak, leading to an uncertain environment for shippers and consignees. The report concludes that with improved border crossings, the NSEC will evolve into a true logistics corridor.

The immediate benefit of the EWEC was the improved connectivity and integration with the neighboring countries—Thailand, Lao PDR, and Viet Nam—resulting in reduced travel time and transport costs. A 75% reduction in travel time between Dansavahn in Lao PDR and Khanthabouly in Viet Nam over values reported in 2001 was found by Luanglatbandith (2007). During the past five year, growth in this transport sector has been substantial, with the number of passenger buses along the corridor increasing 160% and the number of freight operators doubling between 2000 and 2005 (Luanglatbandith 2007).

Following the opening of the second Mekong Bridge at the end of 2006, the first two months of 2007 alone saw an 8% increase in tourists compared to the same period in 2006. With the improvement in Route 9 (also part of the EWEC), the province of Savannakhet in Lao PDR, saw the number of tourist arrivals increase almost 145%, rising to 222,063, compared with 1999 levels (Luanglatbandith 2007). More than half of such tourism is regionally based originating in Thailand, Lao PDR, and Viet Nam. According to the study, easier access to new farming technology and cheaper inputs from Thailand and Viet Nam has increased the productivity of the agricultural center in Savannakhet. Annual growth in this sector averaged 7.2%, well above the national average of 3.4%.

In a country-specific study, Menon and Warr (2006) estimated the impact of improvement in road conditions for Lao PDR of the kind covered in the GMS Transport Strategy. They found that vehicle operating costs (VOC) would be reduced anywhere from 16% to 65% depending on the type of road initially in place (including no road) and the type of upgrade performed on the road in question.

A broader, more indicative approach to the determination of the potential gains of the GMS economic corridor programs can be found using the Nathan Associates report on ASEAN logistics (Nathan Associates 2007).

The report cites that a lack of funding for road maintenance on international routes, a low standard for international truck facilities at border crossing and transloading areas, and a lack of agreements allowing trucks to travel easily from one country to another with transit goods as chief reasons for the corridors' poor performance. All these measures are covered under the recently signed CBTA. Notably, customs were cited as a stand out in good performance for both corridors examined.

If full implementation of the CBTA, and the economic transport strategy were to bring the transport network in the GMS on par with well performing roads in the Asian region, according to these numbers, costs would be reduced by between 40% and 50% for both corridors. Total costs to shippers along the Vientiane-Laem Chabang corridor would be reduced 40% and along the Danang-Mukdaharn corridor by almost 50%. Time savings would be 43% and 63%, respectively.

Several ADB studies were also consulted. The first (ADB 2007a), a detailed study of part of the EWEC, analyzes the effects of the Second Mekong International Bridge, Mekong Bridge Access Roads, Road 9 Rehabilitation, Highway 1 Periodic Maintenance, and Da Nang Port Improvement on Lao PDR and Viet Nam. The report found that VOC were reduced between 2% and 32% with a median of 16% and that transit times were reduced by around 25%. The value of trade across the border of the two countries was found to increase by 41% between 2003 and 2006. The report concludes that these projects were successful in achieving their primary objectives of increasing the movement of people and goods, reducing the VOC and travel time while increasing the level of traffic achievable in the region.

The second study (ADB 2007b), examined the impacts of improvements in the highway links between Phnom Penh in Cambodia and Ho Chi Minh City in Viet Nam. It estimated that VOC were reduced 10% for passenger cars and by 15% for trucks and buses. In Cambodia, travel time from Phnom Penh to the border was reduced by 30%, with similar reductions achieved in Viet Nam. The value of trade along the border increased by over 40% per annum between 2003 and 2006.

Finally, some preliminary work evaluating the entire EWEC by ADB (ADB 2008c) has shown that while Thailand is relatively efficient in its trade facilitating environment, compared with “best practice” countries such as Singapore, it is still far behind almost all of the national logistics performance indicators. The study estimated time needed to export averaged 17 days in Thailand while in Singapore it averaged just 5 days. Importers experience a smaller but still significant gap: 9 days in Thailand and 3 days in Singapore. Once the EWEC corridor is completed, and policies have been implemented, estimates suggest that the travel time along the corridor will be cut in half.

The evidence suggests that improvements in transport infrastructure and trade facilitation in the GMS can bring substantial gains to the region. The studies reviewed above report costsaving values ranging from 16% to 65% with the median value being around 45%. The last three studies report time savings between 25% and 50%.

Benefits from the economic corridor project and the CBTA can manifest themselves in two ways: reductions in the direct cost of operating vehicles on roads and reductions in the costs of trading goods across borders. Some estimates suggest that indirect costs from time delays can have a greater impact on trade volumes than direct costs (OECD 2003). Within the model, we can adjust the direct costs of transport through the international transport margins and the trade costs of trade facilitation through technology changes. Both approaches are applied in this work.

The source originates from ADBI (Asian Development Bank Institute)