Behind border issues: Trade Facilitation Asst. Prof. Ruth Banomyong Thammasat Business School Banomyong@thammasat.net 1
Background Lao PDR is sole land-locked country in South East Asia. The relative lack of funds and the country s lower level of development make it important for Lao PDR to have access to efficient transport for goods distribution. This is crucial for sustaining growth and reducing poverty in Lao PDR. 2
Lao transit arrangements Bilateral Asian Development Bank (ADB) Association of South East Asian Nations (ASEAN) United Nation Multilateral Treaties 3
Bilateral With Thailand 1978 Agreement on transit trade 1999 Agreement but still difficulties in protocol implementation With Vietnam 1991 Agreement on transit trade 1999 Agreement on road transport 2000 Agreement on transit trade With Cambodia 1999 Agreement on road transport 4
Trade with Thailand Nongkhai is the most important province for Thai-Lao PDR: border-trade transit trade More than 90% of Lao transit trade goes through Nongkhai. 5
Trade with Thailand Carriage of transit goods can only be done through designated and licensed road hauliers. 5 licensed operators for transit cargo: Express Transport Organisation (ETO) Ubonsahatham Regional Container Line (RCL) TL Enterprises State Railway of Thailand (SRT). 6
Trade with Thailand Export from Lao PDR into Thailand can move: in any Thai registered vehicle in Lao registered vehicle for delivery only within Nongkhai province. transload of export or transit cargo in Nongkhai. 7
Example of difficulties with Thailand Transit shipment ex-pakse via Phiboon via Bangkok to Le Havre in France. Export of Palm Beer Must export via Vientiane (~750 km north) as it is the only officially recognised transit point for tobacco & alcohol. 1999 Transit agreement and its protocol still lacking! 8
Trade with Vietnam Mutual rights: Lao trucks can operate in Vietnam. Vietnamese trucks can operate in Lao PDR Transit quotas Majority of quotas lifted in 1994 Exceptions for certain types of goods 9
ADB agreement G.M.S. 1999 Trilateral Agreement for the transportation of goods & people Thailand, Lao PDR, Vietnam Cambodia acceded in 2001 China acceded in 2002 Myanmar expression of interest The GMS agreement has been designed to harmonise individual bilateral agreements among the members countries, in particular, the harmonisation of customs and immigration procedures. 10
ADB Agreements Even though ADB led agreements have been signed for transit facilitation but their implementation is still lacking. The issue of single window customs inspection has not been finalised even though it is one of the prerequisite. 11
ASEAN Agreements Facilitation of Goods in Transit Hanoi 1998 Inter-state traffic TBS Multimodal transport Unsigned but is expected for, 2004? 12
Status of protocol for ASEAN goods in transit agreement PROTOCOL STATUS AS OF DECEMBER 2002 Protocol 1 Designation of Transit Transport Routes and Facilities (pending) There has been no further development since October 2001 as Singapore and Malaysia cannot agree. Protocol 2 Designation of Frontier Posts Protocol 7 Customs Transit System Members countries of ASEAN are currently being asked to verify their designated frontier post in the annex of Protocol 2 and also the list of prohibited or restricted goods not permitted for transit transport in the annex of Protocol 7 (Both are still pending) Protocol 3 Types and Quantity of Road Vehicles Protocol 4 Technical Requirements of Vehicles (Both signed on 15 September 1999) Signed and accepted by Lao PDR, Myanmar, and Vietnam Philippines ratified Protocol 3 13
Status of protocol for ASEAN goods in transit agreement PROTOCOL STATUS AS OF DECEMBER 2002 Protocol 5 ASEAN Scheme of Compulsory Motor Vehicle Insurance (Signed on 8 April 2001) Cambodia and Vietnam have accepted/ratified this protocol Protocol 6 Border and Interchange Stations (Pending) Protocol 9 Dangerous Goods (signed 20 September 2002) Singapore made representation that there are still a number of issues, which needed further clarification for Protocol 6. Protocol 8 Sanitary and Phitosanitary measures (Signed on 27 October 2000) Only Vietnam has accepted this Protocol to date. 14
International Trade Multilateral treaties None related to Customs or Multimodal Transport matters Convention on Transit Trade of Landlocked States, New York, 8 July 1965. 8 July 1965 (Signed) 29 December 1967 (Ratified) 15
ALTID: Facilitation at border crossings Resolution 48/11 on road & rail transport modes in relation to facilitation measures - 7 international conventions:! Convention of Road Traffic (1968)! Convention on Road Signs and Signals (1968)! Customs Convention on the International Transport of Goods under Cover of TIR Carnets (1975)! Customs Convention on the Temporary Importation of Commercial Road Vehicles (1956)! Customs Convention on Containers (1972)! International Convention on the Harmonization of Frontier Controls of Goods (1982)! Convention on the Contract for the International Carriage of Goods by Road (CMR) (1956) 16
Export via Bangkok (Thailand) Cost per TEU to Bangkok quoted at ~ USD 800/TEU (FAK) Vientiane-Nongkhai quoted at ~USD 116/TEU Nongkhai-Bangkok quoted at ~ USD 500/TEU Distance just under 700 km. Non-transport related cost estimated at around 40% of total cost for FOB Bangkok. 17
Cost structure for export up to Bangkok port Cost ($) 700 650 600 550 500 450 400 350 300 250 200 150 100 50 Nongkhai Thanaleng Bangkok Port Distance (km) Vientiane 50 100 150 200 250 300 350 400 450 500 550 600 650 Road Transport Source: The Author 18
Thai-Lao Border crossing charges Customs (26 $) 20% Border formalities (35 $) 27% Transit charge (20 $) 15% Total : 131 $ Transload (50 $) 38% 19
Bangkok port charges B/L charges (13 $) 9% THC (68 $) 46% Thai Custom (6 $) 4% Container stevedorage (21 $) 14% Container wharfage (22 $) 15% Total : 197 $ Lift on/off charges (17 $) 12% 20
Variation in transit time via Bangkok Time (hr) 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 Distance (km) Vientiane 50 100 150 200 250 300 350 400 450 500 550 600 650 Maximum Source: The Author Average Minimum 21
Export via Danang (Vietnam) Cost per TEU to Danang quoted at USD 1600/TEU Vientiane-Dan Sawanh: USD 730/TEU Lao Bao-Danang: USD 330/TEU Distance around 1,060 km Non transport related cost estimated at ~27% of the FOB Danang price per TEU. 22
Cost structure via Danang Cost ($) 1700 1600 1500 Danang 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 Lao Bao Sawanakhet Dan Sawanh Distance (km) Vientiane 100 200 300 400 500 600 700 800 900 1000 Road Transport Source: The Author 1100 1200 23
Non transport related charges Handling charges (50 $) 33% Storage charges (3.2 $) 2% Total : 153.2 $ Document charges (100 $) 65% 24
Average transit time Time (day) 3 Danang 2 Lao Bao Dan Sawanh 1 Sawanakhet Vientiane 100 200 300 400 500 600 700 800 900 1000 1100 Distance (km) Road Transport Source: The Author 25
Comparison of transit cost Cost ($) 1700 1600 1500 Danang 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 Nongkhai Sawanakhet Thanaleng Lao Bao Dan Sawanh Bangkok Port Distance (km) Vientiane 100 200 300 400 500 600 700 800 900 1000 1100 1200 Road Transport Source: The Author 26
Comparison of average transit time Time (day) 3 Danang 2 Lao Bao Dan Sawanh Sawanakhet Bangkok Port 1 Nongkhai Vientiane Thanaleng 100 200 300 400 500 600 700 800 900 1000 1100 Distance (km) Road Transport Source: The Author 27
Comparison of border crossing time Border Crossing Time 4 3 Time (hr) 2 1 0 Lao-Thai Lao-Vietnamese Maximum border crossing Minimum border crossing 28
Questions? Comments? Thank You For Your Attention! 29