1. Measures for generating investment resources
The striking feature of the Triangle is the shortage of socio-economic and trade infrastructure.
A high percentage of the population in the Triangle lives on agriculture. In many areas, self-sufficient production method has still been maintained and commodity production has not yet developed that result in negligible capital held by the public. Private enterprises are limited in number and are mainly of small and medium scale.
In the Development Triangle, foreign funded project (ODA and FDI) are constraint in terms of quantity and scale due to various reasons: ODA has been mainly devoted to poverty reduction and some environmental activities and an attractive environment for FDI is yet to be created.
Practices indicate that investment measures are of vital importance, deciding the formation and rapid or slow development of the Triangle. In the immediate time, it is necessary to:
- Mobilise various fund resources for mainly investing key infrastructures for promoting economic development such as transport, irrigation, power, etc. Integrate programmes and projects in each area for efficient management and utilization of capital resources.
- Additionally increase funding to programmes for poverty reduction and employment generation in rural areas. Especially, provide ethnic minority poor households with loans so that they can develop production.
- Encourage all economic sectors to sign contracts with farmers on product consumption, provision of capital services and production supporting materials, establishment of unified methods for production organisation chain in the process of developing commercial production in the market mechanism, from input production to processing and selling.
- Encourage various methods for mobilising capital from the public, and from enterprises to invest in strengthening production capacity, developing small and medium enterprises, household cooperatives and farms.
- Financial contributions by the three countries:
For the initial operation by the Development Triangle, financial contributions by the three governments are very important, especially for the improvement of socio-economic infrastructure. To date, Vietnam and Laos have cooperated with each other to build the national highway 18B linking Attapeu provincial town (Laos) to Laos-Vietnam border then connecting to Vietnam’s national highway No. 40. Cambodia and Vietnam have also been proceeding with activities for upgrading the national highway 78 connecting provincial town of Rattanakiri to Cambodia- Vietnam border. These are the most important activities to create artery transport routes to link the localities toward the West-East direction. In the follow-up development process, many other infrastructure schemes need to be developed under bilateral or multilateral framework based on the demands by concerned parties. However, since the state budget of the three countries remains limited, investment in large-scale scheme shall be subject to careful consideration. When infrastructure is strong enough for profitable production and business, taxes and fees shall be collected to create additional funding for further improvement of infrastructure. In addition to investing in infrastructure for cooperation objectives, the provinces in the Triangle shall also invest in improving their own infrastructure for their socio-economic development. Such kinds of investments will both fulfil specific objectives of each country and serve the common cooperation goals by the Triangle.
- ODA mobilisation: The three countries of Cambodia, Laos and Vietnam have been the recipients of ODA from international organisations and donors for development and poverty reduction. The Development Triangle is has been the priority region for poverty reduction projects by the three countries.
Generally in ASEAN, ADB is the financial organisation giving great attention to the formation of the Development Triangle, providing loans, including technical assistance (for master plan research, feasibility study) and loans (technical and economic infrastructure construction) to the concerned countries in the Triangle. Under the framework of GMS, ADB funded projects are implemented along the corridors, supporting infrastructure development and poverty reduction. As compared to the above-mentioned criteria by ADB, the Triangle has the advantages for being given priority in receiving ADB projects because on the territory of the provinces in the Triangle, there are two corridors toward “West-East” direction to be established. In recent time, Japan has committed to set aside USD 1.5 million to invest in infrastructure for GMS countries. The Development Triangle is located in the region that is under consideration for using this fund.
In addition to ADB, some other international organisations also pay great attention to assisting the Development Triangle. The United Nation Industrial Development Organisation (UNIDO) expressed great interests in implementing pilot projects on clean and rural energy in the Triangle. Grasping information on donors, proving provinces with such information and assisting them to formulate projects calling for investment will help them overcome initial difficulties for creating premise for development cooperation.
- Mobilisation of foreign investment and capital from domestic enterprises: For the Development Triangle, newly established enterprises are mainly of small- and medium- scale with a small amount of capital, largely operating in agro-processing sector. The three countries’ enterprises have initially cooperated with each other in some areas like consumer wooden goods production, bee raising, and consumer goods trading. However, the cooperation scale is still small due to low demand by the population, infrastructure and labour barriers and preferential mechanisms.
As such, maintaining and developing business relations among enterprises require enabling conditions and policy mechanisms (to be discussed in more detail in the following sections) so that investors can enjoy confidence in doing business profitably. Business transactions among enterprises can initially be at a very small scale such as trading along borderline, border markets. However, these initial activities will create conditions for large-scale cooperation among enterprises when infrastructure (soft and hard) is improved.
Under present conditions, Vietnam’s corporations (such as Coffee Corporation, Rubber Corporation and Electricity Corporation) play a very important role in creating a driving force for the development of the Triangle.
In the immediate time, the Development Triangle is not the attractive location for foreign investors because necessary enabling environment has not yet been created here. However, in recent time, some businessmen (especially from Thailand) have gone along the highway 18 of Laos to conduct surveys of Bo Y border-gate and roads leading to Vietnam’s seaport. This indicates that when the main roads in the Triangle are completed, more economic activities in some sectors like trade and tourism by foreign investors must be taken into account.
2. Special preferential mechanisms and policies
Cambodiaand Vietnam as well as Laos and Vietnam have had agreements on bilateral cooperation mechanisms and policies in various areas. These mechanisms and policies have been increasingly improved based on sovereignty respect by concerned parties, advancing towards regional integration. Expert and provincial level meetings indicate that for many issues which are agreed by central level face a lot of difficulties when being implemented at local level due to untimely information, different understanding by central and local level and mistakes in decentralisation.
The objectives of establishing the Triangle can show that this type of cooperation can be seen as the initial experiment for large-scale cooperation and regional integration. As a result, bilateral agreements by countries will still be practiced here, but it is necessary to supplement higher priority policy mechanisms agreed by the three parties.
(1)- At central level
- Coordinate plans for infrastructure construction by the three countries to directly and indirectly support key economic activities in the Triangle. Apply the most preferential provisions by the law on domestic and foreign investment of each country. Introduce the most encouraging mechanism for calling for investments to large and key schemes such as construction of transport roads and other infrastructures in the Triangle.
- Facilitate cross-border movements of goods, people and capital within the Triangle through close coordination in custom and migration procedures. Introduce the most convenient mechanisms for travellers and dwellers in all localities within the Triangle, allowing labours to reside in accordance with investment project duration and facilitating the employment of day labours in border-gate economic zones. Citizens in provinces of the Triangle travelling for business and tourism are allowed to use common identity card by the Triangle. Facilitate foreigners to apply for visa at border gates of the Triangle rather than at a provincial town or a centre.
- Create favourable conditions for trade: Various approaches are considered for improving efficiency and effectiveness of trade procedures, for harmonising documents and unifying goods classification system. Tax reduction and non-tariff barrier elimination roadmap is reviewed for early implementing AFTA regulations in the Triangle, advancing towards establishing quality criteria for agro-exports. For border-gate economic zones, the formation of industrial parks for temporary import, processing and re-export is considered for taking advantage of the labour force, material areas and priority tax rate applied to the poor countries’ exports by WTO.
- The three governments must have financial mechanisms and policies (providing highest priorities in terms of tax, capital support, preferential credit…) to develop the infrastructure system.
(2)- At local level
- Develop border trade cooperation: One of the advantages of the Triangle is the two West-East corridors that are constructed and run through Vietnam’s seaports. As such, the common tendency is that the national border-gates between Vietnam and Cambodia are likely to be upgraded to international ones.The establishment of the twin border-gates will firstly have the impacts on border trade. As a result, localities need to coordinate with each other for facilitating and encouraging enterprises to cooperate and develop border trade among provinces in the Triangle.
- Coordinate comparative advantages for developing small and medium enterprises: Although enterprises in the Triangle are of small scale, after a certain years in operation they have accumulated various experiences in selecting investment areas and looking for partners. Labour distribution in provinces implies the possibility for supplementing of skilled labour force from Vietnam to provinces in the other two countries. At present, some Vietnam’s enterprises have implemented cooperation activities in provinces of Cambodia and Laos. Consequently, localities should encourage enterprises cooperate with each other in making investments in production, business and technology transfer. In the initial stage, industrial promotion can be carried out along borderline and in border-gate economic zones, taking advantage of the infrastructure in Vietnam’s provinces. Attention is given to support the development of small and medium enterprises in the Triangle via training programs and export market promotion.
- Coordinate human resource training: Based on funding from international organisations, budget for poverty reduction, financial support by Cambodia, Laos and Vietnam Committee, cross-border human resource development programs to improve the capacity, technical knowledge and foreign languages for farmers, teachers, health staff, businessmen, managers are formulated.
- Coordinated measures for rationally exploiting natural resources and environmental protection: The Triangle is the upstream of many rivers with a large forest coverage area. At present, the three countries have had forest protection policies, especially for upstream forests. Forest protection can only be workable in a better manner if there will be contributions by localities in the Triangle. As a result, localities must take coordinated measures to prevent deforestation for cultivation and unplanned timber exploitation. Under the conditions that many international organisations are very interest in financing environmental protection projects, localities must take initiatives in formulating common projects on environmental and ecological protection, preservation of national reserves in the Triangle.
- Initiative and dynamics in development cooperation: the master plan implementation progress largely depends on the decentralisation between central and local level in the countries as well as the initiative and dynamics by local level.Localities need to take advantage of the neighbour relations with defined cooperation activities. Mechanism and policy problems might arise from cooperation activities but only the central level can resolve these problems. Then localities take lead in discussing the problem with the Working Group or submit them to competent authorities for solution. Proposals for addressing specific problems in bilateral cooperation must be directed to integration tendency.
The focal agricultural and forestry development direction of the Triangle is to ensure food production stability and strongly shift to commercial production. As a result, in order to rapidly increase food output for ensuring food security, raising product volume and improving the quality of input products so that agro-processing industry for exports shall be competitive in the market, the leading importance of scientific research and technology transfer is breed improvement. Research institutions at central and provincial level need concentrate investment on projects for developing high-yield and good quality crop and animal varieties. Extension and demonstration of technology must be strengthened to translate technological transfer into production, especially for people in remote areas.
The Triangle has some main exports like coffee, rubber, and timber, etc. (especially in the Central Highlands). As a result, in addition to export market expansion, it is necessary to pay attention to the market of each nation so that products can be exchanged with each other for diversifying commodities in the market, thus meeting people’s consumption demands. In the initial stage when processing units in the Central Highlands do not have sufficient materials (cashew nut, rubber, pulp, timber, forest products), the Triangle is the potential market for materials from the provinces of Cambodia and Laos.
Provinces in the Triangle need to promote goods exchange with economic centres of each country and among the provinces themselves. Gradual steps should be carried out for promoting researches to develop market in a stable manner so that farmers can enjoy stable production and improved income. In addition, measures for improving quality, lowering production costs and improving marketing are taken for improving competitiveness in the market.
In recent years, provinces in the Triangle have practiced settlement for stabilising ethnic minority’s life, mitigating deforestation and protecting environment and ecology. However, shift cultivation has still been in progress, leading to difficult life by the population. As a result, effective measures need to be taken for completing settlement in order to stabilise and improve the living conditions of the people.