Bottlenecks on the Road to the AEC

By Marwaan Macan Markar 11 June 2014

BANGKOK — An over 620-mile journey that begins in Thailand, cuts through Cambodia and ends in Ho Chi Minh City has become, for obvious reasons, the route of choice for Thai truckers shipping cargo to that city in southern Vietnam. But despite the ostensible convenience of this overland run, Thai transport companies are not tooting their praises for improvements in road conditions in neighboring countries; nor are they expressing much enthusiasm for the prospect of increased regional connectivity and cross-border trade.

The border crossing in Aranyaprathet, on the Thai side, and Poipet, on the Cambodian side, offers reasons for such restraint. Time-consuming customs procedures and quotas limiting the number of Thai trucks from entering Cambodia slow the flow of cross-border traffic to a crawl. Under a quota system, only 40 Thai trucks are permitted to cross into Cambodia daily—30 of which are passenger trucks.

Negotiations between the Thai and Cambodian governments are ongoing, and the two sides aim to surmount this barrier by the end of this year. Thailand wants the quota to be eased to permit 500 cargo trucks to cross into Cambodia daily, according to the Thai National Shippers Council (TNSC). That would end the current practice: the majority of trucks unloading their cargo at the border, only to be reloaded into Cambodian-owned trucks for the rest of the journey.

Traffic Jams at Border Points

Across mainland Southeast Asia, such impediments to cross-border trade abound. Traffic jams are the norm wherever cargo trucks hit the international borders separating Cambodia, Laos, Myanmar, Thailand and Vietnam. Only now, as the governments of the 10-member Association of Southeast Asian Nations (Asean) hail the imminent birth of the Asean Economic Community (AEC) by the end of 2015, are efforts to address this issue gaining real momentum. Under the AEC 2015 Connectivity Plan, easing pressures at border checkpoints is seen as key to achieving regional economic integration.

To help smooth the way, the Asian Development Bank (ADB) has stepped in to promote Cross Border Transportation Agreements (CBTA), including one between Bangkok and Phnom Penh focusing on the Aranyaprathet-Poipet crossing. The agreement between Thailand, Laos and Vietnam permits each country a quota of 400 cargo trucks to cross the borders annually. Consequently, more Thai trucks are heading down this route, taking two days to deliver cargo to Da Nang. Before, ships were regularly used to ferry the Thai cargo to the port city on Vietnam’s central coast, often taking 15 days.

But there is still a distance to travel to convert such agreements into reality.

“Two main issues continue to hamper the full benefits [of improved roads],” said Jayant Menon, lead economist in the ADB’s office of regional and economic integration. “The first involves bottlenecks in the full implementations of the CBTA. The second involves missing infrastructure links, which have reduced the effectiveness of completed projects.”

Such shortcomings have not been ignored by the World Bank’s latest “Logistics Performance Index,” an assessment that exposes the potholes in Asean’s logistics terrain in 2014. Only Singapore, ranked fifth, made it to the top 10 of 160 countries surveyed by the bank for customs clearance, infrastructure, international shipments, logistics competence, tracking and tracing products and timeliness. Its closest regional contender was Malaysia, 25th, followed by Thailand, 35th, Vietnam, 48th, and Cambodia, 83rd. Laos, ranked 131st, and Myanmar, at 145th, were among the worst in the index.

“[The] challenges for Asean include narrowing the gaps in trade facilitation and logistics performance across Asean members, [and] reducing excessive and time-consuming documentation requirements,” Mr. Menon told The Irrawaddy. “[Asean members have to] address irregular and arbitrary payments for expediting customs procedures.”

Thai transport companies admit to discrepancies in bilateral agreements for hauling cargo over borders. Even though Thailand has a memorandum of understanding with Myanmar and Cambodia, “it is not practiced in fact,” said NoppornThepsithar, chairman of the TNSC, in an interview. “It will take a period of time to adjust to collaborate with neighboring countries.”

And Thailand looms as the ideal terrain to gauge progress on this logistics front. None of its mainland neighbors match it for its network of roads—including the 12 Asean highways that crisscross it. That has boosted its cross-border trade with its neighbors (including Malaysia), which hit one trillion baht (US$30 billion) in 2013, up from 770 billion baht (US$21.64 billion) in 2010, according to the Thai Chamber of Commerce University.

The main Thai exports to its four neighbors are natural rubber, computer parts, rubber products and auto parts, while its imports are natural gas, electrical machines and parts, and copper products. These are part of the export volume of 10,800 tons and imported volume of 12,700 tons annually that are transported through the 25 cross-border trade points spread across the 3,468-km border Thailand shares with its neighbors.

No wonder AEC’s connectivity blueprint has been hailed by its supporters as a future windfall for the logistics sector. And some of its benchmarks could spur progress at the borders.
“The lead-up to 2015 is thus important because it creates peer pressure for individual member implementation,” said PavidaPananond, associate professor of international business at Bangkok’s Thammasat University.

“But overall, AEC will be lucky if it can follow the Asean average of implementing around 30 percent of what it agrees on paper.”

This story first appeared in the June 2014 issue of The Irrawaddy magazine.