Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in the Greater Mekong Subregion (GMS) PDF

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Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in the Greater Mekong Subregion (GMS) Drawing Conclusions for Potential Future German Technical Cooperation Assistance: A case study of Bokeo and Louang Namtha Provinces in Lao People’s Democrat...

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Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in the Greater Mekong Subregion (GMS) Drawing Conclusions for Potential Future German Technical Cooperation Assistance: A case study of Bokeo and Louang Namtha Provinces in Lao People’s Democratic Republic (Lao PDR) Mekong Development Program (MDP) Department Mekong Institute (MI) September 2014

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS

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Mekong Institute

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS

The findings, interpretations and conclusions expressed in this report are drawn from the literature review, field research, discussions with various stakeholders and conclusions drawn from the various sources.

Research Team Lead - Mr. Sanjay Gathia, Program Manager, Mekong Development Program (MDP), MI Member - Dr. Kornkarun Cheewatrakoolpong, Assistant Professor, Chulalongkorn University Member - Mr. Tetsuya Kanno, Research Specialist, Agricultural Systems and Rural Development Member - Ms. Thiphaphone Phetmany, Researcher and Interpreter, EDC Laos

© Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH The research is copyright of GIZ. Permission for any reproduction and references should be sought from concerned authorities in GIZ.

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Mekong Institute

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS

DIRECTOR’S ACKNOWLEDGMENT On behalf of Mekong Institute, I would like to express our sincere thanks to Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, for partnering with MI and in conducting the research, “Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in the Greater Mekong Subregion (GMS): Drawing Conclusions for a potential future German Technical Cooperation Assistance - A case study of Bokeo and Louang Namtha Provinces in Lao People’s Democratic Republic (Lao PDR)”. MI has been working for the GMS regional development, co-operation, and integration since 1996. Today after more than 18 years of its existence, it stands as an autonomous international institution owned and operated by the six GMS countries it serves: Myanmar, Thailand, Cambodia, Laos, Vietnam and the Autonomous Provinces of Yunnan and Guangxi of the People’s Republic of China (PRC). MI is committed to the needs for human resources development of the sub-region. Our primary responsibility is to enhance people’s knowledge and skills so as to effectively prepare them for the greater extent of integration in the GMS. This is to ensure that the benefits from regional economic growth are inclusive and equitably distributed to all. MI is delighted to submit the research finding analysis and provide GIZ with inputs towards its future strategy planning in developing the economic corridors in GMS. We hope the research recommendations will facilitate GIZ to further its development of action plan and strengthen its resolve to address poverty alleviation for the well-being of the GMS people, as part of its long-term strategy. I would like to thank all the colleagues in GIZ for all their academic, administrative and logistics support to our research team during the research work. I also thank the Government of Lao PDR, Governors of Bokeo and Louang Namtha Provinces, respective Provincial Ministries and officials for giving the permission for the research work to be undertaken and also in sharing their insights with the research team. Last, but not the least, I thank MDP’s Research Team Member’s - Mr. Sanjay Gathia (India), Dr. Kornkarun Cheewatrakoolpong (Thailand), Mr. Tetsuya Kanno (Japan) and Ms. Thiphaphone Phetmany (Laos), and give them the due credit for their hard work, collaborative spirit and dedication towards the challenging research activities such as collecting relevant information, field visits, final analysis report and its presentation to GIZ team. Once again, I would like to express my deep appreciation to Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH for its great initiative for our subregion and for working with MI on this research work. We are happy to be a part of this achievement and we look forward to future GIZ – MI cooperative endeavors in GMS.

Dr. Watcharas Leelawath Director, Mekong Institute GMS Inter-Governmental Organization for Development & Cooperation, focused on providing HRD and Capacity Development Learning programs to enhance regional development, cooperation and integration. www.mekonginstitute.org

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Mekong Institute

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS

CONTENTS MAPS .............................................................................................................................................................................9 TABLES ....................................................................................................................................................................... 10 CHARTS ...................................................................................................................................................................... 11 FIGURES ..................................................................................................................................................................... 12 ACRONYMS AND ABBREVIATIONS .......................................................................................................................... 13 EXECUTIVE SUMMARY ............................................................................................................................................. 15 CHAPTER 1: ECONOMIC CORRIDOR DEVELOPMENT AND NORTH-SOUTH ECONOMIC CORRIDOR (NSEC) IN THE GREATER MEKONG SUBREGION (GMS) ......................................................................................................... 34 1.1

Greater Mekong Subregion and Economic Corridor Development ............................................................. 34

1.2

Development Statute of the North-South Economic Corridor (NSEC) ........................................................ 40

1.3

Current Status of the Economic Corridors and Their Obstacles ................................................................. 43

1.3.1

Current Status of the Economic Corridors .............................................................................................. 43

1.3.1.1

North-South Economic Corridors (NSEC) ..................................................................................... 43

1.3.1.2

East-West Economic Corridor (EWEC) ......................................................................................... 45

1.3.1.3

Southern Economic Corridor (SEC) ............................................................................................... 46

1.3.2

Obstacles of Implementing Economic Corridors..................................................................................... 48

1.3.2.1

Coordination failures ...................................................................................................................... 48

1.3.2.2

Economic inefficiency of some economic corridors ....................................................................... 48

1.3.2.3

Maintenance and repairs of roads established under the economic corridors ............................... 48

1.3.2.4

Problems in Myanmar .................................................................................................................... 48

1.3.2.5

Failure of CBTA implementation .................................................................................................... 49

1.4

Chapter Conclusions: Future Plan of the GMS and Economic Corridors.................................................... 49

CHAPTER 2: IMPACT OF ECONOMIC CORRIDORS ON ECONOMIC GROWTH, RURAL DEVELOPMENT AND POVERTY REDUCTION .............................................................................................................................................. 53 2.1 2.1.1

Impact of Economic Corridors on Economic Growth .................................................................................. 53 Literature Review on Impact of Infrastructure Improvement and Trade Facilitation on Economic Growth 53

2.1.2

Related Macro-economic Figures........................................................................................................... 53

2.1.3

Economic Assessment of the Economic Corridors ................................................................................. 60

2.1.4 2.2 2.2.1

Impact of Economic Corridors on Lao PDR’s Economic Growth ............................................................ 62 Impact of Economic Corridors on Rural Development and Poverty Reduction ........................................... 71 Literature Review on the Impact of Infrastructure Improvement and Trade Facilitation on Rural

Development and Poverty Reduction .................................................................................................................. 72 2.2.2

Related Macroeconomic Figures ............................................................................................................ 76

2.2.3

Impact of Economic Corridors on Lao PDR’s Rural Development and Poverty Reduction .................... 79

2.3

Seventh Five-Year National Socio-Economic Development Plan (NSEDP) of Lao PDR ............................ 83

2.3.1

NSEDP 2011−2015 Targets ................................................................................................................... 85

2.3.2

NSEDP 2011−2015 Major Directions ..................................................................................................... 86

2.4

National Growth and Poverty Eradication Strategy (NGPES) ..................................................................... 87

2.5

Chapter Conclusions .................................................................................................................................. 88

CHAPTER 3: CONCISE FIELD-RESEARCH OBSERVATION’S & FINDING CONCLUSIONS .................................. 90 3.1

Hypothetical Framework of the Impact of NSEC on Rural Livelihood ......................................................... 90

3.2

Impact of Economic Corridor on Rural Economic Development and Rural Livelihood................................ 94

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Mekong Institute

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS 3.2.1

Economic and Income Growth of Rural Population ................................................................................ 94

3.2.1.1

Increased Road Connectivity, Transportation and Mobility ............................................................ 94

3.2.1.2

Increased Investments and Use of Telecommunications .............................................................. 95

3.2.1.3

Contract Farming and Inter-community Job Creation .................................................................... 95

3.2.1.4

Access to Local and Cross-Border Markets .................................................................................. 96

3.2.1.5

Service and Tourism Sector Development .................................................................................... 96

3.2.1.6

Land Management and Real Estate Prices ................................................................................... 97

3.2.1.7

Increase in Personal Household Income and Assets .................................................................... 97

3.2.2

Impact on Agriculture and Natural Resources along NSEC ................................................................... 97

3.2.2.1

Expansions in Contract Farming Practices along NSEC ............................................................... 97

3.2.2.2

Local Forest Area and Food Security Situation ............................................................................. 99

3.2.2.3

Decline in Raising Large Livestock ................................................................................................ 99

3.2.2.4

Difficulty in Wild Animal Hunting, NTFPs and Fuel-wood Collection............................................ 101

3.2.2.5

Contamination of Drinking Water Sources ................................................................................... 101

3.2.3

Internal and Cross-Border Migration .................................................................................................... 102

3.2.4

Access to Educational Institutions and Facilities .................................................................................. 102

3.2.5

Access to Health Institutions and Facilities and Personal Health Issues .............................................. 103

3.2.6

Public Road Safety along R3A/NSEC .................................................................................................. 103

3.2.7

Communicable and Preventable Diseases ........................................................................................... 104

3.2.8

Entertainment, Gambling and Prostitution ............................................................................................ 104

3.2.9

Stakeholder Analysis and Stakeholder Coordination............................................................................ 104

3.2.9.1

Roles, responsibilities and involvement of EC stakeholders in Lao PDR .................................... 105

3.2.9.2

Coordination and Coordination Problems among Related Stakeholders to Formulate and

Implement EC Initiatives ............................................................................................................................... 110 3.3

Chapter Conclusions ................................................................................................................................ 110

CHAPTER 4: CONCLUSIONS, RECOMMENDATIONS AND STEPS FORWARD ................................................... 115 4.1

Conclusions .............................................................................................................................................. 115

4.2

Policy Recommendations on Development of Economic Corridors for Positive Impact on Rural

Development, Poverty Reduction and Rural Livelihoods ....................................................................................... 118 4.2.1

Initiating Inter-Provincial and Inter-Departmental Dialogue and Cooperation Mechanism.................... 119

4.2.2

Improvement or Establishment of Feeder Roads Connecting NSEC to Interior Rural Communities .... 119

4.2.3

Using Agro-Ecosystem Analytical Framework for Economic Corridor Development ............................ 119

4.2.4

Capacity Building for Local Economic Development (LED), Public Sector Reform (PSR) and Project

Management ..................................................................................................................................................... 120 4.2.5

Development of Special Economic Zones (SEZ) along Economic Corridors ....................................... 120

4.2.6

Micro-finance System Development ..................................................................................................... 121

4.2.7

Comprehensive and Integrated Land Management Policy and Initiatives for Sustainable Development 121

4.2.8

Mapping Lao PDR Labour Market Requirements and Technical and Vocational Education and Training

(TVET) Skills Development ............................................................................................................................... 122 4.2.9

Cross-Border Trade Agreements (CBTAs) Implementation ................................................................. 122

4.2.10

Developing and Sustaining Laos National GMS Project Monitoring System .................................... 123

4.2.11

Strengthening Good Agricultural and Collection Practices (GACP) and Post-Harvest (PH) for

Improving Value Chain Management and Implementation of the Practice of Certificate of Origin (CO/COO) ... 123 4.2.12

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Tapping Solar Power for Clean Energy and & Household Income Saving Alternative ..................... 123

Mekong Institute

GIZ Research: Assessment of Impact on Rural Economic Development and Rural Livelihoods of Economic Corridor Development in GMS 4.3

Policy Recommendations on Development of Economic Corridors that Have Negative Impact on Rural

Development, Poverty Reduction and Rural Livelihoods ....................................................................................... 124 4.3.1

Sustainable Preservation of the Sources of Water and Water Bodies.................................................. 124

4.3.2

Biodiversity Conservation to Secure Multiple Sources of Food Security at Community and Household

Level

125 GIZ During & Post AEC 2015: Policy Recommendations and Steps Forward – Possible roles facilitating

4.4

economic corridor development aimed to serve land management, rural development, poverty reduction and rural livelihood ................................................................................................................................................................ 125 4.5

Policy Recommendations & Intersecting GIZ Key Areas .......................................................................... 131

ANNEXES .................................................................................................................................................................. 132 ANNEX 1: RESEARCH APPROACH ......................................................................................................................... 132 1.1

Background of the Study .......................................................................................................................... 132

1.2

Purpose of the Analytical Report .............................................................................................................. 133