Potential and Opportunities
NSEC has vast potential for development since it is endowed with abundant
natural resources, is economically diversified along its north–south axis, and
has close historical and cultural ties among its national components. The
corridor covers some of the least developed and most ecologically sensitive areas
in the GMS, and the realization of this development potential through subregional
cooperation can substantially help reduce poverty and achieve more balanced and
sustainable development, not only within the NSEC national components, but also
in the subregion as a whole. NSEC areas stand to benefit from the increasing flow
of goods and people, as well as expanding commercial and investment activities
along the corridor and adjoining localities. Annex A presents a profile of NSEC and
its components to provide the human, physical, social, and economic context for
NSEC’s development.
NSEC is a “natural economic corridor” in the GMS, because the multimodal
transport and infrastructure network in the subregion has a generally north–
south orientation. It is strategically located, linking the more developed and
industrialized economies of the PRC and Thailand. NSEC serves as the main land
route for trade between the PRC’s Yunnan Province and Thailand, and provides
an important land link opening up sea access to landlocked Yunnan Province. It is
also a direct trade conduit between southern PRC and northern Viet Nam. Having
the PRC’s only two borders with the countries of the Association of Southeast
Asian Nations (ASEAN), NSEC is well positioned to serve as a gateway for ASEAN–
PRC trade, which is expected to expand rapidly with the implementation of the
free trade agreement (FTA) between the PRC and ASEAN. NSEC’s links extend
northward—beyond Yunnan Province and Guangxi—to the rest of the PRC and
southward—beyond Thailand—to Malaysia, Singapore, and the rest of ASEAN.
NSEC intersects the GMS East–West Economic Corridor (EWEC) in Thailand’s Tak
and Phitsanulok provinces, thus providing access to the Andaman Sea and South
China Sea and generating mutually reinforcing momentum for the development
of the corridors.
The underlying impetus for NSEC development emanates from the complementarities
among the GMS countries. However, there is a wide diversity in topography, natural
resources, structure of production, levels of income, and other factors along the
corridor, which enables optimization of comparative advantages within NSEC. The
northern part of the corridor is composed mostly of mountainous and rolling terrain,
interspersed by valleys and plains with scenic landscapes. They have abundant
natural resources, especially minerals and forests, as well as high biodiversity. They
8 Strategy and Action Plan for the Greater Mekong Subregion North–South Economic Corridor
are generally sparsely populated and serve as home to many ethnic communities.2
Incomes in these areas tend to be lower and poverty incidence tends to be higher than
the respective national averages, although there are variations across the national
components. Except for Yunnan Province and Guangxi, agriculture contributes a
larger proportion of annual production than industry in the northern subregions
of NSEC. Moving south along the corridor to lower elevations, population density
increases, and the areas progressively become more industrialized, commercialized,
and urbanized, with income levels rising commensurately.
There are differences among the national components of NSEC in access to capital
and technology, land availability, and supply of trained workers and management
skills, which could be used to help expand economic links among NSEC areas. The
access of the Lao PDR and Myanmar components of NSEC to capital and technology
is acutely limited, partly due to their relative isolation and underdevelopment.
Although not as severe, the same is true in the northernmost provinces of Viet Nam.
For instance, the food and agricultural processing industry in Viet Nam’s Lao Cai
Province has been constrained by the use of outdated technology. Thailand, Yunnan
Province, and Guangxi can help in improving the access of less developed areas in
NSEC to private capital, to agricultural and industrial technology, and to managerial
and entrepreneurial skills.
Rubber cultivation in Louang Namtha Province in the northern Lao PDR under contract
with PRC entrepreneurs is a good example of cross-border complementation. This
arrangement takes advantage of lower labor costs and land availability on one side
of the border, and more advanced entrepreneurship and technology, and greater
availability of capital and management skills, on the other. In this case, PRC agricultural
scientists have been able to develop a special variety of rubber tree suited to
conditions in the northern Lao PDR. There are similar arrangements between Guangxi
and northern Viet Nam involving cassava and sugar plantations, and between NSEC
areas of Lao PDR and Thailand involving sugarcane and fruits. Although agriculture
is prominent in all the northern provinces of NSEC, there are complementarities that
could be pursued due to differences in climatic and soil conditions, land availability,
and application of technology.
The increase in intra-GMS trade in general and in cross-border trade in particular
is expected to lead to greater cross-border investment, complementing trading
activities and involving cross-border production, processing, and marketing tieups
that relieve raw material supply constraints, upgrade technology, and improve
capacity utilization. The expansion in extra-GMS trade (GMS trade with the rest of
Asia and the world) can also enable enterprises in major NSEC components to link up
with regional production networks and supply chains.