Mitigating Factors and Conclusions

The gains from improvements in transport and trade facilitation presented above must be tempered by the potential negative impacts of improved transport networks in the region. These impacts include:

1. Increasing income disparities (international, regional, and ethnic)
2. A deterioration in regional economy in some areas and countries along the border crossing routes
3. Spread of HIV and AIDS,¹⁵ avian flu, and other infectious diseases
4. Human and drug trafficking, a potential spread of terrorism
5. Deterioration of traffic safety.

As transit countries with fewer resources and low economic competitiveness, Lao PDR and Cambodia may suffer from worsening traffic safety and deterioration of the natural environment as a result of growing flows of transit cargo. There is also a concern among the people that only foreign multinational companies will reap the benefits of cross border trade expansion (JICA 2007).

The spread of HIV and AIDS has been known to closely follow the progress of economic integration in the GMS. For instance, it was reported that the number of HIV-positive persons and AIDS patients rose sharply in Savannakhet during and after the construction of the Second Mekong Bridge (Takao 2007).¹⁶

Human trafficking and illegal trade in narcotics are also deeply rooted in the problem of poverty. According to a report on Laotian villages, those who wanted to work outside their own countries were often victimized (ADB 2006). This report stated that a third of those obtaining such outside work were given false information about their earnings or forced to work in a job different from the initial promise (often prostitution in the case of women).

Traffic accidents are a concern across the developing world. Indeed, the World Bank has instituted a road safety program whose purpose is to raise awareness and understanding of road safety problems, including monitoring and evaluation of the effectiveness of road safety activities.¹⁷ A World Bank study (Kopits and Cropper 2003) found that while most other forms of death rates fall with development, traffic accidents is a notable exception. The report found road traffic death per capita increasing across the developing world, including Southeast Asia. If historical trends continue, fatality rates in the region are expected to climb from 10.9 (deaths per 100,000 persons) to 16.8.

An ADB (2005) study provided estimates of annual economic loss from road accidents for GMS countries to be over US$4.7 billion, or over 2% of annual GDP. This value is substantiated by EU estimates which state that road crashes cost approximately 1% to 3% of a country's GDP Ministry of Road Transport and Highways, India, 2008). Lost time, damaged cargo and vehicles, lack of insurance, injuries, and even death all add to the high costs of traffic accidents.

6.1 Conclusions

There are clear gains, albeit with some drawbacks, in the region from improvements in land transport costs and improved trade facilitation. Gains in regional trade reported here are even greater than those found in earlier ADB studies of approximately 40% (ADB 2007a and 2007b). This study takes a more comprehensive view of the GMS CBTA and economic corridor strategies when examining impacts. While there was some trade diversion of exports, overall impacts were still positive. One of the policy implications arising from this study is the impact of focusing on improving the so-called soft aspects of trade facilitation which improve transit times and trade service costs.

The results also provided a glimpse into the potential gains as the region develops. Trade between the GMS countries currently tends to be in favor of importing while exports go outside the region. The results presented here show the gains to intra-regional trade, highlighting the potential markets within the GMS. As the region develops, it is reasonable to assume that the welfare and GDP gains reported here will increase significantly.

Thus, the results presented here must be seen for what they are: a static view of one-off gains from a conservative estimate in a reduction in transport costs and improvements in trade facilitation. They do not adequately capture the synergies developed by businesses starting along the economic corridors, the foreign investment likely to be attracted as facilities improve, or the spillovers from these types of investments throughout the economy. Finally, the degree to which trade flows are understated in the underlying database will impact the size of the results presented here.

What the study does show are the clear gains from improvements in physical land transport and the more substantial gains from improved trade facilitation. The implications of these results are that physical infrastructure must be in place for trade to take place. However, once in place, attention should turn to soft aspects of trade facilitation. Based on the results presented here, once a sufficient physical system is in place, additional benefits are marginal compared with improvements in policy initiatives under the heading of trade facilitation.

While the GMS does not have the level of physical infrastructure that would be considered truly adequate for its desired level of economic activity, the results show that investing in soft aspects now still has substantial payback. In future, as a greater physical base is put in place, the region should enjoy further benefits from expanded markets having a solid trade facilitation system in place.

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