Review of Cross-Border Infrastructure Projects

The review in this section draws on available documents from inside and outside ADB and interviews with ADB officers. The framework and criteria suggested in the previous section are applied in the review to the extent possible.

ADB's lending to explicitly “subregional” projects came on full stream only after the late 1990s beginning with the Greater Mekong Subregion (GMS) Program, followed by other regional cooperation initiatives such as Central Asian Regional Cooperation (CAREC) and South Asia Subregional Economic Cooperation (SASEC). As a result, a limited number of cross-border infrastructure projects have been completed and can be evaluated ex post. Therefore, our review covers both completed and ongoing projects.

The list of the 26 projects we reviewed is provided in Appendix 3. They were selected from the projects either completed or ongoing in the transport, energy, and information and communications technology (ICT) sectors that are at least partially financed by ADB. Of the projects, 10 have been completed and the other 16 are ongoing. We summarize findings from our review of these projects along several key aspects below. (The numbers in parentheses indicate serial numbers used in Appendix 3 [ PDF 24.2KB | 1 page ].)

3.1 Quality at Entry

3.1.1 Inadequate Presentation of Rationale as a Cross-Border Project

With a few exceptions (e.g., Establishment of Pacific Aviation Safety Office, Number 26), project appraisal documents generally fall short of articulating cross-border externalities and rationale for collective action in a multi-country perspective. While the rationale from the viewpoint of individual countries is relatively well established, presentation on the rationale for regional cooperation and coordination is often weak. Positive cross-border effects to neighboring countries seem to be given secondary importance. This would be unfortunate for projects where financing requirements are large and an explicitly regional perspective could help in mobilizing funds from a wider circle of donors, particularly for transport projects for which private sector funds are hard to mobilize. For example, (i) the Lao People's Democratic Republic (Lao PDR) section of the North–South Economic Corridor in GMS seems to be the “weakest link” as categorized by the supply characteristics of regional public goods (see Appendix 1 [ PDF 23.3KB | 2 pages ]) and could have been articulated in the project document (Number 5); (ii) the Cambodian section of the Southern Economic Corridor in GMS seems to be the “weaker link” (Number 6) (also see Appendix 1); (iii) the Cambodian section of the Singapore–Kunming railway link seems to be the “weakest link” (Number 7); and (iv) the Viet Nam section of the Kunming–Haiphong railway link seems to be the “weaker link” (Number 8).

For power projects that are designed to sell electricity from one country to another, the bulk of the benefits accruing to both countries can be considered cross-border benefits because they would not arise if the power generated could not cross the border and exploit economies of scale in a regional perspective. For a selling country, cross-border benefits derive from additional sales revenue for the operating entity and additional tax revenues for the government. For a purchasing country, cross-border benefits derive from additional consumer surplus by receiving lower-cost power compared with alternative energy sources. Their cross-border “net” benefits are obtained by subtracting the construction and maintenance costs incurred by each country.

3.1.2 National Orientation Taking Focus Away from Benefits Distribution

Out of the 26 projects reviewed, 13 included some form of distribution analysis across countries and identification of cross-border benefits separate from national benefits while the others did not include distribution analysis nor separate cross-border benefits in their economic analysis at the project preparation stage (see Box 3 [ PDF 20.1KB | 1 page ]). Of the former group, 8 projects are loans provided to multiple countries while 12 projects in the latter group are loans provided to a single borrower country. While the lack of distribution analysis may be partly due to data and resource constraints, it may also be due to political or strategic considerations within multilateral donor agencies like ADB in dealing with borrower governments. An incentive to carry out distribution analysis might be weak when an assistance loan is extended to a single country. However, such a tendency would be unfortunate because showing additional cross-border benefits accruing to neighbor countries would enhance further cooperation and promote better alignment of national and regional development goals. Assessment of whether there are benefits for all participating countries is very important for the successful preparation of cross-border projects.

3.1.3 Additional Funding Specific to Cross-Border Nature

Most project documents do not explain adequately about additional funding of a concessional nature that may have been provided specifically due to the cross-border nature of the project in question.⁶ Some donors may have strategic as well as commercial interest in supporting certain projects (e.g., Malaysia's support to the railway project in Cambodia) and others including bilateral donors may prefer to allocate a certain portion of their funds to cross-border projects. As these funds are considered to be net benefits flowing into the participating countries as a whole in the form of net resource transfer, a clearer articulation of this aspect is warranted (see Box 4 [ PDF 19.9KB | 1 page ]).

3.2 Monitoring and Evaluation of Project Implementation

3.2.1 Inadequate Compensation for Displaced and Resettled People

Although the issue of displacement and resettlement is a concern not only for cross-border projects but also for national projects, it has a potential of being on a larger scale in the case of the former. Some external studies have reported cases in which adequate compensation was not being made. For example, a nongovernmental organization in Cambodia reported that during the implementation of the Phnom Penh–Ho Chi Minh City (HCMC) Highway Project, there was no compensation on land or inadequate compensation was given to affected families along the project road in Prey Veng Province (Thi 2008). The improvement of National Roads 5 and 6, part of which was under the Cambodia Road Improvement Project, involved relocation of around 2,100 households with more than 3,400 people. Household interviews and focus group discussions in Banteay Meanchey and Siem Reap provinces revealed that most of the affected people owned some form of cottage stores along the roads and felt that the monetary compensation provided was not adequate to reopen their businesses in new sites. Also, they had not been informed about the compensation rate (Ritty 2008).

3.2.2 Incomplete Connectivity Penalizing Outcome

When road construction along an expected transport corridor is left incomplete, the outcome is penalized to the extent of such incompleteness. For example, although it was observed that since completion of the Champasak Road Improvement Project, the number of trucks going from southern Lao PDR toward the Cambodian border increased sixfold, very few trucks actually cross the border due to the absence of the final 6.9-kilometer link road. Therefore, trading of goods by river from the border jetty is more common for now. This happened because there was a conflict between Lao PDR and Cambodia as to the location of the border demarcation. This is a case in which an incomplete border link prevents full realization of expected cross-border benefits. The PRC government has expressed its support to complete the missing part of the road.

There is also a case in which a time lag between different donor assistance projects has created a temporary missing link in a transport corridor. For example, the Phnom Penh–HCMC route is currently incomplete with the remaining bottleneck being the upgrading of the Phnom Penh–Neak Leoung section (61 kilometers) and construction of the bridge over the Mekong River (under construction with Japanese aid and expected to be completed by 2010). There is heavy traffic from HCMC westward toward the Cambodian border and many industrial estates along the road are developing outward from HCMC. However, noticeable cross-border industrial linkages do not appear to have developed between the Phnom Penh and HCMC economies. Obvious economic integration so far seems concentrated at the Moc Bai–Bavet border areas (Fujimura 2008).

3.3 Impact Monitoring During Operation

Capacity and resource constraints tend to be a persistent issue in impact monitoring starting with the baseline survey and benchmarking. The area of environmental impact tends to be most affected by these constraints. For example, during the implementation of the Theun-Hinboun Hydropower Project, the Theun-Hinboun Power Company (THPC) established the Environmental Management Committee Office comprising local staff to manage mitigation and compensation issues. However, its staff capacity was low and received inadequate supervision from the international specialists. As a result, THPC had to deal with impacts as they occurred, rather than in a strategically planned manner. This became a serious issue from the start of project operation.

3.4 Analytical Rigor in Project Evaluation

The quality of project evaluation in different stages of the project cycle depends critically on the initial analytical rigor in project preparation. In the case of cross-border projects, a crucial part of the analysis is the identification and quantification of cross-border benefits. Most of the project documents reviewed in the transport sector did not adequately analyze cross-border benefits beyond national benefits, although good attempts were made in some projects. Table 2 [ PDF 24.2KB | 2 pages ] summarizes the review on this aspect.

It should be noted, however, that some road projects do not have adequate clues with which to benchmark cross-border traffic. For example, in the case of the Northern Economic Corridor Project, the project road was impassable for several months of a year and traffic projection had to be based on the traffic in the areas where the existing traffic was considered proximate to how the traffic might be generated after project completion. Similarly, in the case of the GMS Southern Coastal Corridor Project, the Viet Nam–Cambodia border was closed to international traffic prior to the project, making quantitative benchmarking for cross-border traffic impossible. Practitioners face a practical problem of weighing the accounting of benefits to demonstrate economic viability, e.g., beyond certain cutoff criteria of economic rate of return, against the corresponding cost of collecting additional data and information. As a result, benefit quantification tends toward conservative estimates.

3.5 Patterns of Emerging Outcomes and Impacts: Macro- and Micro-Level Evidence

Mindful of the numerous pitfalls and subtleties listed above, many studies, albeit less than the ideal of randomized evaluation, have produced interesting results indicating emerging outcomes and impacts of cross-border infrastructure projects implemented in Asia. At the macro level, cross-border infrastructure reduces trade costs, leading to more trade and investment, and then to growth. At the micro level, cross-border infrastructure can benefit the poor by improving their income opportunities and access to labor markets and social services. Here, we summarize notable findings based on the review of available project documents and studies undertaken by ADB and others. They are mainly related to cross-border infrastructure projects in the transport sector.

3.5.1 Macro-Level Evidence

Two types of approaches have been used in analyzing the macro impact of regional infrastructure development: econometric analysis using panel data and simulation analysis using CGE models. While these studies have limitations in isolating the impacts of individual projects, they offer insights on the aggregate-level impact of infrastructure development. For example, Edmonds and Fujimura (2008) used a gravity model using panel data from GMS countries to analyze the determinants of regional trade and foreign direct investment (FDI) flows. The study found that cross-border road development (expressed in road density) has had a distinctively positive impact on regional trade flow, controlling for other factors. Menon and Warr (2008) constructed a multi-sector, multi-household general equilibrium model to quantify the effect of rural road improvement on poverty incidence in the Lao PDR. They found different impacts depending on the type of road improvement. For example, upgrading of no-access roads to dry-season-access roads has a far larger impact on household poverty compared with upgrading dry-season-only roads to all-weather roads. This implies that given the Lao PDR's landlocked location, improving rural road networks, which would practically connect to either one of its neighbor countries (e.g., Champasak Road Improvement Project), can significantly enhance the welfare of poor households.

In a forward-looking study of the CAREC region, ADB (2006c) used a multi-sector CGE model to simulate the economic impact of regional cooperation in transport, transit, and trade policy, focusing on the Kyrgyz Republic. Its results indicate that the cumulative increase in the country's real gross domestic product in 2006–2015 would be far higher than the baseline scenario without regional cooperation and that the average cumulative increase in the incomes of poor households could be almost doubled over the same period.

3.5.2 Micro-Level Evidence

Micro-level studies use primary and secondary data collected from qualitative and quantitative surveys (e.g., baseline and post-implementation surveys) and related methodologies such as rapid pilot assessments, case studies, and participatory assessments. Findings from these studies are summarized here in the order of short- to medium- and long-run impacts, and from positive to negative impacts, that are observed at the micro level.

Reduced Travel Time and Transport Cost

An immediate outcome of building cross-border transport infrastructure is reduction in travel time and transport cost. In the case of the Champasak Road Improvement Project, travel time from the Thai–Lao PDR border at Vung Tau to the Lao PDR–Cambodia border of Veun Kham via Pakse was reduced by more than half, and travel costs fell for those using private transport. Also, the cost of public transport decreased by more than 20% in real terms (ADB 2008). In the case of the Phnom Penh–HCMC Highway Project, the average time required to reach local health care services has fallen by about 30%, while travel times to schools and markets are down by about 40% (Phyrum, Sothy, and Horn 2007). In the case of the East–West Corridor Project, travel time from the Lao PDR–Viet Nam border of Dansavanh to Khanthabouly on Road 9 was reduced from about 12 hours in 2001 to 2.5–3.0 hours (Rattanatay 2007). In the case of the North–South Economic Corridor via the Lao PDR, after the completion of the Lao PDR road section, travel time from Bangkok to Kunming was reduced from 78 hours in 2000 to 51 hours in 2006, and is projected to be further reduced to 30 hours in 2015. Correspondingly, the cost of transporting one ton of rubber products from Bangkok to Kunming was reduced from US$563 in 2000 to US$392 in 2006, and is projected to be further reduced to US$210 in 2015 (Banomyong 2007). In the case of the Almaty–Bishkek Regional Road Rehabilitation Project, travel time was reduced by at least 50% from 5–6 to 2–3 hours (ADB 2008). Transport costs for exporting fruits and vegetables from Bishkek to Novosibirsk decreased from US$3,700–3,900 in 2001 to US$3,500–3,700 in 2004 (Ganiev 2005).

Increased Traffic

Reduced transport costs generate increased traffic. After the completion of the Champasak Road Improvement Project, traffic volume on the project route grew at an average annual rate of 22% against the projected growth rate of 5.0–7.5% (post evaluation in 2005). The number of passenger buses on Road 9 in the Lao PDR along the East–West Economic Corridor increased from about 600 buses in 2000 to around 1,560 buses in 2005, while the number of freight operators also doubled over the same period (Rattanatay 2007). Traffic volume on the route of the Almaty–Bishkek Regional Road Rehabilitation Project grew by 25% after 2007 (ADB 2008).

Expanded Trade

Increased traffic is explained by the expansion of regional trade due to the reduced transport costs, particularly over land in the case of road projects. For example, trade between Cambodia and southern Viet Nam along the Southern Economic Corridor increased by about 40% per year between 2003 and 2006 (ADB 2008). For Savannakhet Province as a whole, which is Lao PDR's transit province along the East–West Economic Corridor, the amount of exports and imports increased by 24 times and 39 times, respectively, in 2001–2005 (Rattanatay 2007). Exports from the Kyrgyz Republic to Kazakhstan increased by 160% between 1998 and 2007, presumably due in part to the completion of the Almaty–Bishkek Regional Road Rehabilitation Project (ADB 2008).

Induced Investments

Improved cross-border transport infrastructure induces investments for new economic activities. In anticipation of a closer economic link between Viet Nam and Cambodia, industrial districts on the Viet Nam side along the Southern Economic Corridor are developing, such as the Trang Bang Industrial Park, which is generating many jobs for the local population (ADB 2008). In a field survey on the corridor, 70% of the respondents showed an interest in owning a small business or expanding their current one in the post-development period, 12% showed an interest in expanding their agricultural activities, and 9% expected to work in a factory job if available (Phyrum et al. 2007). FDI is attracted to places where transport costs are low and resource complementarity is high. The value of FDI and joint ventures in Savannakhet Province increased from only US$96 million in 1995–2000 to US$250 million in 2001–2005. Of these FDI projects, 53% are in agriculture, and villagers in the province have been engaged increasingly in activities sponsored by these projects such as silk and cotton production, weaving, and handicrafts (Rattanatay 2007).

Enhanced Tourism

Part of the increased traffic volume is related to the increased number of visitors and tourists. There was a 128% increase in the number of tourists visiting Champasak Province of the Lao PDR between 1998 and 2004 partly due to the Champasak Road Improvement Project (post evaluation in 2005). The number of visitors including tourists crossing the Cambodia–Viet Nam border at Bavet–Moc Bai, rose at an average annual rate of about 53%, and vehicles crossing the border increased at an average annual rate of 38% between 2003 and 2006 (ADB 2008). In Savannakhet Province, the number of tourist arrivals increased from 90,910 in 1999 to 222,063 in 2006. Following the opening of the Second Mekong International Bridge, the number of tourist arrivals increased by 8% in the first two months of 2007. More than half of such tourism involves regional tours covering Thailand, Lao PDR, and Viet Nam (Rattanatay 2007). Tourists visiting Kyrgyz Republic increased by 50% to about one million between 2005 and 2007, partly due to the Almaty–Bishkek road improvement and its associated border facility improvement, and partly due to the complementary private sector investments in accommodation and services at key tourist destinations in the country. A similar development is likely to happen along the Southern Economic Corridor because the route passes through all of Cambodia's designated tourism zones (Angkor, Phnom Penh, and coastal zones).

Enhanced Movement of People and Income Opportunities

Enhanced movement of people leads not only to increased short-run tourism but also to increased long-run labor mobility. For example, magnitudes of labor movement in GMS have been significant. Even Saravan Province in the Lao PDR, which is off the direct East–West Corridor route, has sent significant numbers of cross-border workers to Cambodia and Thailand—implying a far reaching impact of wage-differential incentives. Enhanced labor mobility improves household income opportunities. Overall, the situation for cross-border workers in GMS seems to have improved over 2001–2005 as their perceived changes were largely for the better in terms of working conditions, ease of crossing the border, and wage level (Singh and Mitra 2006).

Increased Income and Improved Living Standards of Households

Evidence is emerging on increased income and improved living standards of households under the influence of cross-border transport infrastructure projects. About 46% of households in the influence area of the Champasak Road Improvement Project increased their agricultural output for sale at local markets and increased their incomes (post evaluation in 2005). Of the respondents to the survey on the Southern Economic Corridor, 70% claimed their living standards had improved while 23% said there had been no changes and 7% complained of being worse off, amounting to a generally favorable perception of the developmental impact (Phyrum et al. 2007). Between 1994 and 2000, gross domestic product in the six municipalities and counties in the influence area of the Southern Yunnan Road Development Project increased by 1.9 times on average, significantly higher than the national average of 1.4 times. During the same period, US$390 million was paid to the workers as wages. The number of tourists in the project area also rose fivefold, leading to significant spillover effects (ADB 2008). These are considered to be the initial impacts of various investments along the North–South Economic Corridor on the Yunnan side. The majority of people living in districts along the East–West Economic Corridor, who previously depended on subsistence farming and shifting cultivation, are now engaged in commercialized agricultural production of such products as livestock, poultry, sugarcane, cassava, bananas, watermelon, and tree plantations for domestic and international markets. As the East–West Corridor Project included rural access road components, its benefits also reached households located far off Road 9, contributing to wider poverty reduction (Rattanatay 2007).

Growth in Border Cities and Towns: Agglomeration Effects

As movement of goods and people across borders becomes easier, the diversity of resource endowments among neighboring countries tends to magnify agglomeration effects in which entrepreneurs exploit new arbitrage opportunities and combine resources with varying competitive advantage across borders. While it is still too early to detect the extent of agglomeration effects attributable to specific projects, one can safely associate noticeable developments at border areas at least partly with the progress in cross-border infrastructure, in terms of both physical infrastructure and accompanying institutions and regulatory arrangements. For example, the garment industry at Poipet border areas is likely to further flourish due to easier movement of goods and people: “In its most basic form, the process begins with Thai wholesalers selling Thai fabric to traders in the large Rong Kleung market. These traders then subcontract or outsource the production to Cambodian manufacturers living in the Poipet area, these manufacturers or subcontractors are usually households with tailoring equipment and employing 10–40 garment workers…” (Singh and Mitra 2006: 95). A similar development has been observed at the Thailand–Myanmar border at the western end of the East–West Corridor. Labor-intensive industries are becoming concentrated in Mae Sot District of Tak Province, where Thai garment firms employ labor from Myanmar on a large scale (Kudo 2007). Also in other border areas in the GMS such as Bavet (Cambodia)–Moc Bai (Viet Nam) and Mae Sai (Thailand)–Tachilek (Myanmar), initial agglomeration effects are observable.

Dispersion along Economic Corridors to Some Extent

In some economic corridors, dispersion of economic activities from existing nodes seems to be emerging. For example, district towns along Road 9 in the Lao PDR are growing fast where new concrete houses, markets, guesthouses and restaurants, trade and service activities such as petrol stations, automobile repair shops, and other micro enterprises never observed before in these remote areas have been mushrooming (Rattanatay 2007). The East–West Economic Corridor is starting to see some dispersion effects along Road 9 after the initial agglomeration effects at the border nodes such as the Mukdahan (Thailand)–Savannakhet (Lao PDR) and Dansavanh (Lao PDR)–Lao Bao (Viet Nam) borders. When complementary institutions and regulatory aspects of cross-border goods movement improve, the dispersion of cross-border benefits will accelerate. (See Appendix 2 [ PDF 22.9KB | 2 pages ] on the dynamics of agglomeration and dispersion.)

Dispersion Effects Depend on Complementary Investments

While cross-border benefits are expected to spread over time, the speed of such diffusion and its perception by households depends on complementary investments off the trunk routes of transport corridors. For example, 45% of the survey respondents from the Southern Economic Corridor believed that in addition to developing the main corridor, rural infrastructure as well as basic education and health care should be addressed in order to improve rural livelihoods. Responses included rural roads and electricity (88%), factories (74%), irrigation (45%), and health and education infrastructure (37%) (Phyrum et al. 2007).

Road Accidents

One initially observable negative outcome of cross-border transport infrastructure is an increase in accidents. Increased speed and easier border crossing can cause more frequent and more severe accidents. Along Road 8 in the Lao PDR, there were around 5,000 accidents with more than 7,300 injuries and around 500 deaths in 2005. Along Road 9 in Savannakhet Province, there were around 1,000 accidents and 2,000 injured with almost 100 deaths in the same year (Rattanatay 2007).

Casino Prevalence

Initial agglomeration effects at border areas, ironically, often begin with quick-cash businesses such as casinos, which typically locate at the side of the border where law enforcement is weaker, e.g., the Mong Cai (Viet Nam) side of the Viet Nam–Guangxi border; the Poipet (Cambodia) side of the Thailand–Cambodia border; the Bavet (Cambodia) side of the Viet Nam–Cambodia border; the Tachilek (Myanmar) side of the Thai–Myanmar border; the Maila (Myanmar) side of the Yunnan–Myanmar border; and the Boten (Lao PDR) side of the Lao PDR–Yunnan border. At Mong Cai, an investor based in Hong Kong, China opened a casino hotel in 2002 to serve tourists from the PRC. At Poipet, nine casino hotels were operating by 2006 to serve Thai tourists. At Bavet, five or six casino hotels opened by 2006 to serve Vietnamese tourists. At Boten, a PRC company has recently been given a 30-year right to build and operate the Boten Economic Development Zone in which reportedly the main draw so far is a casino, which is to serve tourists from the PRC and is off limits to Laotians.

While these casino businesses in border areas have some positive effects in terms of cash revenue to the host partners (private and public sector) and employment creation effects for local residents (in unskilled jobs presumably), unfavorable social spillover effects including those described below can be expected not only for the host country but also for the tourist-sending country. In fact, at Maila (Myanmar), where the Shan State allowed PRC investors to establish casino hotels in the 1990s, crowds of tourists from the PRC flowed into the previously quiet town and concern raised by the PRC authorities over the reckless behavior of the PRC visitors and their increasing debt led to the closure of the casino hotels by 2005 (Kudo 2007).

Smuggling

Poor people are often used as intermediary porters in smuggling networks. In just two examples, poor border villagers are paid to drive smuggled motor bikes and cars across rice fields and forest trails along the Cambodia–Thai border; and poor Cambodian women and children living in border areas are paid to wear as many Thai clothes as possible and walk across the border along informal gates. They are exposed to a considerable risk (especially so for women) because, if caught, they are often abused verbally and sometimes physically. In the case of drug smuggling, the carriers tend to be poor and vulnerable groups living in the corridor provinces, such as street children in Poipet. They take the highest risk in becoming porters and peddlers in drug smuggling for small sums of money. Young migrant workers are vulnerable to drug abuse because often their employers force them to take amphetamines for “strength” so that they can work longer hours (Singh and Mitra 2006). In the CAREC region, drug smuggling is a serious issue, especially along the road corridors involving Afghanistan.

HIV/AIDS

Among the most serious forms of negative cross-border externalities is the spread of communicable diseases, especially HIV/AIDS. The number of HIV carriers in Tay Ninh Province in Viet Nam reached 1,316 by October 2005 with a marked increase during recent years. Among Vietnamese commercial sex workers in Svay Rieng, as many as 40% are considered HIV carriers. Out of 1,400 HIV-infected people in Lao PDR in 2001, 872 were found in Savannakhet and Saravan provinces alone. Most of these cases are found along the Thai border and along Road 9 (Singh and Mitra 2006). Most of outbreaks of HIV/AIDS and sexually transmitted diseases are found in the integrated areas along the Thai–Lao PDR border, such as Roads 9 and 13 (Thi 2008).

Human Trafficking

Human and drug trafficking was the most-cited concern among the survey respondents from the Southern Economic Corridor (68% response rate) (Phyrum et al. 2007). There are three broad degrees of trafficking: (i) cheating cross-border workers into low standard jobs; (ii) cheating children and vulnerable groups into doing risky and demanding tasks such as smuggling, begging, and drug peddling; and (iii) trafficking for prostitution or sex work. All three forms of trafficking are commonplace along the GMS corridor provinces and are more concentrated in areas near the border as there is more labor migration from there. Even when authorities know who traffickers are in their jurisdiction, they lack the evidence to bring them to court. Witnesses are difficult to find and victims are afraid of coming forward for fear of being looked down on by their fellow villagers (Singh and Mitra 2006).

Illegal Logging and Deforestation

Opening of regional transport corridors can lead to more illegal logging and deforestation. Migration from outlying villages to areas adjacent to the project road in the Champasak Road Improvement Project is resulting in clearing of forest buffer zones using slash-and-burn techniques. Migrants tend to clear the forest area to build their houses and to create paddy fields. This forest encroachment issue needs to be better understood before a comprehensive solution can be found (post evaluation in 2005). Given that the bulk of wood processing industries in the Lao PDR are concentrated in the central region and particularly in the provinces along the East–West Economic Corridor, it is likely that the easier transport stimulates more illegal logging (Singh and Mitra 2006). It was reported that landslides and deforestation increased in Xishuangbanna in Yunnan Province along National Road 3 of the North–South Economic Corridor. Forest cover decreased in the buffer zones of the road while rubber plantations increased dramatically along the road, causing concerns about environmental degradation. Similar development has been observed on the Lao PDR side of the North–South Economic Corridor: cutting of forest trees on both sides of the road to be replaced by monoculture crop production such as rubber and coconut plantations (Thi 2008).

However, it can be argued that the extent of illegal logging depends on the initial quality of the road and the change in the quality due to the project. For example, if a project is upgrading from gravel to sealed road, it would not make a difference in the extent of logging or smuggling. If the existing quality of the road already enables the transport of illegal logs, further improved road quality would not have an incremental negative impact.

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