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Cablegate: If We Build It Will They Come? Northern Thailand and The

VZCZCXRO5501
PP RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC
DE RUEHCHI #0170/01 3160312
ZNR UUUUU ZZH
P R 120312Z NOV 09
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 1202
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHOO/CHINA POSTS COLLECTIVE
RUEHCHI/AMCONSUL CHIANG MAI 1293

UNCLAS SECTION 01 OF 03 CHIANG MAI 000170

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD SENV EINV PREL BTIO CH LA TH
SUBJECT: IF WE BUILD IT WILL THEY COME? NORTHERN THAILAND AND THE
GMS'S KUNMING-BANGKOK CORRIDOR

REF: A. 07 CHIANG MAI 166 (GATEWAY OR SPEED-BUMP? NORTHERN THAILAND AND THE KUNMING-BANGKOK CORRIDOR)
B. 08 CHIANG MAI 169 (CROSS-BORDER MOVEMENT EXPANDS WITH R3A HIGHWAY)
C. CHIANG MAI 57 (GMS: ROADBLOCKS ON NORTH-SOUTH CORRIDOR)
D. D. CHIANG MAI 67 (GMS: SOUTHEAST ASIA'S BACKDOORS TO TRADE WITH CHINA)

CHIANG MAI 00000170 001.2 OF 003


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Summary and Comment

-------------------

1. (SBU) Projects in northern Thailand's Chiang Rai province
to improve the Greater Mekong Subregion's (GMS) north/south
economic trade corridor between southern China and central
Thailand continue to move forward. A new bridge over the Mekong
River at Chiang Khong, the last link for the Kunming-Bangkok R3A
highway corridor, is scheduled to be completed in the next two
years. Further upriver, the construction of a new Mekong River
port in Chiang Saen and the opening of a new customs house in
Mai Sai, both of which have considerable excess capacity,
indicate what may be an overly optimistic hope for the growth in
trade between southern China and Thailand. Residents on
Thailand's side of the Mekong continue to voice concerns about
the possible environmental and social impacts from unchecked
growth and construction, mostly falling on deaf ears.
Meanwhile, northern Thai business leaders are of two minds:
hopeful about the increased opportunities in trading with China,
but concerned that it will all be in one direction, north to
south.

2. (SBU) Comment: Northern Thailand pins high hopes on
realizing economic growth from development of trade routes
within the Greater Mekong Subregion (GMS). In pursuit of this,
the development of trade infrastructure along the northern Thai
border with Laos and Burma -- such as river ports, customs
houses, and bridges -- is the most visible step toward
increasing Thai-Chinese overland and riverine trade through the
North. Thailand has already seen increased bilateral trade with
China in recent years, mostly in agricultural goods, though the
balance of trade favors China. If northern Thailand's
entrepreneurs can find a way to break into the vast market of
southern China, the rewards could be immense. End Summary and
Comment

----------------------------

Visit to the "Golden Gateway"

----------------------------

3. (SBU) Econoff and EconLES traveled to Chiang Rai
province's border cities of Chiang Khong, Chiang Saen, and Mai
Sai October 29-30. The province, which lies at the heart of the
Greater Mekong Subregion's (GMS) north/south corridor linking
southern China to Bangkok, aspires to be Thailand's "golden
gateway" for trade with inner China (Ref A). The Thai and
Chinese governments have spent, and continue to spend,
significantly on new and existing roads, bridges, and land and
river ports in hopes of increasing the volume of trade between
southern China and central Thailand. We spoke with
businesspeople, government officials, and residents to track the
progress of these projects and to understand their hopes and
concerns.

--------------------------------------------- ---------

New Bridge at Chiang Khong Will Complete R3A Corridor

--------------------------------------------- ---------

4. (SBU) Chiang Khong -- on Thailand's Mekong River border
with Laos -- has two ports. The first port is located in town.
It is primarily used for ferrying passengers and cars back and
forth across the Mekong between Thailand and Laos. The second
port, located a few kilometers from town, is used primarily for
loading and off- loading goods borne by river from China and,
since there is no bridge across the Mekong in Chiang Khong, for
ferrying trucks across the Mekong. The second port, however, is
unable to operate during the dry season when the Mekong River is

CHIANG MAI 00000170 002.2 OF 003


at its lowest level. This forces all goods to be routed through
the passenger port in town, requiring freight trucks to navigate
narrow and crowded streets. This in turn limits the capacity of
the Chiang Khong port district during the dry season
(January-April), and increases the time required to move goods
along the GMS's R3A highway corridor linking Kunming and
Bangkok. (Note: see Refs B-D for more reporting on movement of
goods and people along the GMS north/south corridors).

5. (SBU) The problem of ferrying trucks across the Mekong
River at Chiang Khong will be alleviated with the construction
of a new bridge that will complete the R3A land link in its
entirety. China and Thailand will split the cost of the bridge
(funding has already been allocated), and contractors from both
countries will be involved in the work. Bridge construction is
scheduled to begin early in 2010 and be completed within 18
months. Thailand also plans to build a new customs house at the
site, but funding has not yet been allocated.

---------------------------------------------

Local Environmentalists Voice Their Concerns

---------------------------------------------

6. (SBU) 25 years ago, Chiang Khong residents recognized the
environmental impact increased trade and tourism could bring to
their region. They formed the Rak Chiang Khong Council to
monitor these impacts and voice the community's concerns. In
1995 the Council designated its first "Community Forest" to
protect it from the impact of increased tourism. The Council
has gone on to form the Mekong Lanna Natural Resources and
Conservation Network (MLNCCN). This network, which includes
five local districts with a combined population of about 40,000
people, has been a strong voice for protecting the rights and
land of the residents.

7. (SBU) The group's most recent action was to mount
opposition to the Chinese government's plan to clear the Mekong
River of rock formations in 21 different locations from southern
China to Chiang Khong. These rock formations slow navigation
and prevent larger transport vessels from using the river. The
MLNCCN voiced its concerns about the possible ill effects this
would have on local fishermen. However, the protests fell on
deaf ears in both the Thai and Chinese governments, and removal
of the rock formations was carried out. The project was finally
stopped at the 21st and final location in Chiang Khong -- not
because of any actions by the MLNCCN, but due to a border
demarcation issue. The Thai and Lao governments were concerned
that exploding the final rock formation could change the border
designation between their countries. Removal of the final rock
formation has been put on hold indefinitely until this issue can
be resolved.

8. (SBU) Chiang Khong civic activists have also raised
concerns about several dams China has been building upriver in
southern China. They fear the dams will give the Chinese
government control over the Mekong's water level, leaving them
without a voice on potential ill effects downstream on local
fishermen's livelihoods and flooding levels.

--------------------------------------------- -------------------

Welcome to Our New 100-Year Port. Do You Think We Overbuilt It?

--------------------------------------------- -------------------

9. (SBU) Upriver in Chiang Saen, the Thai's have begun
construction on a new state-of-the-art river port. The facility
is to be completed in 2011. This has triggered construction to
expand existing roads connecting this new port to the R3A
highway leading to seaports outside Bangkok. The new port lies
outside of town and will take traffic from the existing river
port in the city, which will then be used primarily for
passenger service. The new facility is expected to employ 1000
workers once in service. Some locals question the need for the

CHIANG MAI 00000170 003.2 OF 003


new port at all, considering that Chiang Saen's existing port is
more than capable of handling current cargo volumes. In private
conversations, port authority officials have referred to the new
port as the "100-years port," insinuating that it will be 100
years before trade in the region will increase enough to use the
new port to its full capacity.

--------------------------------------------- -------------------

New Mai Sai Customs House Open for Business. Is There Anyone Out
There?

--------------------------------------------- -------------------

10. (SBU) Mae Sai sits on Thailand's border with Burma, astride
the second major GMS north/south corridor, the R3B highway. The
new Mai Sai Customs House facility is quite large, covering
several dozen acres, and has several large administrative
buildings, including staff housing. The facility has seven
truck lanes and the latest equipment, including a portable X-Ray
truck scanner. However, the 345 million baht (USD 10.35
million) facility currently uses only one of the seven
inspection lanes, handling approximately 40 trucks per day. The
average wait to complete the entire customs process is five
minutes.

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Chiang Rai, Sitting at the Dragon's Gate

----------------------------------------

11. (SBU) Chiang Rai Chamber of Commerce leaders expressed
concern to us over the amount of new investment China is making
in Laos. They feel Lao is becoming a "puppet" of China in its
desire to attract investment from the regional economic super
power, and believe China is planning to use Laos as a launching
point for trade from southern China to the other ASEAN
countries.

12. (SBU) The Chamber also expressed concern that increased
trade with China will all be in one direction, north to south,
with little benefit to local Thai businesses. The Thai must
find effective ways to protect their interests, they said, or
risk being passed over by the Chinese.
MORROW

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