WITHOUT BURMA, EAST-WEST CORRIDOR IS UNDERUSED AND

C O N F I D E N T I A L SECTION 01 OF 03 CHIANG MAI 000174

SIPDIS

E.O. 12958: DECL: 11/14/2018
TAGS: ECON ELTN ECIN EINV ELAB ETRD EWWT PREL BM VM
LA, TH
SUBJECT: WITHOUT BURMA, EAST-WEST CORRIDOR IS UNDERUSED AND
UNDERVALUED

REF: A. A. CHIANG MAI 169: CROSS-BORDER MOVEMENT OF PEOPLE EXPANDS WITH GREATER MEKONG HIGHWAY

B. B. CHIANG MAI 96: AFTER NARGIS, A BORDER TRADE BOOM IN THAILAND'S FAVOR

C. C. 2007 CHIANG MAI 166: GATEWAY OR SPEED-BUMP? NORTHERN THAILAND AND THE KUNMING-BANGKOK

CHIANG MAI 00000174 001.2 OF 003


CLASSIFIED BY: Kevin Rosier, Consular-Political Officer,
Consulate General, Chiang Mai.
REASON: 1.4 (b),(d)



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Summary and Comment
--------------


1. (SBU) Stretching 1,056 miles from Rangoon, Burma to Da Nang,
Vietnam, the R2 highway remains incomplete, underused, and with
little economic value to date. Though the Asian Development
Bank (ADB),the mind behind this highway and the larger Greater
Mekong Subregion infrastructure project, considers the R2
complete, the irregularity of road width and unsettled
border-crossing agreements leaves the highway underused. Most
notably, on the western end, Burma sits as the darkness at the
end of the corridor with the R2 coming to a meaningless end at
the Thai-Burma border. With the ADB unable to operate in Burma,
Thailand has stepped in to fund the remaining western portion of
the highway, highlighting the economic importance of Burma for
Thailand.


2. (C) Comment: The RTG's decision to fund directly
construction of the R2 highway within Burma is not only a sign
of Thai business' eagerness to unleash Burma's trade and
investment opportunities; it is also an indicator of Thailand's
willingness to deal with the Burmese regime. Thai businesses
see completion of the highway as an economic win-win for
themselves and their Burmese neighbors. Economic benefit for
other Asian countries, however, will be minimal unless Burma
fully develops the Moulmein seaport (the R2's western terminus).
End Summary and Comment.

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One Lane, Two Lanes; Four Lanes, Six Lanes
--------------


3. (U) The idea of the R2 highway (aka the East-West Economic
Corridor, or EWEC) was born over a decade ago with a proposal by
a Thai economist to develop a land bridge that would slice
through the lower north of Thailand to connect the Andaman Sea
with the South China Sea. Later, the RTG modified the idea of
the land bridge into a crossroads with the North-South Economic
Corridor, which connects southern China to Bangkok. The roads,
or "corridors," would meet in the northern Thai city of
Phitsanulok, at what is now known as the "Indochina Junction."
Later, the Asian Development Bank (ADB) absorbed the plan into
its Greater Mekong Subregion project, labeling the R2 route "the
East-West Economic Corridor."


4. (U) At present, the EWEC, which stretches 1,056 miles from
Rangoon to Da Nang, is only half complete. About half of the
highway, or 478 miles, already exists in Thailand, but is not
completed to ADB standards. Only 35% of the Thai portion is
considered complete, the Phitsanulok Highway Director told
EconOff and EconLES during a recent trip. The RTG considers a
portion of the highway "complete" only when it has expanded to
at least four lanes. For the 478 miles of the EWEC in Thailand,
the road narrows and widens from two to four to six lanes at
various points, making the traffic flow along the route
inconsistent and inefficient.


5. (SBU) Of the 65% that is not complete, only 90 miles are
currently under construction. The remaining 262 miles are
pending RTG funding, about which the Phitsanulok Highway
Director is not optimistic. He speculates that the entire route
within Thailand will not be upgraded to the four-lane minimum
until 2013. The construction cost for expanding the route
within Thailand is just under $300 million.


6. (SBU) The challenges of EWEC construction and implementation
are not only in Thailand. According to the Phitsanulok Highway
Director, Vietnam has been reluctant to sign an agreement that
would facilitate the movement of vehicles across its border. In
Burma, the challenge is infrastructure, where the current road
from Myawaddy (opposite Thailand's Mae Sot border town) to
Rangoon is mostly an unpaved, single lane allowing one-way
traffic that switches direction between day and night. With all
of these obstacles still left to overcome, the EWEC is far from
reaching its perceived potential.

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The Road to Nowhere (a.k.a. Burma)
--------------


CHIANG MAI 00000174 002.2 OF 003



7. (C) It is far from guaranteed whether Thailand will ever see
and enjoy the EWEC's full potential. Both private and public
sector actors who monitor the EWEC say that Burma is the main
barrier to the highway's completion. The Phitsanulok Chamber of
Commerce said that greater access to the Burma market is a
priority. An advisor to the Chamber said that even with the
existing single-lane, unpaved portion of the highway in Burma,
Thai exports to Burma via Mae Sot average about 10 billion baht
(or $300 million) per year. (Note: This figure is based on
border trade and includes estimates of unofficial Thai exports.)
The Chamber expects this border trade value to increase
significantly once EWEC improvement is completed. "We can't
imagine how much exports will increase once the road is done,"
said the Chamber's President, noting that the more advanced
infrastructure will reduce costs for border trade and
cross-border investments, such as contract farming. He
commented also that while the North-South Economic Corridor
would mostly benefit China, Thailand is the real winner in the
EWEC because it would offer greater access to Burma.


8. (C) Thailand is not the only country keeping its eye on
economic access to Burma. The Phitsanulok Chamber of Commerce
said that a Singaporean company made an agreement with the GOB
to operate the seaport at Moulmein. Currently, the Moulmein
port is undeveloped; and the Singaporean company has plans to
revamp the seaport. When asked why Thailand did not seek
control of this port, the Chamber representative said,
"Singapore got it first." Also, other Asian countries, such as
Taiwan, have been using Thailand as a midpoint to export to the
Burmese market. The Chamber reported, for example, that a
Taiwanese trader put a recent order in to a Phitsanulok-based
auto parts sub-contractor to export the goods to Burma.

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A Costly Thai Solution
--------------


9. (C) With so much economic potential for Thailand, the RTG --
after significant lobbying from the Thai business community --
agreed to finance the construction of the EWEC road inside
Burma. The entire 30-mile route within Burma has an estimated
$8.8 million price tag and is provided as a direct government
grant to be disbursed in parts. The first 11 miles from
Myawaddy is already complete, and the final 19 miles to the
Moulmein seaport, which must cut through a rugged mountainous
area in Karen state, is still in the design phase. After
RTG-GOB negotiations last August in Mae Sot on EWEC
construction, the GOB persuaded the Thais to build a new road
that will dip southward, rather than improve the existing road
connecting Myawaddy and Moulmein, according to Mae Sot business
leaders who attended the negotiations.

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Wanted: Burmese Speakers
--------------


10. (SBU) In the meantime, northern Thailand is creating an
environment that is more amendable to stronger economic
relations with Burma. One example is the Center for Myanmar
Studies at Naresuan University in Phitsanulok, which receives
significant guidance and support from the RTG Ministry of
Foreign Affairs. The Center, which currently enrolls about 20
participants per year, instructs Thai students in Burmese
language skills and culture. Under sponsorship from the Thai
MFA, the Center recently published the first set of Thai-Burmese
language materials in celebration of the 60th anniversary of
Thai-Burmese diplomatic relations.


11. (SBU) According to the Center's director, demand for
Burmese-speaking Thais outweighs supply. Not only do NGOs and
hospitals that assist Burmese clients require Burmese speakers,
but also the many Thai companies that do business in Burma also
recruit them. The Center is looking for ways to make Burmese
studies more attractive, such as offering the option of
cross-enrollment with other faculties. The Director said that
students are unaware of the high job-market demand for
Burmese-speaking Thais.

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All Quiet on the Eastern Front
--------------


12. (SBU) With Thailand putting its attention and money on the
western side of the EWEC, all is quiet on the Laos and Vietnam
sides of the highway. Thailand views Laos, which offers few
export opportunities, as a mere transit point on the way to
Vietnam and the South China Sea. Although its growing economic
might suggests that Vietnam would be an active player in the
EWEC, business experts here say that Vietnam and Thailand have
not gone beyond an exchange of business delegations in building

CHIANG MAI 00000174 003.2 OF 003


up their bilateral economic relationship with respect to the
EWEC.


13. (U) This cable was coordinated with Embassy Rangoon.


ANDERSON
MORROW