Open for business, if anyone wants to come
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Open for business, if anyone wants to come

The Special Economic Zone in Savannakhet is talking big about its ambitions to help lift Laos, and Thai investors also see opportunities

Friends with benefits: The Thai-Lao bridge from Mukdahan is busiest on weekends. Thais visit the Indochina market in Laos, while Lao people cross to the Thai side to go to the cinema or buy groceries. (Photos by Pattarapong Chatpattarasill)
Friends with benefits: The Thai-Lao bridge from Mukdahan is busiest on weekends. Thais visit the Indochina market in Laos, while Lao people cross to the Thai side to go to the cinema or buy groceries. (Photos by Pattarapong Chatpattarasill)

Crossing the Thai-Lao Friendship Bridge from Mukdahan one is immediately struck by a gleaming new four-storey office set up as a one-stop shop to attract and support foreign investors.

Inside the air-conditioned and marble-floored offices of Laos’ Savan-Seno Special Economic Zone (SaSEZ) building, employees sit behind school-style wooden desks eager to attend to anyone who walks through the front door.

On a recent March morning when Spectrum visited, we were the only clients. We asked to see the governor of Savannakhet and were immediately ushered to the second floor for more meetings with assistants.

It seemed too informal and friendly, until we were asked to provide a written request to meet the governor, which it turned out could take weeks to process.

Still, the obliging and friendly demeanour of staff made a strong impression.

MEKONG PASSAGE: Tourists enjoy the scenery at the Second Thai-Lao Friendship Bridge. The bridge connects the northeastern province of Mukdahan with Savannakhet in western Laos.

“Investors find it very easy to meet with high-ranking government employees of Laos,” said Thailand-based legal consultant Vinay Ahuja. Mr Vinay was based in Vientiane for several years and his firm DFDL provides legal advice for businesses trying to set up in Laos.

The Savannakhet SEZ is the first of 42 planned across Laos as part of a government strategy to lift the landlocked nation out of third world status by 2020.

The SEZs were approved by a prime ministerial decree in 2003. But with the deadline looming to shake its third world status, there is growing urgency to attract investors via tax concessions and favourable land leasing arrangements.

BORDER TRADE: Workers in Mukdahan load up goods from Thailand to sell in Laos.


The office, known as the SEZA, was completed a few months ago as a one-stop service bureau to issue investment licences, business registrations, import and export licences and work permits for foreigners.

The SaSEZ is divided into four zones with different sectors of operation.

Zones A and D are managed by the Thai firm Savan City, and are for projects in the residential, entertainment and financial industries.

Zone B, covering 20 hectares, is situated in Uthumphon near the Laos-Thailand border and is to be developed as a logistics park. According to the website of the Thai consulate in Savannakhet, two Thai companies, Double A logistics and Nann Logistics, and the Japanese firm Logitem are already investing in the zone.

Zone C is managed by Savan Pacific Development Co Ltd, a joint-venture between Pacifica Streams Development Sdn Bhd of Malaysia (70%) and the Laos government (30%). It is tasked with developing the first government-approved free trade and special economic zone in Savannakhet province.

“The investors do not have to visit any of Laos’ ministerial departments for applications,” said Tee Chee Seng, a Savan Park manager.

“This one-stop service policy assists — especially foreign investors — by saving on unnecessary costs and providing more investment protection, privileges and incentives.”

Savan-Seno is Laos’ first SEZ and was established following the 2003 decree to designate the country’s second-largest city as a regional investment hub.

But to do that without foreign investment is a tall order.

Laos depends mostly on Chinese and Japanese private investors to boost economic growth. As of December 2013, Laos had also received US$1.4 billion (around 45 billion baht) from the Asian Development Bank.

The ADB is the main financier for projects in the country, which it categorises as “lower middle-income”.

The Second Thai-Lao Friendship Bridge, which joins Mukdahan and Savannakhet, was funded by the Japan Bank for International Cooperation (JBIC) under a loan scheme between the two governments.


In Zone C, business is humming along with foreign investors taking advantage of the generous benefits from the Lao government.

“As of today, the SEZA has issued 41 licences to investors in Savan Park,” Mr Tee said. “The foreign investors came from as far away as France, Holland, Canada, Hong Kong, Japan, Malaysia, Thailand and other places.”

Mr Tee said areas being invested in include lens manufacturing, car parts, plane accessories, tin refining, paint, toy and cosmetic products as well as logistics and transport services.

“We have successfully attracted several multinational companies looking to expand their manufacturing bases overseas,” he said.

“We have Toyota Boshoku, Essilor International, Celestica and AERO Works, which have already started their manufacturing operations.”

A major contributor to the zone’s success is a cross-border transport agreement reached by Laos, Thailand and Vietnam which speeds up the customs process, enabling goods to get to international markets more quickly.

“Containers and goods inspected and sealed by Lao customs officials in Savan Park require no further declarations be made in either Thailand or Vietnam,” he said. “They can go straight to the sea port in Danang, Vietnam for shipping to Japan and China or Laem Chabang port in Thailand for shipping to Europe and the United States.”


Projects at sites A and D — which focus on the residential, entertainment and finance sectors — are managed by the Thai firm Savan City, which holds 70% of a joint-venture with the Lao government.

Savan City chief executive Chanchai Jaturaphagorn said the SEZ’s location means that in the future it will need accommodation, service and entertainment facilities.

“Savannakhet itself does not possess any major attraction,” Mr Chanchai said. “However, the city is located on the East-West Economic Corridor (EWEC).

“Other foreign investors proposed an industrial park on the Mekong side to the Lao government, but due to environmental concerns the government approved an ‘eco city’ plan instead.”

But when Spectrum observed the sites there appeared to be a long way to go before Mr Chanchai would see his visions realised. While some construction preparation was under way in Zone D, the riverside Zone A was little more than scrub and forest bisected by dirt roads.

Mr Chanchai said he first proposed development projects on the Laos side of the Mekong River in 2005, winning approval in 2007.

READY TO GO: Aderans manufacturing centre has the capacity to hire 4,000 employees. But when Spectrum visited there appeared to be only construction and security staff and no manufacturing under way.

“By 2008, the Savan City firm was set up and I was able to obtain the renewable 50-year land lease on zones A and D,” he explained. “Later in 2009, the Lao government revised the regulations, allowing land leases of up to 99 years for investors. As a result, the leasing contract I am holding now is for 149 years.”

Mr Chanchai said Zone A comprised a waterfront plot of 305 hectares, which he predicted would be the region’s next financial hub, equipped with high-quality hotels and hospitals, banking and business precincts and a duty-free shopping centre.

Recently, Mr Chanchai revealed a funding-per-project scheme between Savan City and a Malaysian investor, Asean Union Group. He said there would be marketing investment opportunities in a 350-room hotel, a duty-free pavilion, petrol station and tourist and financial districts in Zone A.

He declined to reveal which investors had vied for businesses in Zone A, but insisted construction would start soon on serviced apartments, a community mall and sports complex.

PRICE OF PROGRESS: Lao people who live in makeshift shacks must move out to make way for future development projects in the SaSEZ.

FUTURE FOUNDATIONS: Savan City is developing new housing units under the scheme.


In Zone D, development looked slightly more promising. Signs were hoisted showing planned residential projects and workers shacks had sprung up on the 118 hectare site in expectation of the construction to start soon.

One factory — in reality a string of military green one-storey sheds — has already been set up for the Japanese Aderans group, which makes wigs.

Mr Chanchai said the Aderans manufacturing centre is the largest in Southeast Asia and has the capacity to hire 4,000 employees. But when Spectrum visited there appeared to be only construction and security staff and no manufacturing under way.

The residential projects will cater for employees as well as locals who have been resettled from Zone A.

Last month, the Thai hospital group Vichaivej signed a memorandum of understanding with the Lao government to build a 150-bed hospital in Zone D. The Vichaivej group confirmed the MOU had been signed, but declined to reveal the budget or construction time frame.

Mr Chanchai said construction of the 12-storey Vichaivej hospital building would begin next month and take 18 months to complete.

The Savan City CEO also said compensation payments were being calculated for around 100-200 families living mostly in shacks in zones A and D.

He said they would be based on how much land the residents held and could vary from household to household.

But one onsite engineer told Spectrum that as the government had issued an SEZ decree, residents must move without being compensated. He said new accommodation would be provided by SEZ developers, although no clear guidelines had been provided by the Lao government.

Mr Chanchai said in Zone D there were plans for 1,000 two-storey housing units to cater for domestic and foreign workers. The engineer said that many construction workers on the site were Vietnamese because Lao labourers lack the skills to do the job. The daily minimum wage was 30,000-40,000 kip, or about 100 baht.

UP AND COMING: Construction projects in SaSEZ’s Zone D are set to begin from this month and workers have already moved into the 118 hectare site.


DFDL’s legal consultant Mr Vinay said the special economic zone has received good investment in the past two to three years and is developing rapidly.

“The three broad categories of investment are commercial, production and the service sector,” he said. “The cost of investment is cheap. The country also provides cheap labourers and enjoys political stability.”

But Mr Vinay believes the real opportunities for Laos lie in the tariff exemptions it enjoys and its shared borders with four other Asean countries. Exporters to Europe and the US benefit from preferential tariff treatment under the Generalised System of Preferences. Thailand no longer enjoys the GSP after it was lifted in January.

“Savan-Seno is ideal as the assembly point of production,” Mr Vinay said. “Parts of goods could easily be imported from China or India and export of the manufactured goods can enjoy a certificate of origin as well as tariff exemption.”

Mr Vinay added that along with Myanmar, Laos would become one of two gateways from China to Asean.

“After the commencement of the Asean Economic Community at the end of 2015, Laos will enjoy a lot of advantages,” he said.

“It connects China with Asean. Myanmar does the same thing but it borders with less countries than Laos. Laos connects to China’s Yunnan province which is a hub for heavy machinery and production.”


The immigration points on both sides of the Friendship Bridge are particularly busy on weekends. Visitors from the Thai side make their way to the famed Indochina market in the middle of Savannakhet. Lao people, many in shining SUVs, cross to the Thai side to go to the cinema or shop for groceries at a Tesco Lotus located a few kilometres from the bridge.

As Lao visitors return with household items packed in their vehicles, Thai pickups stacked with sacks full of raw coffee beans, grown on the high grounds of Pakse and Champasak, head in the opposite direction. The daily commerce reflects the economic opportunities for people on both sides of the border.

Early last month, Thai Commerce Minister Chatchai Sarikulya held talks with Lao officials in Mukdahan where an agreement to increase annual trade by 15-20% was signed. Annual cross-border trade is expected to rise from US$5.4 billion at present to US$8.1 billion by 2017.

Mr Chanchai also revealed he was trying to come to an agreement with Lao authorities to extend the runway at Savannakhet airport to cater for bigger aircraft and increased regional flights. Currently, there is only one airline operating at the airport, Laos Airlines, which operates three flights daily: Savannakhet-Pakse, Savannakhet-Vientiane and Savannakhet-Bangkok.

The nearest Thai airport to Savannakhet is Nakhon Phanom, situated 30km from the Friendship Bridge.

The existing Second Thai-Lao Friendship Bridge is a major infrastructure component of the East-West Economic Corridor. The EWEC is an integral part of the United Nations and Asean’s plans for development of the Greater Mekong Sub-Region.

Also known as the R9 highway, the corridor spans 1,450km of road linking Indochina and the Indian Ocean. Beginning from Vietnam’s Danang, around 500km from Savannakhet, the road connects Thailand and Laos, passing through the provinces of Kalasin, Khon Kaen, Phetchabun, Phitsanulok and Sukhothai before reaching the border district of Mae Sot in Tak province. It ends at Myanmar’s Mawlamyine, the gateway to the Indian Ocean and sea routes to the sub-continent and Middle East.


Neighbouring Mukdahan on the Thai side wants to take full advantage of its geographical position. An MOU was signed in 2004 between the Thai and Lao governments designating Mukdahan and Savannakhet as twin cities.

Last July, the National Council for Peace and Order established a Special Economic Zone Committee and in January designated Mukdahan as one of five pioneering Thai SEZs. The others were Tak’s Mae Sot, Sa Kaeo’s Aranyaprathet, Klong Yai in Trat province and Sadao district in Songkhla.

Mukdahan Chamber of Commerce secretary-general Somsak Sribunruang said local authorities realised the urgency of establishing an SEZ. However, details had not yet been mapped out.

“We are expecting to see the Mukdahan SEZ established in 2015 or 2016,” he said. “However, there is no agreement over the exact area of the SEZ because we want to avoid disrupting local traditions and the environment.”

He said they were considering three districts for the SEZ, but no final decision had been made.

“There had been a proposal that the province be turned into an industrial estate resembling Laem Chabang in Chon Buri province," he explained.

"However, it was turned down due to environmental concerns and the fact that goods still need to be transported to Laem Chabang as part of the global logistics chain,” he said.

Mr Chanchai said Mukdahan and the Savannakhet SEZ had the opportunity to work together rather than compete against each another.

He said this could mean 50-60% of the assembly could be done in Mukdahan, with the “finishing points” in Savannakhet.

But Mr Vinay said due to “Thailand’s unstable policies from the political circumstances” new investors might be reticent about looking at Mukdahan.

“Existing investors in Thailand will not leave, but new ones may not prefer considering investing in Thailand,” he said.

The Asian Development Bank estimates that up to 60 SEZs would be at the planning stage by the end of 2015.

Of these, 54 are expected to be located in Laos and Cambodia. n

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