Cross-Border Infrastructure: A Toolkit Infrastructure Development: A Regional Perspective Session on Planning & Policy Rita Nangia Asian Development Bank The views expressed here are those of the presenter and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Directors, or the governments they represent.

Cross-Border Infrastructure: A Toolkit Session Description The session covers:  Cross-border initiatives in Asia  Important challenges and opportunities facing the GMS region  Examples of well-known initiatives

Cross-Border Infrastructure: A Toolkit Overview of the Session Asian Highway Network Mekong river GMS power trading

Cross-Border Infrastructure: A Toolkit Asian Highway Network UNESCAP as lead agency  Helping address the region’s transport needs  Conceived in 1959  To promote regional cooperation and trade  Becoming an integrated, international transport system  Provides transport to all Criteria for identification of routes  Maximize use of the existing networks  Capital to capital links  Industrial and agricultural centers  Sea, river and air ports  Container terminals & depots  Tourism attractions

Cross-Border Infrastructure: A Toolkit Formalization of Asian Highway Intergovernmental agreement  Seoul Ministerial Declaration, 17 November 2001  1st Regional drafting meeting,11-12 November 2002  Subregional seminars to review draft  Intergovernmental meeting adopts on 18 November 2003  Open for signature at 60th session of UNESCAP Commission (26 April 2004, Shanghai)

Cross-Border Infrastructure: A Toolkit Formalization of Asian Highway ( continued ) Contracting parties  Adopt AH network  Negotiating procedures  Conform to AH design standards  Display AH signs Working group on the Asian Highway  Provides negotiating forum

Cross-Border Infrastructure: A Toolkit Source: UNESCAP

Cross-Border Infrastructure: A Toolkit Conformity to Asian Highway Standard Unreported 2% 2,700 km Class III 29% 41,600 km Class II - 30% 42,900 km Class I - 8% 11,000 km Below III 17% 23,700 km Primary - 14% 19,600 km Source: UNESCAP, Presentation on Asian Highway Projects

Cross-Border Infrastructure: A Toolkit Investment Costs - Asian Highway Priority Projects Kilometers of road coveredCost in US $ millions South East Asia3,5694,638 North East Asia6,5463,235 Central & South West Asia12,0387,301 South Asia3,4342,251 Total25,58717,425 Countries covered: South East Asia = Cambodia, Indonesia, Lao PDR, Myanmar, Philippines, Viet Nam North East Asia = PRC, Mongolia, Russian Federation Central & South West Asia = Afghanistan, Armenia, Azerbaijan, Georgia, Iran, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Uzbekistan South Asia = Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka Source: Asian Highway Network, UNESCAP

Cross-Border Infrastructure: A Toolkit Source: UNESCAP To Europe To East Asia and beyond

Cross-Border Infrastructure: A Toolkit Trans-Asian Railway Formalization of TAR network  Focus on collaboration and combined transport Demonstration runs of container block trains along the TAR Northern Corridor

Cross-Border Infrastructure: A Toolkit To Europe Source: UNESCAP

Cross-Border Infrastructure: A Toolkit Future Collaboration on AHN Asian Highway/Trans-Asian Railway Intermodal connections Harmonization of facilitation agreements Trade/transport facilitation committees Forecasting traffic demands  Data collection/sharing  Identification of bottlenecks

Cross-Border Infrastructure: A Toolkit ECONOMIC INTEGRATION IMPROVED MEKONG NAVIGATION

Cross-Border Infrastructure: A Toolkit Mekong Navigation The countries of the Mekong are increasingly inter-dependent in terms of trade, economic development and political cooperation. Regional initiatives for cooperation in economic development in the Greater Mekong Basin:  ADB sponsored Greater Mekong Sub-region (GMS) initiative;  Programs under ASEAN (Association of South-East Asian Nations)  Mekong River Commission (members: Cambodia, Lao PDR, Thailand and Viet Nam) Bilaterally, China is an important economic partner for all the Lower Mekong countries

Cross-Border Infrastructure: A Toolkit Mekong River Commission According to the 1995 Agreement, MRC’s role is to promote - “Cooperation in all fields of sustainable development, utilisation, management and conservation of water and related resources of the Basin.” The population in the basin is growing rapidly, at 2% per year. It will increase from 73 million at present to 120 million in 2025.

Cross-Border Infrastructure: A Toolkit Mekong River Commission Article 9: Freedom of Navigation “ On the basis of equality of right, freedom of navigation shall be accorded throughout the mainstream of the Mekong river without regard to the territorial boundaries, …” “ The Mekong river shall be kept free from obstructions, measures, conduct and actions that might directly or indirectly impair navigability, interfere with this right or permanently make it more difficult.”

Cross-Border Infrastructure: A Toolkit Energy Efficiency and Pollution Distance in miles to move 1 ton of freight with 1 liter of fuel and pollution in terms of CO2 71 km 41 g t/km 182 km 42 g t/km (Source: 3rd World Water Forum – Water and Transport, MTS, US Department of Transportation 21 km 207 g t/km

Cross-Border Infrastructure: A Toolkit New Trends In 2000, the Governments of China, Lao PDR, Myanmar, and Thailand have signed an agreement for commercial navigation for the stretch between Simao (China) and Luang Prabang (Lao PDR)

Cross-Border Infrastructure: A Toolkit

Challenges to Enhanced Mekong River Navigation Physical and non-physical impediments for regional trade Lack of awareness of potential and possibilities No regional transport planning  In cases, no national planning  Poor regional navigation agreements - no frameworks Limited human capacity for water resource planning Training provided only in Vietnam

Cross-Border Infrastructure: A Toolkit Challenges to Enhanced Mekong River Navigation ( continued ) No safety regulations either - more than 3400 lives lost in last ten years Need simultaneous work on safety regulations, legal framework and environmental regulations Large investments needed

Cross-Border Infrastructure: A Toolkit Building the Mekong Power Market

Cross-Border Infrastructure: A Toolkit Regional Power Market Through power trade, GMS countries will be able to:  Reduce investments in power reserves to meet peak demand  Achieve more reliable supply  Reduce operating costs  Reduced greenhouse gas emission and pollutants  Increase consumer access to the cheapest power sources available

Cross-Border Infrastructure: A Toolkit Current Physical Status Big disparity in the size countries’ markets. Four countries (PRC, Thailand, Vietnam and Myanmar) have transmission systems that interconnect most of their internal demand centres. Two countries currently have no nationwide transmission systems (Lao PDR and Cambodia).

Cross-Border Infrastructure: A Toolkit Current Physical Status ( continued ) Three countries (Myanmar, Lao PDR and Cambodia) have internal demand levels that do not allow for the development of large-scale generation projects that are only based on internal load. Therefore the possibilities of obtaining energy at low (competitive) prices are linked to cross-border trading. Constraints to develop new hydro power in Thailand and there is a growing concern that natural gas reserves are not sufficient to satisfy future load growth. Coal resources are also limited to lignite, which has historically been associated with significant environmental problems.

Cross-Border Infrastructure: A Toolkit Current Regulatory Status Power sector structures: All GMS countries are organized wherein there is a single buyer (implicit or explicit) in their generation and transmission activities. Transmission ownership: The single buyer is usually the Transmission Facilities Owner (TFO), which operates and maintains the national transmission network. Independent power producers: All GMS countries allow for the development of stand-alone privately owned IPPs. No direct sale to large consumers: possible exception of PRC and some industrial zones within Thailand. Centralized government power sector planning

Cross-Border Infrastructure: A Toolkit Current Regulatory Status ( continued ) IPP framework through power purchase agreements International transmission interconnectors: Construction of international transmission lines also requires case-by- case negotiations between the governments and domestic TFO and single buyer of the GMS countries. Absence of transmission access regime Formal regulatory regimes: There are therefore no formal legal and regulatory frameworks for the power sectors in the GMS countries. No congestion management

Cross-Border Infrastructure: A Toolkit Institutional Arrangements Providing the policy and institutional framework to promote opportunities for extended cooperation in power trade Developing the grid interconnection infrastructure through a building block approach allowing cross-border dispatch of power Undertaken through:  Electric Power Forum (EPF)  Experts Group on Power Interconnection and Trade (EGP)

Cross-Border Infrastructure: A Toolkit Stages of the GMS Power Market Stage 1Stage 2Stage 3Stage 4 Cross-Border Transmission Country to Country Regional Network: Limited Capacity Regional Network: Higher Cap. Fully Functional Regional Network International Experience Argentina- BrazilCentral America/ South Africa Continental Europe Central America by 2007 RPTOAShare of Limited Benefits Share of BenefitsLimited Competition Full Competition Operation SecurityCoordination Inter- TSO Regional Coordination by RTC Regional Coordinated Operation Integrated Operation RegulatorConsensusExtended Consensus Limited Independent Regulator Independent Regulator

Cross-Border Infrastructure: A Toolkit Next Steps: ADB Technical Assistance for Regional Power Trade Coordination and Development Develop action plan on regional power trade ( ) Create institutions for initial stages of power trade ( ) Undertake capacity building / human resource development ( ) Develop platform and database for information exchange and communication ( )

Cross-Border Infrastructure: A Toolkit Source: ADB Regional Indicative Master Plan on Power Interconnection in the GMS Possible Regional Master Plan on Power Interconnection “Blocks” of power interconnection lines that can stand on their own merits Phased cross-border connections to meet power demand forecasts and generation system planning scenarios

Cross-Border Infrastructure: A Toolkit Financing GMS Grid Interconnection Infrastructure: A Challenge Investment need  Grid interconnections - part of overall infrastructure requirements of the GMS  GMS power infrastructure investment need - $10-15 billion over next 5-10 years Financing sources  Government budget - not sufficient  Multilaterals and bilateral - for high priority projects; include policy advice, capacity building, and guarantees

Cross-Border Infrastructure: A Toolkit Financing GMS Grid Interconnection Infrastructure: A Challenge ( continued ) Financing sources  Private sector (developers and lenders) - can fill the financing gap and provide technology and management Environment conducive to private sector participation  Enabling policy, legal and regulatory frameworks  Transparency and predictability

Cross-Border Infrastructure: A Toolkit ADB & Regional Cooperation Honest broker - bringing together various countries and getting involved in a neutral way Technical advisor - providing knowledge and expertise to ensure effective implementation of projects Financier - providing loans and technical assistance for high priority projects Coordinator - facilitating the involvement of other development partners

Cross-Border Infrastructure: A Toolkit Key Messages Borders can divide or expand opportunities. Overall outcomes depend on the ability of the leadership of the region to overcome challenges and enable communities to gain from the economic expansion through cross-border infrastructure GMS experience and vision of three Cs: about greater connectivity to enhance competitiveness that will help build a prosperous, cohesive community.