By Mr. Oudet Souvannavong Vice-President of Lao National Chamber of Commerce and Industry Secretary General of the GMS-Business Forum 1 st September 2010 Mekong Institute, Khon Kaen, Thailand Business Networking Forum “ Enhancing Entrepreneurship in SME Development and Export Consortia” “Potential SME Networking in GMS”

The GMS Business Forum  Initiated in 1995 and established in October  A private sector organization formed by National CCIs of six GMS countries and of corporate enterprises: TNT, Schenker, MMG Lanexang Minerals, Holley Group, BHP-Blue Scope, Itochiu, …  Its role is to provide needed private sector-related products and services to facilitate the implementation of the GMS Economic Cooperation Program (ECP).  Its strategic focus and scope is to contribute to the effective implementation of the ECP through the involvement of the private sector in program activities and investment.

The Economic Corridors Development Program  GMS-BF support the vision and goals to create an economic corridor that stimulates economic growth that reduces poverty and raises the standards of living in the areas. The Goals are:  to enhance connectivity of the Corridor areas by reducing cross- border transactions and transportation costs;  to increase competitiveness through economies of scale offered by cross-border investments that are based on value-adding processes;  to empower the private sector by promoting joint financial, technological, marketing, production, and other collaborations in the Economic Corridor areas; and  to reduce poverty, support development of rural and border areas, and increase the earnings and provide employment to the low- income groups.

Issue and Constraints of the EWEC  The EWEC has weak link to market and industrial demand areas. The infrastructures and CTS portion from Thailand and Myanmar are not completed. Since its official launch in June 2009, only a few transport operators have been selected and registered.

Issue and Constraints of the EWEC  The EWEC is a specific route which excludes going outside the corridor. It is becoming a cage because transport operators cannot turn off to national transport networks. This requires operators to work with transshipping, thus increasing the cost of transportation.

Issue and Constraints of the EWEC  Local transport operators in the GMS are not interested to operate on long hold transport across the EWEC because of the large risk to return with empty load.  EWEC’s transport registration and pre-payment guarantee fees imposed to the operators are considered expensive especially in Thailand.

Issue and Constraints of the EWEC  The EWEC guarantee system has limited support from national customs authorities. Transport operators are confident to use bilateral transport legislation which is based on national laws and on national shipment guarantee supported by national customs authorities.  There are complex protocols for the selection of transport operators, obtaining transport permit and quota.

Issue and Constraints of the NSEC  The two NSECs have link with vibrant industrial zones;  (i) the Kunming-Bangkok  (ii) the Pearl River Delta– Guangxi– Hanoi – Ho Chi Minh City  Road infrastructures need to be completed and CTS improved in both two NSECs.  Transport traffic along the NSEC is high even though the CBTA protocols and complete transport infrastructures have not been put into place yet.

Issue and Constraints of the NSEC  In-land transport traffic between industrial zones in Thailand, in Vietnam and in the Pearl River Delta in China are increasing and growing quickly because of industrial and manufacturing logistics link between the industrial production zones.

Issue and Constraints of the SEC  In Cambodia:  the authorities do not allow any registered broker to do bonded transit declaration from border to Inland Container Depot (ICD).  They do not recognize Truck Manifest for purpose of bonding forward to ICD.  There are requirements to have original copies of documents for transit at all checkpoints and stops and for bonded transfer to ICD.  The SEC has potential links between sea ports and industrial zones in Thailand, Cambodia and Southern Vietnam.  Road infrastructure and harmonization of CTS and administration procedures are to be developed.

Issue and Constraints of the Economic Corridors – All Corridors  Very few information is provided concerning the CBTA protocol implementation.  Local transport and logistics operators have low awareness about the CBTA protocols, CTS and other regulations and standard requirements for operating in the economic corridors. They lack expertise and technical skills and corporate management.

Issue and Constraints of the Economic Corridors – All Corridors  Local operators especially of CMLV need to upgrade themselves to standard requirements. They have not the capacity to renew transport fleets and infrastructure because they lack funds and credit.

Importance of Business Networking - Transport and Logistics Cooperation  Transport and logistics cooperation is important in order to create “win-win” solutions for all GMS member countries with the commitment to the full implementation of CBTA. It was remarked that the CBTA is not a well publicized instrument and more efforts are needed to explain how the CBTA will facilitate the movement of goods, people and vehicles across GMS borders.  Public and private sector consultations in the GMS must increase in order to provide a pro-logistics business environment. This will enable GMS logistics service providers (LSPs) to provide logistics activities as per clients’ requirement.  There is a need to consider the possibility of establishing a GMS logistics association by the private sector such as the GMS Freight Forwarder Association (FRETA). Financial issues are currently hindering the expansion of GMS LSPs. GMS LSPs can play a key role in accelerating the economic integration of the sub-region by improving the efficiency and effectiveness of trade flows.

Importance of Business Networking - Transport and Logistics Cooperation  Harmonization of standards is necessary in order to ensure the compatibility of logistics system within the GMS. This harmonization should not just focus on technical standards but also on policy standards.  Border crossings is the biggest constraint of GMS economic integration and further harmonization is needed. Solutions to address them may well go beyond the borders, and require systematic diagnostics and consistent approach.  Existing information technology level must be increased with system compatibility across the GMS a key issue.  Emphasis must to be put on logistics human resource capacity development. The logistics industry must become more professional from truck drivers to logistics managers. Certification of logistics skill levels will have to be developed.

Business Networking Strategy  Establish GMS-FRETA  Establish FRETA Clusters (4 clusters)  Identify SME (Transport and Logistics) for horizontal networking in each cluster  Training of entrepreneurs (finding common problems and need, define networking activities)  Establish SME network  Acquire financing (GMS SME Funds)  GMS-BF provide training through the FRETA Clusters  Network members improve their standards (trucks, drivers, services, etc.)  Network members operates in the GMS corridors

Lessons Learned from SME Networking  It should be a business oriented network link to a value chain  It should be a production of products or services that are grounded  It should be targeted to SME that have common situation  There need to be a good business orientation  Networking is not for the exchange of information between SMEs – however Networking should start with the Social events and gradually shift to business talk  Networking must aim at visible improvement in the economic/business situation and participating SMEs  It must grant the group competitive advantage which the enterprise alone could not reach

References  SME Cluster and Network development in the developing countries: The experience of UNIDO; by Giovanna Ceglie and Marco Dini (UNIDO)  Entrepreneurship and Marketing Strategy: The SME under globalization, Gary Knight, Journal of International Marketing  The role of global value chains in agribusiness SME development in the GMS, Anthony M. Zola, Expert group meeting on promoting SME’s participation in global value chains in the GMS.  Promoting SME development: some issues and suggestions for policy consideration, Thitapha Wattanapruttipaisan.  Value Chain Link Training Module, GTZ  Foreign Trade Development of SMEs in Lao PDR, Oudet Souvannavong  Informatisation of SMEs in Laos, Oudet Souvannavong  GMS-BF report to 2 nd Economic Corridor Meeting, Oudet Souvannavong