Cablegate: Build It and They Will Come: Thailand Plans New Mekong Port to Boost China Trade

This record is a partial extract of the original cable. The full text of the original cable is not available.

211008Z Dec 05

UNCLAS SECTION 01 OF 02 CHIANG MAI 000252

SIPDIS

SENSITIVE

STATE PASS USTR
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ETRD ECIN ECON PGOV PREL CH TH WTRO
SUBJECT: BUILD IT AND THEY WILL COME: THAILAND PLANS NEW MEKONG PORT TO BOOST CHINA TRADE

REF: A) CHIANG MAI 214 B) CHIANG MAI 218 (04)

1. (U) Summary Although the Mekong River trade between
northern Thailand and southern China has not lived up to expectations, the Thai government plans to build a second, larger, port in Chiang Rai. The go-ahead came after the Deputy Transport Minister returned from a visit to Yunnan province sold on the potential of China's "Look South Economic Strategy".
End summary
2. (U) The Thai government has off and on talked about building a second port on the Mekong River to supplement the three-year-old port at Chiang Saen, near the Golden Triangle
where Thailand, Burma, and Laos meet. Despite continued doubts
over the economic viability of a new port, Deputy Transport Minister and Thai Rak Thai Party (TRT) Deputy Secretary General Phumtham Wechayachai announced after his December 8-11 visit to Yunnan that the project would go forward.
3. (U) The $25 million project has a number of dissenters.
Private dock owners say a new government-run port is not needed and would not bring substantial returns. Others argue that after the scheduled mid-2007 completion of the Kunming-Bangkok, road transportation would be cheaper for Thai exporters than
sending goods upstream. Local residents and cultural
preservationists oppose building so close to the ruins of the ancient capital of Chiang Saen, which has been proposed for consideration as a World Heritage Site.

SPRINGBOARD TO ASEAN
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4. (SBU) As justification for a second port, Deputy Minister Phumtham reported that China is giving greater priority to water transport development, increasing the capacity of four existing ports along the Mekong River to accommodate a higher volume of riverine activity. Another Thai port at Chiang Saen would complement this growth and stimulate tourist arrivals, the Deputy Minister and TRT official claimed on returning from
Yunnan. A ministry document summarizing the trip noted that
the Chinese government's "Look South Economic Strategy" aims to develop Kunming as a logistics center with Thailand as a springboard to ASEAN.
5. (U) According to Chinese statistics cited in the
ministry's trip report, China annually ships 500,000 tons of cargo down the Mekong to northern Thailand. In making his decision, Phumtham relied on Chinese plans to increase two-way shipping on the Mekong River up to one million tons, including
goods, oil, and natural gas. Phumtham also used tourism
prospects to justify the economic viability of the project.
Noting that Yunnan gets 3 million visitors per year, Phumtham set as a goal attracting 10 percent, or 300,000, who would journey further into Thailand via Chiang Saen.

6. (U) In fact, the value of Thai exports through Chiang Saen increased from $27.4 million in 2004 to $70.3 million in 2005 for the January-September period, with dried lamyai (longan) and rubber sheet in first and second place. However, the river trade itself remains dominated by Chinese traders and shippers and subject to numerous non-tariff barriers (ref b).

TRADING ON THE SHADY SIDE
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7. (SBU) Although the current Chiang Saen port has a capacity of 200,000-300,000 tons per year, official customs records show the port serves only 166,000 tons a year. If the Chinese figure of 500,000 tons is accurate, this means that the great majority of the river trade is going through private docks and warehouses on the riverbank. The manager of the Chiang Saen port claimed that the private docks are owned by Chinese citizens who married Thais in order to operate businesses in Thailand and that these owners have pressured local officials to stop the second
government port. Newspaper and unofficial accounts suggest
that these private docks handle more cargo than what gets reported and that they may also be involved in human smuggling.
Because of these complications, the port manager said no one from Bangkok headquarters wanted to be posted at Chiang Saen; he himself expressed a desire to return to his previous position at the Laemchabang port in Rayong.
8. (U) The new port is to be built at Sop Kok point where the Mae Kok River merges with Mekong outside of Chiang Saen district, five kilometers south from the current port. The new facility will handle larger boats, use more efficient loading

CHIANG MAI 00000252 002 OF 002

technology and have a capacity of 4,000 tons a day. The first
phase of construction is expected to be completed in 2008. A second phase would be completed in 2017 if justified by increased cargo levels. According to Apisit Kampiro, Chief of the Chiang Rai Maritime Office of the Ministry of Transportation, the government will budget 1 billion Baht (US $
25 million) for construction; 50 million baht (US$1.2 million) has been appropriated for land acquisition.

9. (SBU) Although Chiang Khong has also been discussed as a port location, Apisit said the government has designated Chiang Saen as the center for Mekong transportation. Chiang Khong, 70 kilometers downstream along the Thai-Lao border, is to serve as a land transportation link to southern China. While this policy should reassure local fisherman and environmentalists opposed to blasting a navigable channel for large boats, Apisit said the Chinese government remains interested in clearing this stretch of the river in order to navigate all the way to Luang Prabang in Laos.

10. (U) COMMENT: The Thai government is placing its bets on China's plan to use Thailand as a springboard to ASEAN and on the hope that the Mekong River will become the most cost effective and efficient trade route between China and Southeast Asia. However, the Chinese own the fleet and have the river expertise, making Thai traders dependent on Chinese boat
operators to export their goods north. The higher cost of
shipping goods upstream also hobbles Thai exporters, who may find the future road link more cost-effective and easier to control than the river route.

11. (SBU) Comment continued: When Thailand and China signed
an "Early Harvest" partial free trade agreement in October 2003, northern Thai rice farmers hoped that it would allow them to ship rice directly to China via the Mekong River. Instead, continuing restrictions on trade on the Mekong means that rice must still be sent via Bangkok to China's East Coast while other products have been hampered by non-tariff barriers. The fact that the September 22 Thai-Chinese joint statement on trade, investment and economic cooperation (ref a) promised fast track handling for Thai agricultural products entering at Tianjin, Beijing, Shanghai and Guangzhou without mentioning any Mekong ports suggests that the decision to build a new port is based more on politics than economic reality.
CAMP

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