VZCZCXRO4114
PP RUEHDT RUEHHM
DE RUEHCHI #0093/01 1710052
ZNR UUUUU ZZH
P 200052Z JUN 06
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0211
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBK/AMEMBASSY BANGKOK PRIORITY 0490
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0028
RUEHCN/AMCONSUL CHENGDU PRIORITY 0034
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 0241
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RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0017
RUEHJA/AMEMBASSY JAKARTA PRIORITY 0007
RUEHUL/AMEMBASSY SEOUL PRIORITY 0005
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0017
RUEHSH/AMCONSUL SHENYANG PRIORITY 0019
RUEHIN/AIT TAIPEI PRIORITY 0015
RUEHKO/AMEMBASSY TOKYO PRIORITY 0010

UNCLAS SECTION 01 OF 03 CHIANG MAI 000093 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV ETTC TH
SUBJECT: GOLDEN TRIANGLE TO BECOME GOLDEN GATEWAY 
 
REF: A) CHIANG MAI 18   B) (05) CHIANG MAI 253   C) (05) CHENGDU 527 
 
CHIANG MAI 00000093  001.2 OF 003 
 
 
¶1. Summary.   Northern Thailand's physical proximity to southern 
China has led the eight provinces of upper northern Thailand to 
promote the region as the "Golden Gate of Trade to the World." 
Although the area is still better known as the "Golden Triangle" 
of opium fame, new river, air and land routes are increasing 
trade and transit opportunities in a number of directions.  End 
summary 
 
¶2. Hoping to take advantage of rapid economic development in the 
Greater Mekong Subregion (GMS), officials in upper northern 
Thailand adopted in February the moniker of "Golden Gate of 
Trade to the World".  Besides the upper GMS countries (China, 
Laos, Cambodia, Burma, Vietnam and Thailand) the region is 
reaching out to Bangladesh, India, Burma, Sri Lanka, Bhutan and 
Nepal under the BIMSTEC (Bangladesh, India, Sri Lanka, Thailand 
Economic Cooperation) trade grouping. 
 
Transit Route 
----------------- 
 
¶3.  Thailand's potential as a transit country, especially for 
Chinese products, is highlighted by a claim that turbines for a 
major Chinese dam are to be shipped from Shanghai to China's 
Yunnan province via an extraordinarily long route that passes 
through Thailand.  The shipping route, according to a senior 
Thai customs official, will take the turbines by sea around 
Vietnam and Cambodia to Thailand's southern port of Laem 
Chabang, where the turbines are to be offloaded for transport by 
road to northern Thailand and, finally, shipment by boat to 
Yunnan via the Mekong River.  The customs official claimed that 
such heavy equipment is more costly to transport within China, 
through 4000 mountainous miles from Shanghai to Yunnan, than by 
sea freight and land transport via Thailand and finally by water 
again on the Mekong River. 
 
¶4.  Even discounting for some boosterism, Northern Thailand and 
southern China are actively engaged in a broad expansion of 
trade, investment, educational exchange (ref a) and tourism. 
Thailand's hope for the Mekong to serve as a "Golden Gateway" 
for trade is echoed by China's interest in using the river as a 
link to ASEAN.  Exports from Yunnan can be shipped via the 
Mekong and connecting road to Thailand's Laem Chabang seaport in 
the Gulf of Siam in a day and half; shipments in the opposite 
direction require an extra day. 
 
New Industrial Zone to Attract Chinese Investment 
--------------------------------------------- ------------------- 
 
¶5.  To further attract Chinese investment and trade, the Thai 
cabinet in February approved a proposal to establish a "Border 
Economic Zone" (BEZ) and industrial estate on 6,400 acres at 
Chiang Khong District, Chiang Rai province. Although an earlier 
plan to build an industrial estate in  Chiang Saen ran into 
local opposition over historical preservation issues, the new 
location is less controversial and expected to proceed.  Chiang 
Rai Chamber of Commerce President Pattana Sitthisombat told 
participants in a logistics seminar in March that Chinese 
private and public sector representatives, including the 
Director General of the New Industrial Estate in Kunming, had 
visited the Chiang Khong site. 
 
Kunming-Bangkok Highway Due for Completion in 2007 
--------------------------------------------- -------------- 
---------- 
 
¶6.  Although the original Chiang Saen site offered better access 
to the Mekong, the BEZ site at Chiang Khong will tie in with the 
road now under construction through Laos to the Chinese border. 
The section through Laos, funded by the Asian Development Bank 
(ADB), is expected to be completed in 2007. According to an 
earlier Consulate Chengdu report (ref c), the upgrades on the 
final Chinese portions of the road should also be ready in 2007. 
 Still awaiting a Lao government decision and a source of 
funding is the site for the bridge over the Mekong River linking 
Huay Sai in Laos to Chiang Khong.  Once all sections are 
complete, the 2,100 kilometer Kunming-Bangkok highway will 
contribute to expanded trade among the GMS countries. 
 
¶7.  Traders in the north increasingly expect this land route via 
the Kunming-Bangkok Highway to be more reliable than the Mekong, 
 
CHIANG MAI 00000093  002.2 OF 003 
 
 
which has suffered from unsteady water volume in the past few 
years because of dam construction upstream in China.  Rachan 
Veeraphan, former President of the Chiang Mai Chamber of 
Commerce, said that trade by land via Laos would be safer and 
more secure than via the Mekong, which flows past unstable 
regions in Burma. 
 
Mekong River Carries Increased Trade 
--------------------------------------------- ---- 
 
¶8.  Even though the road may eventually prove more viable, trade 
along the Mekong between northern Thailand and Yunnan has 
already  increased dramatically.  Bank of Thailand annual 
reports show that river trade grew from USD 9 million in 1996 to 
USD 129 million in 2005.  Altogether, this trade volume accounts 
for 3 percent of the total foreign trade of northern Thailand in 
¶2005. 
 
¶9.  During 2004-2005, the Chiang Saen port recorded 2500 boat 
dockings (one boat may be docked several times in a year). 
Statistics from the Chiang Saen Customs Office showed that 
exports by weight increased from 84,520 to 154,660 metric tons 
from 2003 to 2005, with an annual growth rate of 35 percent 
during that period.   Chinese statistics are much higher than 
the Thai figures, reporting over 500,000 metric tons of goods. 
Bank of Thailand official Sakorn Srisawat explained that the 
higher Chinese numbers include cargo that is offloaded in Burma 
before entering Thailand, implying that substantial smuggling 
takes place. 
 
¶10.   To accommodate the hoped-for growth in river transport, 
the RTG last December announced plans for a second Chiang Saen 
port (ref b), with USD 50 million in infrastructure.  Deputy 
Minister of Transportation Phumtham Wechayachai returned late 
last year from a trip to Yunnan sold on China's "Look South 
Economic Strategy" and convinced that Chinese vessels had the 
potential to ship a million metric tons of goods on the Mekong, 
including 500,000 tons of consumer goods, 300,000 tons of oil 
and 200,000 tons of natural gas. (Meanwhile, Thai business 
newspaper Prachachart Thurakit reported that Phumtham's sister 
is a major holder in one of Bangkok's largest sea freight 
companies.) 
 
¶11.  The Deputy Minister also touted the tourism potential of 
the Mekong.  Noting that the current port will serve tourist 
boats once the new port is operational for trade, Phumtham 
predicted that one-third of the three million Chinese tourists 
who visit Jinghong in southern Yunnan province annually could be 
expected to sail down to northern Thailand. (Comment:  under 
current tourism conditions this appears to be a wildly 
optimistic statement.) 
 
¶12.   The Early Harvest Program agreement on fruit and vegetable 
products that Thailand and China signed in June 2003 is one 
factor in increased Mekong River shipments. Although Thai fruit 
exporters preferred sea transport through Laem Chabang port to 
reach the large Chinese importers and distributors in eastern 
China, trade tonnage via the Mekong in 2005 leaped 55 percent as 
Thai exporters sent natural rubber and vehicle oil to Yunnan. 
The value of natural rubber exports alone nearly doubled, from 
USD 21 million to USD 41 million, in one year. 
 
Chinese Dams Cause Problems Downstream 
--------------------------------------------- --------- 
 
¶13.  While Thailand sees the Mekong River as a trade route, as 
well as a fishing and tourism resource, for China the river is 
also a source of energy.  Ongoing hydropower dam construction 
has restricted water volume on the Mekong to the point that it 
is often insufficient for shipping.  During this year's dry 
season from January to May the water level dropped so low that 
boats were forced to a stop during one week, with some stuck in 
the middle of the river. 
 
¶14. Thai authorities and business people express optimism that 
China will take steps to better manage the water level when all 
of the dams are completed.  The Deputy Secretary General of the 
Thai Maritime Department told a March logistics seminar in 
Chiang Rai that water volume is not a barrier to Mekong 
shipments because China holds only 17 per cent of the total 
volume of water in the Mekong River. (An environmental NGO 
 
CHIANG MAI 00000093  003.2 OF 003 
 
 
pointed out, however, that in Chiang Saen, 75 percent of the 
water comes from China.) He assured the audience that Chinese 
dams on the Mekong would not affect boat operations because the 
narrow gorges along the Mekong in China were not conducive to 
holding large volumes of water in large reservoirs.  The Chinese 
dams, he said, are intended solely for hydroelectricity 
generation rather than agricultural production and would allow 
water to be released from the dams to flow down to lower part of 
the Mekong Delta. 
 
¶15.  Bank of Thailand staff also claimed that Chinese 
authorities facilitate boat operations on the Mekong by 
announcing a water release schedule for the dams.  They noted 
that the water level was unusually low this past dry season due 
to accelerated dam construction and would likely return to 
normal as construction tails off.  Even under these conditions, 
Mekong shipments greatly reduce transportation time from 
Thailand to some parts of China, these officials claimed. 
 
¶16.  A less sanguine view emerged from conversations with 
journalists from Laos, Cambodia, Thailand, Burma, Vietnam and 
China attending a seminar sponsored by the Indochina Media 
Memorial Foundation in Chiang Mai on "Managing the Mighty 
Mekong".  These journalists reported hearing many complaints 
from Thai NGOs and villagers about the negative effects 
downstream of Chinese dam building and rapids-blasting. A China 
Daily reporter who was part of the training appeared taken aback 
by the critical accounts the students had heard of Chinese 
activity. 
 
Chiang Mai Aims to be Aviation Hub 
--------------------------------------------- -- 
 
¶17.  Growing aviation links and airport improvements offer a 
third alternative to river and road transport.  Air cargo at the 
Chiang Mai International Airport accounts for 60-70 percent of 
the total value of imports and exports for foreign companies at 
the Northern Region Industrial Estate's Export Processing Zone 
in nearby Lamphun.  Electronic assembly plants there rely on air 
cargo to ship finished components to assembly plants located 
primarily in Japan and other places in Asia, the EU and the U.S. 
 
 
¶18.   Chiang Mai airport's on-going USD 52.5 million upgrade is 
scheduled for completion in  2007, with the aim of establishing 
the northern city as an aviation hub for the Greater Mekong 
Subregion and South Asia.   The number of passengers at Chiang 
Mai grew from 2 million in 2003 to 2.9 million in 2005, with 
direct flights to Kunming and Jinghong in China as well as to 
Laos, Taiwan, Singapore, Burma, Malaysia, and Bangladesh.  With 
some routes available only once or twice a week, however, many 
northern travelers still find it more convenient to fly through 
Bangkok to these destinations. 
 
¶19.  Comment:  The growth in river, land, and air routes is 
creating more trade and tourism opportunities between Northern 
Thailand and China's southwestern Yunnan.  Educational exchanges 
are flourishing as well.  While each route has its problems - 
low water levels on the Mekong, incomplete sections on the 
highway, limited flight schedules by air - both the RTG and the 
northern provinces are serious about promoting the region as an 
economic corridor to China and for China to the Greater Mekong 
Subregion and are investing accordingly. 
CAMP