VZCZCXRO2606
PP RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC
DE RUEHCHI #0217/01 3461118
ZNR UUUUU ZZH
P 121118Z DEC 06
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0351
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBK/AMEMBASSY BANGKOK PRIORITY 0619
RUEHOO/CHINA POSTS COLLECTIVE
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 0391
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 02 CHIANG MAI 000217 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV CH TH
SUBJECT: PROSPECTS OF INCREASED CHINA TRADE BRING BOTH ANTICIPATION 
AND FEAR 
 
REF: A. A) CHIANG MAI 193  (GOLDEN TRIANGLE TO BECOME GOLDEN GATEWAY) 
     ¶B. B) 05 CHIANG MAI 252 (BUILD IT AND THEY WILL COME: THAILAND PLANS NEW MEKONG PORT TO BOOST CHINA TRADE) 
 
CHIANG MAI 00000217  001.2 OF 002 
 
 
¶1.    Summary.   The scheduled late-2007 completion of the final 
section of a highway between Kunming and Bangkok will open a 
new, faster route for trade with southern China.   Two other 
routes, one via the Mekong River and another by road through 
Burma, are less attractive alternatives.   Plans for a second 
port on the Mekong in Chiang Saen are likely to be shelved while 
a future industrial estate along the Mekong remains in question. 
  End summary 
 
¶2.   Businessmen in Thailand's northern most province of Chiang 
Rai eye with mixed eagerness and concern the inevitability of 
greater trade with southern China, both via road and via the 
Mekong River.  According to Chiang Rai Chamber of Commerce 
President Pattana Sitthisombat, when the last 160-kilometer 
section of the Kunming-Bangkok highway is completed from Luang 
Namtha to Huayxay in late 2007, the road will offer an 18-hour 
drive from the Yunnan capital to Bangkok.   Others believe the 
approximately 1800-kilometer trip is more likely to take 24 
hours. 
 
--- Size matters  --- 
 
¶3.  Although the Chiang Rai private sector has promoted greater 
economic linkages with southern China for years (ref a), small 
and medium business people are nervous at competing with such an 
economic giant.   Former Chiang Rai Chamber of Commerce head 
Anan Laothamatas expressed concern that the completed 
Kunming-Bangkok Highway - with talk of 3,000 Chinese trucks 
rolling into Thailand daily -- would bring a flood of Chinese 
goods and services that could dominate the Thai economy.  A few 
development experts similarly warned of likely social, cultural, 
and health disruptions along the trade route.  Nevertheless, 
faced with Yunnan's population of 43 million and the 65,000 
members claimed by its Chamber of Commerce, northern business 
leaders see no option other than riding the wave as skillfully 
as possible. 
 
¶4.   The road under construction through Laos is generally 
considered the most reliable route for future trade between 
Thailand and southwestern China.  An alternate land route 
through northern Burma passes through insurgency areas while the 
oft-touted Mekong river route is subject to changing water 
levels controlled by the Chinese. 
 
¶5.   Completion of the much-anticipated road, however, has been 
hampered by construction delays as well as indecision over the 
bridge that will cross the Mekong between Ban Huayxay in Laos 
and Chiang Khong on the Thai side.  After negotiations with 
China, representatives from Thailand, Laos and the Asian 
Development Bank recently agreed to reduce the size of the 
bridge to fit a budget of USD 33.11 million, to be shared by 
Thailand and China.   Even with the funding hurdle overcome, 
however, the finished bridge may be another 3-4 years ahead, 
with design, construction start and a target completion date 
still to be decided. 
 
---  Mekong port activity grows --- 
 
¶6.   Although expected to be eclipsed once the road is 
completed, transport along the Mekong River continues to 
increase, especially for heavy products such as fuel and rubber. 
  The customs officer in Chiang Saen recorded Thai-Chinese trade 
import and export goods in the 2006 fiscal year at 263,000 
metric tons.   These numbers represent only imports and exports 
through the official port operated by the Ports Authority of 
Thailand; additional goods enter through 10 private customs 
bonded warehouses and ports lining the Mekong riverbank. 
According to the Water Transportation office in Chiang Rai, the 
number of Chinese boats on the Mekong River increased by 16 
percent to 1,600 boats in 2005 while the number of Lao boats 
increased from 340 to 520.   (No Thai boats operate on the river 
-- explanations variously include a lack of skilled Thai river 
pilots and the inside information Chinese pilots are said to 
receive about water release from the dams upstream.) 
 
¶7.    Tourism through the port is also growing, with 5-6 Chinese 
tourist boats operating 2-3 trips weekly on the Jing Hong-Chiang 
Saen route.  The one-way trip on a fast tourist boat takes about 
10 hours upriver and costs baht 20,000 (USD 570) per passenger, 
according to the Chiang Saen port manager.   In the first nine 
months of 2006, Chiang Saen Immigration recorded 7,358 tourists 
departing and arriving at the port.   Over half of these 
passengers, 3,696, were inbound Chinese, with another 1362 
outbound; Thai tourists totaled 500 inbound and another 500 
outbound, with other nationals showing 800 arrivals and 500 
departures. 
 
 
CHIANG MAI 00000217  002.2 OF 002 
 
 
¶8.   Despite these steady increases in port activities, plans to 
build a second port (ref b) at Chiang Saen dimmed with the 
demise of the Thaksin Shinawatra government.   Although the 
government compensated villagers 53 million baht to move off the 
160-acre site earlier this year, the interim Minister of 
Transport is now studying whether to go ahead with additional 
funding. When and if the new port is built, the current port 
would serve tourist boats exclusively. 
 
---   Doubts over industrial estate in Chiang Kong  --- 
 
¶9.   Additional Thaksin-era plans to promote trade with China 
included an industrial estate and Border Economic Zone in Chiang 
Khong.  Ratified by the cabinet in February (ref a), the 6,400 
acre estate would serve logistics, agricultural processing 
plants, high value garments, jewelry, and electronics.   This 
project has lost some of its luster since the Sept. 19 coup; 
both Chamber of Commerce head Pattana and the Chiang Khong 
district officer questioned whether Chinese investors would be 
interested. 
 
¶10.   Viable or not, the plan for an industrial estate in Chiang 
Rai has competition from two new Chinese investment schemes on 
the Lao side of the river, one across from Chiang Khong and 
another opposite the Chiang Saen port.   Locating manufacturing 
and farming projects in Laos would allow Chinese investors to 
bypass Thai regulations while still providing access to 
Southeast Asian markets. 
 
¶11.    Comment:    Northern business people remain eager to 
promote trade with China and support all proposals for roads, 
river transport, ports, and industrial estate development that 
will further strengthen economic relations and the border 
economy.   While somewhat fearful at the prospect of being 
overwhelmed by trade and investment from China, they are even 
more nervous at the idea that China might seek other trade 
routes through Vietnam and Burma.   Although tighter government 
budgets after the coup may delay or cancel some of the plans, 
the Kunming-Bangkok road link will eventually be completed, with 
inevitable big changes to this area of the country. 
MOORE