Vientiane-Hanoi Expressway Project

Abstract

The Lao People’s Democratic Republic (Lao PDR) faces development gaps due to its unique landlocked location. To turn the weakness of being ‘landlocked’ into the strength of being ‘land-linked’ in the Mekong Region, Lao PDR needs to play a greater role as a logistics hub and to promote its own manufacturing exports in tandem with enhanced connectivity with China, Thailand, and Viet Nam. Complete national transformation is crucial not only for the country’s industrial development, but also for accelerating the economic growth of the whole Mekong region. Against this background, the Vientiane−Hanoi Expressway (VHE) has been one of the most anticipated transportation projects between Lao PDR and Viet Nam. While these two countries concluded a memorandum of understanding on the VHE, the Lao PDR government endorsed ERIA and the Ministry of Public Works and Transport creating a working group with a keen interest in its early completion. This study project started out reflecting the Lao PDR government’s expectations, and this report is submitted on the basis of the output produced by the working group. This report: (1) explores the potentiality of the corridor between Hanoi and Vientiane as designated by the Greater Mekong Subregion Economic Development Program to obtain financial support from donors (e.g. ADB, World Bank, other official development assistance); (2) illustrates impacts on economies and industries of Lao PDR and surrounding countries such as China, Thailand, and Viet Nam via the VHE; (3) lays down industrial development strategies for Lao PDR, Viet Nam, and Thailand that take maximum advantage of the VHE; and (4) suggests appropriate financial mechanisms to construct the VHE. Thus, this report focuses on how Lao PDR and neighbouring countries can benefit from the expressway by strengthening relevant industries. In sum, our study analyses the economic and industrial impacts from the perspective of global value chains (GVCs) and production networks developed in the Mekong region.