THE RESEARCH ON THE CROSS-BORDER TRANSPORTATION INFRASTRUCTURE: PHASE II Final Report 2) Increase in Traffic Demand and Regional Development Impact driven by Foreign Direct Investment (FDI) integrated with CBTI/CBTA Development (1) Estimate of FDI Impact and Scenario of Trial Calculation Estimation Process of FDI Impact Trial calculation was conducted to estimate the impact of FDI in selected areas. When FDI increases, the GRDP grows through interindustrial relationships. This increased GRDP is the input to the process of transport demand estimation explained in the previous section. The data used here is identical to that of transport demand estimate, and the process is almost the same. The process is shown in Figure 6.6.8. Transport Demand Forecast Model Figure 6.6.8 Estimation Process of FDI Impact Transport network with CBTI development Population by zone Travel Time between zones Calculation of GRDP Potential by zone FDI Estimate of GRDP by zone Growth in GRDP Estimate of traffic generation/attraction Estimate of traffic distribution Traffic assignment FDI Impact Estimates (a) Effect Estimated by Industrial Input-Output Table Since the industrial input-output (IO) tables of Cambodia and Lao PDR have not been worked out, that of Thailand made in 2000 was used instead. The target industry of FDI was selected from past trends. The investment effect in Thailand in 2000 was estimated by industry using the industrial IO table (see Table 6.6.4). The figures in that table reflect the sum of the effects on all industries when one unit of investment is made on a selected industry. For instance, a million-dollar investment in crops created a GDP growth estimated at 1.726 million dollars (1.726-fold increase from a million dollar) in the whole region. 6-36

Table 6.6.4 THE RESEARCH ON THE CROSS-BORDER TRANSPORTATION INFRASTRUCTURE: PHASE II Final Report Investment Effect by Industry Industry Investment Effect Rate Crops 1.726 Livestock and poultry; fishery 1.463 Forestry and logging 1.827 Mining and quarrying 1.638 Food, beverage and tobacco 1.225 Textiles, garments & leather products 1.200 Wood & paper products; printing/publishing 1.196 Chemical products; petroleum 0.918 Nonmetallic mineral products 1.214 Metal products, machinery, equipment., spare parts 0.701 Other manufactured goods 1.017 Electricity and water supply 1.432 Construction 1.061 Transportation 1.072 Post and telecommunication 1.830 Wholesale and retail trade 1.895 Banking, insurance, business services 1.760 Real estate & residential ownership 1.947 Public administration 1.502 Personal, social & community services 1.553 Source: Estimate by AREES, Industrial IO Table of Thailand, 2000 (b) Investment Effect of Bio-Fuel Plant In recent years bio-fuel plant projects have drawn attention in the Greater Mekong Subregion including Cambodia and Lao PDR. Its investment effect was estimated as shown in Table 6.6.5. The result shows that the US$ 23.7 million investment brought about an economic effect of US$ 71.6 million dollars, comprising processed fuel, fertilizer as by-product, decrease of oil import, and so on. Table 6.6.5 Investment Effects of Bio-Fuel Plants Investment amount (US$ mil.) Economic effect (US$ mil.) Forex By- Total Factory Agri l Land Others Fuel Total Saving product 23.7 15 8.7 0 19.8 19.8 32 71.6 Source: Estimated by the Study Team based on interviews with experts and field surveys. Investment Amount It was assumed that a total of US$24 million was invested in bio-fuel projects, as mentioned above. As for other selected industries, the investment amount was assumed to be half of the actual amount of FDIs in 2002, or some US$ 118.6 million in Cambodia and US$ 66.2 million in Lao PDR r (tables 6.6.6 and 6.6.7, respectively). 6-37

THE RESEARCH ON THE CROSS-BORDER TRANSPORTATION INFRASTRUCTURE: PHASE II Final Report Table 6.6.6 Total Investment in Cambodia, 2002 Industry Investment Amount (million US$) Primary Industry 40 Energy 4 Textile 17 Plastic 1 Apparel 14 Wood Processing 1 Other Secondary 15 Industry Infrastructure 18 Telecom 64 Other Services 16 Tourism 47 Total 237 Source: Economic Growth Strategy of Mekong Basin Countries Table 6.6.7 Total Investment in Lao PDR, 2002 Industry Investment Amount (million US$) Agriculture 6.40 Sewing 4.70 Craft 64.39 Wood Processing 5.47 Mining 0.75 Trading 10.07 Hotel/Restaurant 2.05 Consulting 0.72 Service 11.13 Electric Power 1,295.00 Construction 13.70 IT 12.94 Total 1,427.32 Sub-Total (Excluding 132.32 Electric Power) Source: Economic Growth Strategy of Mekong Basin Countries Scenarios of Estimate The trial calculation of the effect of investments was carried out for five FDI scenarios combined with the 5 CBTI/CBTA development cases examined earlier (see Table 6.6.8). It was assumed that the impact of FDI would be limited to within the province (zone). 6-38

THE RESEARCH ON THE CROSS-BORDER TRANSPORTATION INFRASTRUCTURE: PHASE II Final Report Table 6.6.9 Projected GDPs by Case and by Country (%) Table 6.6.10 Comparison of GDPs under Case-3 (CBTI Improvement Only) Case Country Investment Area Growth from Case-3 (%) Case-3A Lao PDR East-West Corridor Southern Area 22.1 Case-3B Cambodia South Corridor 8.1 Case-3C Lao PDR Vientiane Province 18.1 Case-3D Lao PDR Savannakhet 18.6 Province Case-3E Cambodia South Corridor 3.3 6-41

THE RESEARCH ON THE CROSS-BORDER TRANSPORTATION INFRASTRUCTURE: PHASE II Final Report Table 6.6.11 Changes in Trip Generation/Attraction by Country and by Case Passenger Traffic (%) Freight Traffic (%) Table 6.6.12 Comparison of Trip Generation/Attraction under Case-3 (CBTI Improvement Only) Case Country Region Passen ger (%) Freight (%) Case-3A Lao PDR East-West Corridor Southern Area 47.5 19.0 Case-3B Cambodia South Corridor 5.0 3.8 Case-3C Lao PDR Vientiane Prov. 15.5 13.6 Case-3D Lao PDR Savannakhet 12.8 22.7 Prov. Case-3E Cambodia South Corridor 1.7 1.2 The growth in trip generation/attraction by province is shown for Case-3A up to Case-3E in Figure 6.6.11. These cases assumed that investment was made in different areas, in addition to CBTI/CBTA improvement on the east-west and north-south corridor. The growth is high naturally in provinces that received investments. The growth of freight traffic is comparatively lower than that of passenger traffic. 6-44