China-backed SEZ set to transform transport and manufacturing ties between China, Laos, Thailand and Myanmar.

Bridge-building: BRI backing is boosting interconnectedness across Southeast Asia.

Late last month, the Thai government announced plans to develop a cross-border Special Economic Zone (SEZ) in the Chiang Khong district of Chiang Rai, the country's northern-most province. Once established, it is believed that the new SEZ will act as a nexus for a number of Belt and Road Initiative (BRI) related projects under way in the country, as well as in neighbouring Laos and Myanmar.

More specifically, the SEZ will connect with the existing Mohan-Boten Economic Cooperation Zone (MBECZ), which straddles the Laos-China border. Ultimately, it is anticipated that the zone will act as a hub for the growing economic interconnectedness between Thailand, Myanmar, Laos and China.

Laos' own economic zone development programme has met with considerable success to date and the MBECZ is proving to be no exception. A recent update from the Ministry of Planning and Investment showed that the country's 12 SEZs were already home to 350 Lao and overseas companies, representing total registered capital of US$8 billion, with $1.6 billion of that having already been actively invested.

At present, the SEZ programme has created 14,699 jobs, with 7,564 of these going to local workers. That number is expected to rise imminently following the announcement that a further 40 companies are to set-up within the Boten Specific Economic Zone, which forms part of the MBECZ's core offering.

The Mohan-Boten project, a joint venture between China and Laos, was established in September 2015 at a cost of about $500 million with a remit to focus on agriculture, biotechnology, logistics and cultural tourism. The site was originally developed by the Yunnan Haicheng Group and the Hong Kong Fuxing Tourism and Entertainment Group.

In addition to Mohan-Boten, there are a further two large-scale China-backed clusters in Laos – the Vientiane Saysettha Development Zone and the Vientiane Thatluang Lake Specific Economic Project. The MBECZ, though, has a unique significance in that it interconnects with the border crossing point of the China-Laos Railway, a major BRI project that will ultimately provide the backbone for high-speed train connectivity throughout much of Southeast Asia.

As a consequence, the MBECZ's international trade and finance areas have already attracted investment from many of the companies that are engaged in infrastructure construction activities throughout the country, as well as those actively working on the development of the country's hydropower facilities. It is, however, those businesses that are directly involved with the roll-out of the China-Laos rail link that are most widely represented.

Given the size and prominence of these businesses, it is perhaps reassuring that work on the rail link seems to be proceeding with few notable hindrances. As of March this year, the project was said to be already more than 25% complete and well on course for its officially scheduled 2021 completion date.

Since then, a number of other major project landmarks have been passed, including the completion of the construction work on a 1 km tunnel – the line's longest subterranean stretch – at the end of October. On top of that, the primary construction work on the 7.5 km Nam Khone Bridge – the widest-spanning structure along the course of the route – has also been completed.

In a sign of further progress, October saw China begin to export petroleum products to Laos via the Mohan-Boten border crossing for the first time. Amid much official fanfare, PetroChina delivered 64 tons of diesel to the local importer – the Nationwide Trading Petroleum Public Company – at the China-Laos border. Prior to this first batch arriving, all oil and petroleum shipments to landlocked-Laos had been routed via Vietnam or Thailand.

The opening of this new conduit was given added significance by its clear importance to the future of the recently sanctioned, BRI-backed Laos-China Economic Corridor. Given the numerous construction projects this will entail, demand for fuel across Laos is only set to soar over the coming years.

Geoff de Freitas, Special Correspondent, Vientiane

Mainland money has triggered a property boom in Thailand's most sought-after locations, with corporate and individual investors increasingly keen to secure a stake in one of the most popular vacation destinations in the Asia-Pacific region.

Thai Smile: Looking to woo mainland holidaymakers with budget Bangkok flights.

Tourism in and between many of the countries along the route of the Belt and Road Initiative (BRI) is growing fast, with holidaymakers from China particularly prized for their big-spending ways. These aside, about 85 million trips are expected to be made to China from countries in the BRI region between 2016 and 2020, with the collective spend estimated to be about US$110 billion. After China, one of the other big beneficiaries is likely to be Thailand. In 2017, the country received more than 9.8 million tourists from China alone, representing about 28% of its total arrivals for the year.

For want of a somewhat unfortunate phrase, it has not all been plain sailing, however. In July this year, the tragic capsizing of a tour boat in Phuket, the island province that is one of Thailand's primary tourist destinations, resulted in the deaths of 47 Chinese visitors. Inevitably, this incident has deterred many mainlanders from visiting their southern neighbour.

An immediate consequence was that Chinese tourist arrivals fell 0.9% year-on-year. Although the figures are not yet in, the Thai Tourism Ministry expects the overall figures for August to show a far greater decline, with some estimating the drop to top 14%. As a result, the official target for Chinese visitors in July-December this year has been cut by 669,000 (11.5%) to 5.15 million.

Over the long term, however, the disaster is unlikely to derail the tourism sector's underlying growth. Nor is it set to deter the many overseas investors – with a significant proportion of them mainland-based – who have been only too keen to back the many property- and tourism-related developments spurred by the BRI.

As well as the many major BRI-backed infrastructure projects already under way – including new airports, rail links and road networks – a number of commercial operators have also looked to capitalise on the growing Thai-China tourism trade. Nok Air, a Bangkok-based budget airline, for instance, has opened a direct route between Pattaya and Zunyi, a prefecture-level city in China's Guizhou province, while also announcing plans to introduce flights to several other mainland cities, including Baotou, Linyi, Yichang and Nanchang. Meanwhile, Thai Smile, the budget-flight wing of Thai Airways, the national carrier, has launched a Bangkok-Datong service, linking the Thai capital with one of the most popular tourist destinations in the northerly Shanxi province.

In terms of larger-scale plans, moves are also afoot to develop U-Tapao, currently a joint civil-military airport, into a third Greater Bangkok gateway facility in line with the aims of the Eastern Economic Corridor (EEC) initiative, a key element of the BRI masterplan. The EEC initiative also extends to a planned upgrade to the tourism facilities of Pattaya and Rayong, two of Thailand's primary visitor destinations.

Both resorts have attracted substantial investment from China, a development that has triggered something of a property boom in the two locations. In fact, with 86% of Chinese property buyers first visiting the locations they ultimately invest in as tourists, this has seen Bangkok, as well as Pattaya and Phuket, enjoy a surge in real-estate purchases by mainland Chinese buyers.

Huang Xiaodan is the Founder and Chief Executive of Uoolu, a Beijing-based portal that matches would-be Chinese buyers with overseas properties. Highlighting the appeal of Thai property, he said: "Thai real estate stands out on account of its high value proposition, impressive rental yields and low thresholds. In total, Thailand represented half our total 2017 transactions, driving our turnover up by 307%."

Despite Thailand's clear success in attracting individual mainland investors into its property market, the corporate sector is proving to be a little harder to woo, at least according to Suphin Mechuchep, Managing Director of JLL Thailand, a Bangkok-headquartered commercial-real-estate agency. Assessing the current state of the market, he said: "While Chinese corporations have been actively looking for opportunities to invest in a wide range of real-estate assets in Bangkok and in the major resort markets, actual investment activity has remained limited. To date, most of the deals that have actually gone through have either been joint venture property development projects or acquisitions of stakes in Thai property development companies."

Indeed, a quick look at the projects underway clearly bears out Mechuchep's point. Among the currently active Thai-Chinese joint venture property developments is the Baba Beach Club Phang Nga, comprising 16 hotel villas, 104 residential suites and 42 villas, with the project backed by China's Junfa Real Estate and Charn Issara Development, a Bangkok-based property developer. China-based investors are also working with Thai developers on a number of other projects, including The Terminal Phuket, a mixed-use development, and Artemis Sukhumvit 77, a 30-storey residential project.

Looking to the future, the Thai cabinet recently approved plans for a Southern Economic Corridor (SEC), an infrastructure initiative comprising 28 projects at a combined cost of $6 billion. Stretching down the coastline southwest of Bangkok, it will transform the region into the Thai Riviera, a series of resorts that will form the backbone of the SEC. As part of the plan, four coastal provinces – Phetchaburi, Prachuap Khiri Khan, Chumphon, and Ranong – will be reinvented as high-end tourism hubs.

While the combined scale and scope of these tourism-oriented initiatives may seem daunting, it should be remembered that currently less than 10% of Chinese citizens – the primary target of all these developments – are passport holders, a clear indication of the vast growth potential of the mainland's outward-bound tourism sector.

Geoff de Freitas, Special Correspondent, Bangkok

With China and Thailand identifying joint economic objectives, Beijing has loosened its purse strings still further.

Thailand's Eastern Economic Corridor: On track to link-up with the BRI.

Following the Thai Government's recent formal adoption of the EEC (Eastern Economic Corridor) Act, it's now all systems go for the country's Thailand 4.0 development strategy, a programme expected to neatly dovetail into the objectives of China's Belt and Road Initiative (BRI). Moves to more closely align the Thai economic strategy with China's own international infrastructure development and trade facilitation programme began back in 2017, with the growing trade between the two countries now helping to oil the requisite bureaucratic wheels.

In a formal address last month, Prayut Chan-o-cha, the Thai Prime Minister, highlighted the existing synergy between the two developmental blueprints, saying: "It's natural, logical, and mutually-beneficial that the EEC should link-up with the BRI, as well as with other regional initiatives, such as the Regional Comprehensive Economic Partnership (RCEP) or even the Trans-Pacific Partnership (TPP)."

In order to fully capitalise on these emerging synergies, the two countries have already agreed to establish a joint economic development board. Billed as the Sino-Thai Joint Think Tank Forum, the body held its first meeting in Beijing earlier this month in association with the Chinese Academy of Social Sciences (CASS), with 80 senior academic and government officials from both countries jointly considering how best to capitalise on those economic initiatives deemed to be of mutual benefit.

Speaking after the conclusion of this inaugural session, Gao Peiyong, CASS' Vice-president, said: "Thailand's innovation-driven development program is hugely compatible with the goals of the BRI. Both countries have a genuine need to boost their international connectivity, while also promoting industrial upgrading.

"I see infrastructure, telecommunications, the digital economy, energy and internet technology as the five key areas for bilateral cooperation. I believe these should be the two countries' cooperative priorities for the next five years at least."

In terms of the actual EEC programme, at its core is the development of five economic clusters spread across three of the country's eastern provinces – Chaochoengsao, Chonburi and Rayong. Of the three, the Eastern Airport City Zone is one of the initial priorities. Centered around an upgraded U-Tapao International Airport, the focus will be on developing the facilities required to boost the throughput of tourists, with mainland-originated visitors now the single largest segment of Thailand's tourism sector.

A clear second priority is the Eastern Economic Corridor of Innovation (EECi), a large research and development park set to be sited in Rayon's Wangchan Valley. This will be followed by the development of the Digital Park Thailand (EECd), the Smart Park and the Hemaraj Eastern Seaboard Four Industrial Estate. In order to sustain and service these initiatives, a number of rail transportation projects, air terminal extensions and port enhancements will be initiated simultaneously.

China is already set to play a huge role in bringing many of those initiatives to fruition. In particular, it has taken a lead in the implementation of the BRI-backed Bangkok to Southern China via Laos high speed rail link. On top of that, to date more than 80 Chinese companies that have established manufacturing facilities, research centres or operational hubs in the specially-designated Thai-Chinese Industrial Zone.

As of the end of 2016, China's investment in the EEC had already exceeded US$30 billion. Now, with the more formal alignment of the two nation's development schemes, this figure is expected to soar over the coming months.

Geoff de Freitas, Special Correspondent, Bangkok