17th GMS Ministerial Conference Phnom Penh, Cambodia 2 August 2011 GMS-BF Progress Report: GMS-FRETA and Other

Activities Mr. Oudet Souvannavong, Secretary General GMS-BF

The Greater Mekong Sub-region Business Forum (GMS-BF) is a multicountry, independent, non-government organization, and a joint initiative of the Chambers of Commerce of the six GMS countries. It plays an important role in promoting awareness of trade and investment opportunity in the GMS. The GMS-BF expanded its organization to include corporate members, which represent national and multinational companies operating in the Mekong Subregion. During the first Semester 2011, GMS-BF extended its membership to 3 new corporate companies. The GMS-BFs role is to provide feedback to senior officials and leaders of the GMS on trade and investment through reporting to economic corridors forums such as todays ECF 3 conference, to GMS Ministers Meetings and to GMS Leaders at the GMS Summits. GMS-BF activities provide feedback on the implementation of the Customs Transit System, promote business operations under established legal framework, and promote business networking along the Economic Corridors. The GMS-BF has established private sector led working groups to oversee the development of trade and investment along the Economic Corridors. The GMS-BF Trade and Transport Facilitation Working Group (GMS-BF TTF), which reviewed the business environment and the implementation of the CTS in all GMS Economic Corridors and prepared the establishment of the GMSFRETA. The second GMS-BF Working Group is on Investment and Finance. This Group is supporting the revitalization of the GMS Sub-regional Investment Working Group and promoting SME Finance. GMS-FRETA At the Seminar on GMS Logistics in Nanning on 17-18 August 2010 a consensus was obtained to speed up the establishment of GMS-FRETA. Following the Nanning Consensus, the GMS-BF Board Meeting on 28 February 2011 approved establishment of GMS-FRETA Office in Lao PDR under the umbrella of the GMS-BF. With the assistance of the ADB, GMS-BF engaged a resource person to prepare the legal documents for the incorporation of the Association. The Constitution, Terms of Reference and Article of Association were discussed with Government and Private Sector stakeholders. The first GMS-FRETA consultation was held in Kunming, China on 18/5/2011 in conjunction with the GMS North-South Corridor Symposium. The second consultation was held in Vientiane, Lao PDR on 23/5/2011. The third consultation was held in Phnom Penh, Cambodia on 30/5/2011 together with the consultation on the GMS-SEC Blue Book. The fourth consultation 1

was held in Bangkok, Thailand on 3/6/2011. The fifth consultation was held in Hanoi, Vietnam on 10/6/2011. And the sixth consultation was held in Yangon, Myanmar on 14/6/2011. Following the outcomes of the consultations, the legal documents were improved and submitted to the GMS-BF Board Meeting in Bangkok (with VDO Conference link to Beijing and Phnom Penh) on 27th July, 2011. At the Board Meeting, the Board Members involved in the incorporation of the Association signed the GMS-FRETA Memorandum of Agreement. The Secretary General has been authorized to sign and send the letter and statement to the GMS Ministers for opening the Associations office in Lao PDR. The following activities for GMS-FRETA will be resource mobilization and the call for a General Assembly and election of the Associations Office Bearers. GMS-FRETA will be established along the lines of the model developed by the Central Asia Regional Economic Cooperation (CAREC). The establishment of GMS-FRETA aims to enhance the capacity of local operators in the field of freight transport, freight forwarding, logistics, customs broking and other trade facilitation services along the GMS corridors. At present there is no organization which includes both trucking and freight forwarding elements as well as customs brokers and traders. GMS-FRETA will focus specifically on transport routes and issues within the GMS, and not on worldwide traffic flows. The participants in the GMS-FRETA consultation meetings confirmed the necessity of the establishment of GMS-FRETA. A number of issues and recommendations were raised as follows: GMS-FRETAs institutionalization and activities should be recognized by the GMS Governments and be incorporated into the GMS Governments programs especially into the activities of the National Transport and Trade Facilitation Committees. A step-by-step and area-focus approach needs to be taken in planning the road map for the activities of GMS-FRETA. The focus will start with the inland road transport of goods and subsequently expanded to cover multimodal transportation including air, sea, river and rail transportation. As the full implementation of the CBTA and the harmonization of GMSs CTS will take time to complete, GMS-FRETA shall, in parallel, focus on short term targets, practical measures which would reduce cross-border freight and transport costs, allow secure under-shade trans-loading of goods, and enhance business-to-business networking to guarantee return loads. GMS-FRETA shall facilitate access to finance for business operators in Cambodia, Myanmar, Lao PDR and Vietnam, in order that they can upgrade trucking and logistic facilities to meet with internationally required standards. Pilot projects should be set up for selected companies in those countries to lease equipment and/or borrow money from finance institutions on preferential terms. After completion of the Pilot projects the preferential terms can be offered all bona-fide GMS-FRETA members GMS-FRETA shall prepare harmonized GMS standards in accordance with which the members must operate. It is anticipated that all GMS government institutions shall recognize the standard certification. An independent professional private certification body such as SGS or 2

equivalent shall operate the GMS-FRETA standard certification under the supervision of and at the direction of the GMS-FRETA. GMS-FRETAs effectiveness in advocacy and problem solving will depend on the capacity of the association to operate on the ground in each country. It is recommended to establish GMS-FRETA branches and offices in all important ports and at all important border crossing points. To avoid duplication it is recommended to use trucking or freight forwarder associations offices as locations for the GMS-FRETA offices. Strengthening the capacity of local trucking and freight forwarder association, among other things by such co-locations, shall be one of the main roles of GMS-FRETA. GMS-FRETA shall not be a shipment transit guarantee organization but shall rather be an organization to achieve and certify the conformity of its members to high standards of corporate governance, conduct and professional technical excellence for international and national insurance companies and customs organizations. The current national shipment transit guarantee system using bilateral transport rights and national customs transit agreements is not a critical constraint on the movement of cargo for the private sector and replacing it through a multilateral system, whilst desirable, is not a high priority for the private sector. There is also a potential important role for GMS-FRETA to support its members and represent their interests in cases of conflict between GMS countries. Such conflicts virtually never spring from disputes over international transport but border closures and transit stoppages often result from the conflicts. It is important that GMS-FRETA engage to agree with the governments concerned procedures, which allow mutually beneficial trade to continue whilst always fully respecting the national security concerns of the countries concerned. The GMS-BF took the initiative to establish GMS-FRETA for fostering transport and trade in the economic corridors. The establishment of the organization will be easily done. However, starting up the operation of the association will be more difficult because it requires widespread acknowledgement and commitments from all stakeholders, whether from the public or private sectors. Therefore, there is a need for a support program from the GMS governments, ADB and our development partners to ensure the institutionalization, good governance and operation of the association. The action plan of the GMS Trade and Transport Facilitation Program which foresaw foundation of the GMS-FRETA in 2014 needs to be revised and support needs to be channeled starting today already. A letter and statement for the establishment of the GMS-FRETA Office in Lao PDR is today presented to the GMS Ministers at this conference. GMS-BF Secretariat anticipates that the association be established before the Summit in Myanmar in December 2011. SME Finance and Sub-Regional Working Group on Investment GMS-BF proposed to develop a more practical strategy for SMEs to participate in global value chains. In this, SMEs can specialize in supplying 3

specific product components, acquire better technology and skills, and over time, build their competitive advantage in the international market. The lack of access by SMEs to credit for financing their exports is a major constraint to their ability to participate in the export market. The GMS-BF sees the need to help them address this problem by bringing up the idea of a scheme to encourage banks to lend to SME exporters and export suppliers for working capital purposes. The scheme involves the setting up of a SME Regional Development Fund that will provide technical assistance to and equity investments in country-based or local guarantee institutions that will in turn underwrite export financing for SMEs. Such a regional fund may be established with equity investment to be sought from GMS governments, banks, and large corporations doing business in the GMS, as well as regional and international development finance institutions. To address the above issues it is important to revitalize the GMS SubRegional Investment Working Group (SWIG). At the 6th SWIG meeting in Vientiane in 2010, GMS-BF proposed to take the secretariat role of the SWIG, and would like to consult with the GMS Government and ADB on such initiative. Preparation of the GMS Business Forum along side with the GMS Summit At the 2nd GMS-BF Board Meeting 2011 on 27 July 2011, The GMS-BF agreed to organize with the Union Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) the GMS Business and Investment Conference (GMS-BIC) in Nay Pyi Taw, Myanmar on 19 December 2011. The BIC will gather about 150 participants and guests from the GMS and partners countries. The theme of the conference will follow the theme of the GMS Summit and will put on the view of the business sector to the New GMS Strategic Framework (GMS-SF) 2012-2012. The result of the Conference will be reported to the GMS Leaders in the afternoon of the same day. GMS-BF is seeking assistance for the GMS Ministers and ADB on the directions and issues that maybe of important concern and interest to the business sector, so the preparation of the GMS-BIC would be in line with the preparation of the GMS Summit. Transfer of GMS-BF Chairmanship The Chairmanship of Mr. Sun Anmin, Vice-President of the All China Federation of Chambers of Industry and Commerce (ACFIC) will end this year. At the 2nd GMS-BF Board Meeting on 27 July, 2011, Cambodia Chamber of Commerce and Industry (CCCI) announced that it is not ready to take the chairmanship because of the Chamber is going to Chair the ASEAN Business Advisory Council (ASEAN-BAC). The Board Meeting agreed to transfer the chairmanship for 2012-2013 to UMFCCI. Mr. U Win Ang is designed as the incoming Chaiman of GMS-BF. After the reporting to the GMS Leader on 19 December 2011 an official handling over of Chairmanship will be made in front of the Leaders. Report End. 4