DANANG, Vietnam — As the East-West Economic Corridor nears completion, hope is mounting here that the 1,450-km highway will boost traffic and jump-start the economies it traverses, but Japanese companies have yet to warm to its potential.

At least one-third of the $1.7 billion project, which links Vietnam and Myanmar through Laos and Thailand, was funded by Japanese economic aid. The entire road, whose design was conceived in 1998 by the Asian Development Bank, will be completed in 2008.

The opening in December of the Second International Mekong River Bridge created a link along the road between Laos and Thailand, and this is already boosting cross-border traffic of people and goods.

That has convinced many Asian neighbors to set up businesses, including manufacturing plants, along the increasingly busy highway. Still, few Japanese companies see it as a key distribution route.

“The East-West Economic Corridor is sure to facilitate distribution of goods,” said Kenjiro Ishiwata, director at the Vietnam office of the Japan External Trade Organization. “But taking into account the poor infrastructure, it seems like we’re still a ways off before the full promise becomes evident.”

When completed, the corridor will stretch between Danang and Mawlamyine in southern Myanmar through central Laos and northern Thailand, which would make transporting goods between these countries faster and connect the Southeast Asian interior with convenient shipping routes to East Asia.

A prominent characteristic of the project, initiated by the ADB, a multilateral development agency focusing on the Asia-Pacific region, is that the highway does not pass through any of the four countries’ capitals.

Instead, the route runs through their most underdeveloped districts. Hopes are that facilitation of the transborder movement of people and goods will accelerate the pace of development in the poorest regions and thus reduce poverty.

One example of how this strategy is starting to pay off is the Lao Bao special economic commercial area, a 15,804-hectare industrial zone created by the Vietnamese government on the border with Laos in 1998.

Lao Bao has drawn Chinese and Thai companies — many of them manufacturing footholds supplying Thailand, Vietnam and Laos — with tax breaks and other government benefits. Of 45 projects operating, or scheduled to operate, in the area with combined investment of $120.6 million, 10 are foreign-run.

An increase in tourism is also creating opportunities.

After the opening of the Second International Mekong River Bridge, the number of visitors from abroad crossing the border grew by half to 500 a day. Most are from Laos and Thailand, but Vietnamese en route to Thailand and Laos also cross the border there.

“We can sell products to those people,” said Zeng Fan Yu, president of Sun Trading Developing Co., a Chinese firm that will open a huge shopping mall in Lao Bao in September.

Vietnam hopes that Japanese manufacturers use the corridor, for example, to connect parts makers inside the Thai interior with factories in Vietnam, with offices in Danang serving as their bases of operation.

For Japanese manufacturers doing business in Southeast Asia that are streamlining parts procurement and sales networks, Danang could be particularly attractive, JETRO’s Ishiwata said.

Indeed, industrial zones in Danang had already attracted 23 Japanese companies as of December, including micro-motor maker Mabuchi Motor Co. and fishing goods maker Daiwaseiko Inc., according to data compiled by Danang’s office in Japan.

Logitem Vietnam Corp. No. 2, a subsidiary of distribution company Japan Logistic Systems Corp., opened a routing center in Danang in 2002, hoping to capitalize on any opportunities created by the new artery.

“We came here because of the development plan of the East-West Economic Corridor,” said Shunsuke Saito, president of Logitem Vietnam No. 2.

The reduction in transport time — as long as 10 days by ship between Bangkok and Hanoi — was one of the main lures.

“Transporting goods from Bangkok to Hanoi by road used to take about five days. But using the corridor, the time is shortened to three days.”

However, despite efforts by the Vietnamese government to develop areas along the corridor, few Japanese companies are biting so far.

Unpredictable road conditions, poor infrastructure and lengthy customs clearance procedures are the main reasons behind their hesitation.

“There are no streetlights along the route and it’s pitch dark at night, making it pretty dangerous to drive,” Saito said.

Indeed, not a single Japanese company has set up in Lao Bao. Part of the reason is that infrastructure remains woeful, with a sewerage system that has yet to cover the entire area. Also, a lack of medical facilities discourages workers from relocating there.

And though there is ample capacity for handling cargo, and efforts are under way to improve and expand the port of Danang, Vietnam’s third-largest, progress with the project — financed by the Japanese Bank for International Cooperation — is slow due to lower than expected volume.

“The average facility operation rate is less than 50 percent, and we have to delay the expansion until we see a rise in demand for cargo handling,” said Nguyen Xuan Dzung, vice director of Danang port.

Because of these factors, insiders say it’s difficult to gauge how long it will be before Hanoi’s efforts to make the corridor a magnet for Japanese companies to central Vietnam bear fruit.

“We will have to fully utilize the East-West Economic Corridor and develop trade routes, one day extending it (via ships) to Japan,” Dzung said. “But it will take time.”

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