Eastern Economic Corridor

Trade activity on the Eastern Corridor is concentrated in the south around Ho Chi Minh City and in the north around Ha Noi. The link between Ha Noi and Ho Chi Minh City, the AH1, is important domestically, but trade activity tends to be concentrated around the two cities rather than between them.

There are three spurs that branch out from Ha Noi. The most important link in the north is between Ha Noi and Hai Phong, which is used for external trade passing through the port. A link between Ha Noi and Lao Cai, which is being developed by ADB, is considered important in the context of bilateral trade with transshipment at the PRC border. As a rail corridor, the line on the PRC side has yet to be reopened and the rail link between the border and Ha Noi is used mainly for apatite – a mineral used in the manufacture of fertilizer – cargo. There is also a northeastern spur between Ha Noi and Nanning, but freight volumes on this route are significantly less than through Lao Cai. All three spurs are currently being developed, and on completion should eliminate most physical infrastructure constraints.

A key consideration is the potential to route Kunming traffic through Hai Phong port. A logistics strategy was included in the development of the Lao Cai–Ha Noi motorway link, but did include other traffic flows. The possibility that Chinese exporters and importers will use Hai Phong appears weak. There are several key reasons for this.

• PRC sells its exports based predominantly on ex-border warehouse or through the free on board (FOB) Chinese port. To use Hai Phong port, an exporter would have to persuade the overseas importer to take the delivery at the Hekou border or sell at Hai Phong, accepting the transit cost across Viet Nam. Neither possibility is easy and is not compatible with PRC policies at other land borders.
• Hai Phong suffers from draft problems, indicating that it will remain a feeder service port for the foreseeable future and placing it at a disadvantage compared to Shenzhen and Hong Kong ports. Many of the feeder ships calling at the Hai Phong hub are out of these ports.
• Extra facilitation costs of transiting through another country compared with a domestic movement within the PRC suggest that any distance advantages would be neutralized by these extra costs.

The conclusion is there may be limited traffic, but not the major flows suggested by previous assessments.

It can be argued that the lack of through-transport across the PRC borders is a potential barrier to trade. This system of selling from border warehouses or ex-transport vehicles at the border entails overall transport inefficiencies. This trading approach is used at all PRC land borders with restrictions on access by foreign vehicles beyond these designated border markets. Chinese vehicles do transit into neighboring countries, although usually on a restricted basis. It can also be argued that traders prefer this system, as they do not have to concern themselves with internal transport and border costs within the PRC, thus making it easier to trade. There appears to be limited pressure from traders to change the system within the foreseeable future.