Asia's Mekong region seen ripe for funding flow

Asia's Mekong region seen ripe for funding flow

By Robert Birsel

BANGKOK (Reuter): One of Asia's largest rivers, for decades
seen as a war-torn backwater, is being touted as the thread
linking the region's last great investment frontiers.

The Mekong river and the six countries on its banks, including
some of east Asia's poorest and most isolated areas, promise
untold opportunities, fund managers say.

"The opportunities are great," said Gene Simmons, managing
director of Finansa Thai which is organizing three investment
funds for the region worth $100 million.

The Mekong rises in southern China and flows south, where it
forms the borders between the opium-growing hills of Burma and
Laos, and then between Laos and Thailand. It continues on to
cross Cambodia and flows into the sea through a broad delta in
southern Vietnam.

"Because of the regional geopolitics these countries have been
(inward looking) for many years," Simmons said in an interview.
"Now it's clear that the rest of the world won't let them get
away with that and everyone's killing themselves to get in
there."

As well as vast hydropower potential, the region is seen as
offering opportunities in a host of sectors including tourism,
mining, transport and light manufacturing. But much investment is
necessary before its potential can be fully tapped.

The Asian Development Bank (ADB) estimates that the Greater
Mekong Sub-region will require more than $25 billion in
infrastructure expenditure and it is going all out to rally
private sector investment to the cause.

"A key challenge to project implementation is financing,"
Noritada Morita, the ADB's director of programs, told a
conference.

"The costs associated with most of the priority sub-regional
projects, particularly those in infrastructure, exceed the
financial capacity of the six governments and official
development assistance commitments."

As well as Finansa, which is organizing its funds with HG
Asia, the Crosby Group has recently announced a $25.6 million
fund that will invest in unlisted companies in the six countries.

"Governments in the Mekong region... are liberalizing their
economies, promoting foreign investment and regional cooperation
which is resulting in strong economic growth," Crosby said in a
statement.

Thailand's southeastern Asian neighbors, including Malaysia
and Singapore, are also keen to see that their businessmen get a
piece of the action and are pushing for a role in the planning
and development of the area.

Simmons and others said the ADB, which is investing $10
million in the Crosby fund, was a catalyst, helping to finance
large-scale infrastructure such as roads and bridges, thereby
facilitating private sector investment.

"The ADB is the one which has been really pushing projects
which have strong sub-regional elements," said Peter Brimbell, of
consultants The Brooker Group.

While stressing the opportunities for private investment,
Brimbell said not all areas would be equally attractive to
investors.

"Telecommunications is an area where the private sector will
come in without too much trouble. The power sector is a bit more
complicated. As for roads, it's very hard to imagine private
sector involvement and railways, forget it," he said.

Brimbell warned that investment in the region should be seen
as long-term and problems were bound to arise.

A $1.1 billion hydropower project in Laos, the Nam Theun 2
project being built by an international consortium, has been
stalled while the World Bank seeks further studies on its
environmental impact.

Despite the delay to the Nam Theun 2 project, a representative
of one of the companies involved said the region had great
opportunities.

"I would imagine that the Greater Mekong Sub-region has one of
the highest growth rates and private sector involvement in the
world," said David Iverach, of Australia's Transfield. "It's
competitive as hell."

Plans to develop the Mekong river have been on the drawing
board since the 1950s when the United Nations set up the Mekong
Commission, grouping the river's four lower basin countries --
Thailand, Laos, Cambodia and Vietnam.

But decades of war in Indochina, coupled with fundamental
disagreements over water usage, prevented any progress.

The four lower Mekong countries finally reached a broad
agreement on water usage last year which the Mekong River
Commission hailed as a landmark.

The commission, funded by donor governments, stresses
sustainable development, poverty alleviation and the need for
environmental impact studies.