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Greater Mekong Subregion: Northern Economic Corridor Project in the Lao People’s Democratic Republic

sector: Transport | country: Lao, People’s Democratic Republic

An effective project implementation entity is important when multiple financiers are involved, in order to ensure uniform standards in the construction of the project road. For the ADB-funded section of the road, the Lao PDR government could keep track of expenditures and verify if timelines and guidelines are followed. This was not the case with the People’s Republic of China (PRC) and Thailand financed sections. For example, PRC used its own design standards for the road without conducting any dialogue with the Lao PDR government.

An agreement for collective maintenance is an essential element for the sustainability of subregional road projects, such as this project. A mechanism needs to be devised for the costs to be shared in proportion to the benefits received by the stakeholders.

Objective quantitative assessment of benefits and costs may help in the setting up a mechanism for fair distribution of costs across countries. The independent evaluation mission’s economic analysis indicates that the net present value of the project for the Lao PDR could be made positive if higher grant elements were used in the financing by the PRC and Thailand.

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