From battlefield to marketplace: the Greater Mekong Sub-regionPosted by on May 22, 2012
The Greater Mekong Sub-region (GMS), comprising six economies along the Mekong River - all at different stages of development - is perhaps the most successful example of sub-regional economic cooperation in Asia. It has turned a once-bitter battlefield into a marketplace, [more] in the words of former Thai Prime Minister Chatchai Choonhavan.
The GMS economies - Cambodia, China (specifically, Yunnan Province and the Guangxi Zhuang Autonomous Region), Laos, Myanmar, Thailand and Vietnam - cover approximately 2.6 million square km and have a combined population of around 326 million. An area rich in natural and human resources, it has great potential to become a diverse sub-regional investment and production platform for regional and global markets.
The concept of a zone of economic cooperation in the GMS, an area that had been plagued by wars over many centuries, is relatively recent. Prior to 1990, most trade involving Cambodia, Laos and Vietnam was based on political alliances with the former Soviet Union and Eastern Europe. Myanmar had adopted an inward-looking centrally-planned economic system. Only Thailand had a history of resource allocation by free markets and an export-driven development strategy.
The collapse of the Soviet Bloc in 1989 resulted in the need for Mekong economies to find new trading and investment partners. Coupled with the remarkable sustained economic performance and increased economic integration of Southeast and East Asia, this expanded the scope for cooperation.
An early turning point was the Thai Lao Investment Forum, organised in Bangkok in 1991, by the Thai-Canada Economic Cooperation Foundation, with support from the Asian Development Bank (ADB). It affirmed that old adversaries could cooperate in their self-interest, and led to the launch of an ADB-facilitated sub-regional cooperation programme in 1992, with Japanese support. It provides significant technical and financial assistance, including from a variety of donor sources channelled through the ADB.
GMS cooperation is guided by pragmatism. The purpose is to support the development process beyond the limits of national boundaries, and to enhance the investment attractiveness of the GMS economies as a group. GMS countries established a flexible coordinating framework as part of the ADB-facilitated programme. Establishment of the GMS Business Forum, supported by ADB and the UN Economic Social and Social Commission for Asia and the Pacific (ESCAP), strengthened private sector involvement. The very senior level of participation – now including periodic meetings of GMS heads of state – signals strong and sustained commitment of the participating countries to the sub-regional cooperation process, and to specific priority projects.
The most significant success has been in infrastructure: in transport connectivity; in energy (eg, power projects and the basis for sub-regional power grid interconnection); and in telecommunications (eg, optical fiber interconnection). There has also been important progress in addressing non-physical barriers to sub-regional trade, including arrangements for single-stop inspection to simplify cross-border flows.
At the same time, some priority areas have lagged. Economic corridors, announced with great expectations both by governments and business, have been slow in materialising. This is largely because these corridors have not been sufficiently anchored in economically sound and commercially viable cross-border production, investment and trade linkages in the GMS, within the broader context regional and international markets.
A key challenge facing GMS economies is to link domestic enterprises more effectively to international markets to achieve sustainable growth for employment and incomes. This is particularly challenging for small-and medium-sized enterprises (SMEs) that are the main source of jobs and incomes in GMS countries but which face key constraints on their capabilities to access and compete on international markets.
The emergence of global value chains (GVC) as the organising framework for international production across a wide range of industries, as well as for trade and investment, is an important mechanism for integrating GMS enterprises – particularly SMEs – more effectively into the international economy.
As the next phase of sub-regional cooperation, this will position the GMS as an important production, investment and trade platform in the emerging and integrating East Asian region.