UEM-V

CLMV COUNTRIES
Group-8 11/24/2013

The membership of CMLV (Cambodia, Myanmar, Lao and Vietnam) in ASEAN had given corporate development in the Mekong Sub region a new dimension and an added advantage. The objectives of many greater Mekong region are in alignment with ASEAN objectives. Many CMLV infrastructure projects are part of ASEAN wide programs. Also, recently CMLV along with Malaysia, Philippines, Singapore, Thailand and Brunei Darussalam have signed a Shareholders agreement for the establishment of the ASEAN infrastructure fund (AIF). An ASEAN comparative study on labor laws in the ASEAN member states led by CMLV aimed at promoting workforce competitiveness, occupational health and safety and progressive labor practices has been completed and is ready to be published. As a result, many ASEAN programs are being carried out at much rapid pace with GMS. ASEAN is now using CMLV (or GMS) as a framework to integrate these four members more quickly with the rest of its members. CLMV (Cambodia, Lao, Myanmar, Vietnam) share some common characteristics, such as they are transition economies, prevailing high poverty incidence, weak institutions to support market economies and their economies are agro-based. While the per capita GDP levels when compared to other countries are much lower, the GDP rate is higher than those in the others (except Myanmar). Country Per Capita GDP in 2006(US$) Brunei Darussalam 31,076 Cambodia 598 Indonesia 1,920 Lao PDR 736 Malaysia 6,880 Myanmar 216 Philippines 1,653 Singapore 3,5206 Thailand 3,740 Vietnam 837 Source: Website of ASEAN Secretariat Annual GDP Growth Between 2000-2007 (%) 7.8 10.0 5.1 6.6 5.7 NA 5.2 5.1 5.0 7.7

This makes the fact very clear that the economies of CLMV are in fact growing dynamically. This also can be seen from the sectoral share in GDP of these countries, where the share of secondary industries has risen in the last two decades. This growth is significant because the acceleration of industrialization is deemed to be critical for sustenance of a stable economic growth.

Table 2 Industry-wise Share in GDP (%) 1990 2000 2006 Primary Secondary Tertiary Primary Secondary Tertiary Primary Cambodia 55.6 11.2 33.2 37.9 23 39.1 31.7 Lao PDR 61.2 14.5 24.3 52.6 22.9 24.6 42.6 Myanmar 57.3 10.5 32.2 57.2 9.7 33.1 NA Vietnam 38.7 22.7 38.6 24.5 36.7 38.7 20.4 Source: Asian Development Bank, Key Indicators for Asia and the Pacific 2008 Challenges ahead of CLMV and the role of regional partners Cambodia Starting from a very low base, Cambodia is one of the fastest-growing economy, with doubledigit growth rates and macro-economic stability except in 2008 crisis. Many development challenges persist, including a high poverty rate, wide income gap, poor human resource and low production base. Main sectors that contribute to its economic growth are the tourism, garment industry, construction and agriculture. It implemented the 3rd Five Year Plan, the National Strategic Development Plan (NSDP; 20062010), and Governments Triangular Strategy, which focuses on growth, employment, equity and efficiency. Cambodian has very few finished products, and that too of such poor quality that they cannot compete with similar products imported from neighboring countries. Human resource development and promotion of trade and investment are very crucial for future development (Chap, 2008a) Lao PDR Lao PDR has been facing numerous challenges and is one of the least developed countries (LDCs) in the world. Some of the areas Lao is working are(1) Infrastructure development main focus on land-linked countries and economic corridors; (2) Strengthening the private sector by promoting SMEs-financial, labor, and real estate markets; (3) Tourism industry by promoting eco-based, and historical tourism in the country as a sustainable tourist friendly destination; Myanmar Four economic objectives (Basic Economic Guidelines towards Democratic State) are: (1) All-round development of other sectors of the economy as well;

Secondary 27.6 31.8 NA 41.5

Tertiary 40.8 25.6 NA 38.1

(2) Proper evolution of the market-oriented system; (3) Economy development by inviting technical know-how and investments from both sources inside the country and abroad; and (4) Initiative to keep the national growth in hands of the state and the national peoples. Vietnam Main development objectives for the years to come: (1) To sustain high economic growth; (2) Exit from the status of a poor country by 2020 (3) To become a modern-oriented industrialized country by 2020; and (4) To make the slogan Prosperous people, a forceful country, and an equitable, democratic and civilized society a reality. MANAGING THE PHASE OF REFORM AND INTEGRATION:

The strong trade and FDI growth in CLMV countries have been a result of their open economy reforms. The trade FDI nexus, institutional and policy reforms undertaken in trade and investment have improved the business environment and have attracted both domestic and foreign investors in export oriented industries.

However, greater openness to foreign trade and investment has revealed greater weakness in the economy which would necessitate high increased in-depth reforms at later stages. Despite all the rapid growth of industries in exports in Cambodia, Laos and Vietnam; the data for trade shows the time and cost constraints hampering domestic exporters and importers at the border. They can act as serious obstacles to participating in the supply chain globally and also regionally, especially for time sensitive goods such as high value apparels and electronic products whose production depends heavily on the components that need to be imported across the borders. Improving poor infrastructure, policies and regulations that facilitate customs procedures and improve inland transport and logistics services would be very important especially for land locked Lao. Further, the countries should try to achieve more transparent and liberal trade regimes in the CLV countries. WAY FORWARD: FURTHER REFORM FOR BETTER GROWTH AND OPEN TRADE CAMBODIA: For Cambodia what is important is to remove impediments to investment and start attracting diversified investment in sectors other than apparels. Cambodias total investment as a percentage of GDP has been remained flat in 2000s compared to that of Vietnams. Increasing both domestic and foreign investment as part of its five year plan is key to promote industrial development and generating more and better jobs.

Development and utilization of SEZs in CLMVIn spite of their various location advantages and well-educated and low-waged labor forces CLMV economies did not contribute enough in East Asian production and distribution networks. Special Economic Zones (SEZs) including Export Processing Zones (EPZs) could be a good tool to reduce transaction costs in the CLMV economies. SEZs will provide well-developed infrastructure with suffice capital investments in the production sites. SEZs will provide efficient

administrative procedures, including one-stop services for import and export. These business services will include offshore banking and logistics, and governmental support for human resource development and technological transfer. However, these services will be made possible in SEZs by establishing them in insulating areas of the country where the investment climate is poor. It can be located at the border areas that will connect the regional and global economies through neighboring countries such as Thailand. Transport network (hub) development The CLMV countries are blessed with excellent potential of geographic advantage: they face both the Pacific and Indian Oceans and are also juxtapose to growing Asian countries such as China, India and Thailand. They need to develop a good logistics network that links major cities of above countries and CLMV. Main routes of these economic corridors should be extended and connected with each other by several branch links. In this development, the existing policies of public-private-partnership (PPP) should be improved, in order to promote efficient development and operation of the infrastructures. To facilitate trade along these economic corridors, the ASEAN Framework Agreement on the Facilitation of Goods in Transit should be implemented continuously. Good connections will encourage relocation of industries to clusters in the SEZS. In order to effectively utilize the newly constructed infrastructure for development, the governments need to introduce some specific policy measures for attracting industrial firms to the sites within CLMV.

http://www.eria.org/publications/images/pdf/PDF%20No1-1/No.1-1-part17.DEVELOPMENT.pdf