Border Economies in the Greater Mekong Sub-region

M. Ishida

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137302892
• eBook ISBN: 9781137302915
• Topic: Business
• Subtopic: Business General
• Index: Business

A group of internationally recognised experts examine the recent trends of cross-border movements of people, goods and economic activity at fifteen major borders in the Greater Mekong Sub-region with the aim of predicting the long terms future for this region.

Part I

General Views

Prologue: Progress in Cross-Border Movement and the Development of Border Economic Zones

Toshihiro Kudo and Masami Ishida

Introduction

Since the inauguration of the meeting attended by the ministers of Cambodia, Laos, Myanmar, Thailand, and Vietnam, along with the representative of Yunnan Province, in 1992, subregional economic cooperation has been driven by the initiative of the Asian Development Bank (ADB). This sub-region has been named the “Greater Mekong Subregion” (GMS), reflecting the fact that the Mekong River runs through these five countries and the one province, including the Mekong River Basin. In 2005, a new area, the Guangxi Zhuang Autonomous Region, which shares a border with Vietnam, was added to the subregion, even though the Mekong River does not run through this area.

Since its inception there has been a focus on the development of international primary roads or cross-border transport infrastructure (CBTI). In 1998, the concept emerged of an “economic corridor,” which is designed to disperse the benefits from developing the CBTI into remote rural areas through the use of value chains of production. In 2001, the routes of three economic corridors, the East–West Economic Corridor (EWEC), the North–South Economic Corridor (NSEC), and the Southern Economic Corridor (SEC), were designated, and they have been developed and improved as flagship projects of the Greater Mekong Sub-region Economic Cooperation (hereinafter called “GMS Program”). As a result of the development of these economic corridors, there has been an enormous expansion in the cross-border movement of people and goods, as is detailed in the following chapters.

Turning our eyes to the operation of these economic corridors, however, we see that they are utilized as logistics routes connecting metropolises such as Bangkok, Hanoi, and Ho Chi Minh City. Unfortunately, it has taken more time before the benefits of such development have poured into the remote rural areas. In addition, a considerable number of residents and businessmen in the underdeveloped areas such as those in Cambodia and Laos are concerned that their economies may not receive any benefits from the development of the economic corridors. It has been an important challenge to support underdeveloped countries and rural areas that do not have industrial agglomeration. As one solution, the development of border areas, which were regarded as peripheries, has been focused in the GMS.

This book offers an account of the increase in the movements of people and goods at border areas and the emerging border areas developed as “Border Economic Zones” in the GMS. In addition, this introductory chapter outlines the features of the GMS, detailing its geography and history, and explaining the fundamental concepts that appear in the following chapters and also the mechanism of the “rise and decline” of the border areas. Section I.1 gives the economic indicators and geographical features of the GMS. Section I.2 historically reviews the GMS. Section I.3 explains the effects of the increase in the movements of people and goods at border areas. Finally, section I.4 considers the development possibilities of border economic zones and discusses the mechanism of the rise and decline of the border areas.

I.1 General views regarding the GMS

The Mekong River has its source in Qinghai Province and runs through the Tibet Autonomous Region and Yunnan Province of China. From there, it runs as a border between Myanmar and Laos and then as a border between Laos and Thailand (partly runs through Laos), penetrating Cambodia and then pouring into the South China Sea at the Mekong Delta Area in Vietnam. Its length is longer than 4,800 km. As stated above, the area, which covers Yunnan Province, Myanmar, Laos, Thailand, Cambodia, and Vietnam, has been given the label of the GMS, and the GMS Program has thus been implemented in this subregion. In 2005, the Guangxi Zhuang Autonomous Region was added to the GMS, and a policy of economic cooperation has been implemented in the five countries and two regions.

Table I.1 shows the economic indicators of the five countries and two regions of the GMS as of 2009. The largest parts of the area are to be found in Myanmar, Thailand, and Yunnan. The area totals 2,581,272 km² and is equivalent to 58.2% of the entire area of ASEAN. With regard to the population, Vietnam has the largest, followed by Thailand, Myanmar, Guangxi, Yunnan, Cambodia, and Laos, respectively, and the total population of the entire region is 328.8 million – equivalent to 55.6% of ASEAN. Regarding economic size, Thailand is the largest and occupies more than 40% of the entire economy, followed by Guangxi, Vietnam, and Yunnan, respectively. By contrast, the shares of Myanmar, Laos, and Cambodia are smaller; at 4.1%, 0.9%, and 1.7%, respectively. The entire economy of the five countries and two regions totals US$605.4 billion, equivalent to 40.5% of the entire ASEAN region. Finally, in respect of GDP per capita or GPP per capita, Thailand, Guangxi, Yunnan, and Vietnam are all higher than US$1,000, showing US$3,950.8, US$2,339.0, US$1,975.8, and US$1,104.2, respectively. At the other end of scale, the GDP per capita of Cambodia, Laos, and Myanmar is smaller than US$1,000; at US$692.6, US$942.1, and US$419.5, respectively. Seeing the value in parentheses, the income gap between these countries and Thailand equals 4.2–9.4 times.

Table I.1 Economic indicators of GMS member economies, 2009

Notes:

1 The total values of the GMS mean the aggregated values for the area, population and GDP and averaged values for the density and GDP per capita.

2 The values in the parentheses of the area, population and GDP mean the shares.

3 Each value in the parenthesis of the population density means an index with assuming that the averaged population density of the GMS is equal to 100.

4 The values in the parenthesis of GDP per capita mean an index with assuming that that the value of Thailand is equal to 100.

Source: Website of ASEAN Secretariat (http://www.asean.org/news/item/selected-key-indicators) and Statistical Department of People’s Republic of China (2010).

From the available figures it is possible to divide the five countries and two regions by GDP and GDP per capita as of 2009, with a border line of US$1,000: Thailand, Guangxi, Yunnan, and Vietnam are bundled together and are referred to as “GMS Middle-Income Countries/Regions”; and Cambodia, Laos, and Myanmar are also bundled together and are referred to as “CLM countries” in this book. Further, among the GMS Middle-Income Countries/Regions, Thailand, Guangxi, and Yunnan are categorized as “GMS Higher-middle Income Countries/Regions” and Vietnam is categorized as “GMS Lower-middle Income Countries.”

Let us consider Figure I.1, bearing in mind the income levels of the five countries and two regions. Thailand is surrounded by the CLM countries, and Yunnan, Guangxi, and Vietnam surround the CLM countries. In other words, a belt of CLM countries play a role in connecting the three surrounding Middle-income Countries/Regions of Yunnan, Guangxi, and Vietnam with Thailand. The three economic corridors connect the Middle-income Countries/Regions and the CLM countries and also connect the Higher-middle Income Regions (Yunnan and Guangxi) and the Lower-middle Income Countries (Vietnam). In other words, at each of the borders on the three economic corridors, a higher-income country/region and a lower-income country face one another. When the cross-border movements of people and goods become liberalized, such income differences at the borders can lead to an increase in potential dynamism. This is one of the reasons why we focus on the economies at the border areas, including the major ones, which are shaded in the figure.

More interestingly, considering a map showing the surrounding countries of the GMS in Figure I.2, the GMS can play a role in connecting bridges between China and India, China and ASEAN (Malaysia and Singapore), and India and ASEAN. For instance, in recent years, a logistics firm is providing a service connecting Shanghai and Singapore by way of the EWEC and the route penetrating the Malay Peninsula. In the near future it is anticipated that a road system will be constructed that will connect China and India, as well as India and ASEAN. Furthermore, India, China, and ASEAN cannot be connected without passing through each of the CLM countries. Thus, it is clear that the importance of the economic development of the CLM countries will be affected by the connections of India, China, and ASEAN.

Figure I.1 Map of the GMS and the borders focused in this book

Source: Drawn by the authors.

Figure I.2 Location of CLM countries in East, South-East and South Asia

Source: Drawn by the authors in accordance with a world map.

I.2 The end of the Cold War to the ear of regional integration

I.2.1 The end of the Cold War and regional integration

In the GMS, ethnicities tend not to be clearly separated by borders. Rather, the borders are characterized by a mosaic of different ethnicities. There are many instances in which only one ethnic group with a common culture, language, and history inhabits a cross-border area. In such areas, cross-border trade used to be quite active, and “indigenous economic zones” were formed naturally.

Such “free” economic activities, however, were forced to stagnate because of the Cold War. In Vietnam, it was 1975 when North Vietnam and South Vietnam was unified following the Indochina War (1949–1954) and the Vietnamese War (1959¹–1975). Even following the unification, Vietnam fought with China at the border areas in 1979. The civil war in Laos also ended in 1975. In the case of Cambodia, it was 1991 when people started to enjoy peace again after the 1970 coup by Mr Lon Nol and the era sunsequent of Khmer Rouge rule (1975–79). During the era of the Cold War, tensions had continued at borders such as at those between Thailand and Laos and between China and Vietnam (Ishida 2006, pp. 2–3).

One of the biggest turning points in terms of the easing of tensions in the region was the establishment of a series of market economies and open door policies in formerly socialist countries. In 1986 Laos declared Chintanakan Mai (New Thinking) and the Vietnamese Communist party also adopted the policy of Doi Moi (Renovation). In Burma (Myanmar) in 1988, the State Law and Order Restoration Council (SLORC) began the transition from a centrally planned economy to a market economy that abandoned reclusive Burmese socialism after suppressing demonstrations for democratization through the use of arms. In a similar vein it was in 1992 when the Chinese Communist Party Congress adopted the “Socialist Market Economy.” Cambodia also furthered the market economy after the general election in 1993 under the surveillance of the United Nations Transitional Authority in Cambodia (UNTAC). Furthermore, the prime minister of a free market country, Thailand, Mr. Chartchai Chunhavan advocated “the conversion of Indochina from a battlefield to a market” in 1988.

Through the 1990s this wave of market liberalization created “local economic zones” by undermining the walls at the borders. These local economic zones, such as the South China Economic Sphere, Quadrangle Economic Zones, and the Sea of Japan Economic Grouping, contained transitional countries, while the growth triangles in the Southeast Asia were exceptional (Nagai et al. 1993, p. 1). These proposed and realized local economic zones contained both higher-income countries and lower-income countries. As well as such local economic zones, there were many border areas between one of the GMS Middle-income Countries/Regions and one of the CLM countries and between the Higher-middle Income Regions and Lower-middle Income Regions.

This wave of market economies and open door policy pushed the socialist countries in Southeast Asia to become members of ASEAN. Vietnam, Laos, Myanmar, and Cambodia became member of the organization in 1995, 1997, 1997 and 1999, respectively. In 1996, the first meeting of the Asia Europe Meeting (ASEM) was held, and ASEAN member countries and Japan, China, and South Korea held talks on the eve of the meeting. These had become the significant grouping of ASEAN+3. In 2000, Mr Zhu Rongji, the Chinese Prime Minister, proposed the creation of an ASEAN and China Free Trade Area (ACFTA), and 11 countries then signed the Framework Agreement on Comprehensive Economic Cooperation. In accordance with the schemes of the AFTA and ACFTA, China and the ASEAN-6 countries composed of Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand removed import tariffs except those for sensitive commodities in 2010. Then, Cambodia, Laos, Myanmar, and Vietnam (CLMV countries) will have to remove import tariffs in 2015. In addition, in 2015, the ASEAN Economic Community (AEC) will be established.

To date, in the historical stream of the end of the Cold War and in the introduction of a market economy and open door policies by socialist countries, it thus c...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Tables
• List of Figures
• Preface
• Notes on Contributors
• List of Abbreviations
• Part I General Views
• Part II Introducing Each Border in the Greater Mekong Subregion
• Part III Summary
• Index