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The Mekong: Challenges, Successes and Opportunities

Keynote Address by
Liqun Jin
Vice-President, Operations 1
Asian Development Bank

At the Mekong Development Forum

3-4 April 2006
Stockholm, Sweden

Introduction

Your Excellency, Minister Carin Jamtin
Your Excellency, Minister Somphong Mongkhonvilay
Ms. Eva Asplund of SIDA,

Ladies and Gentlemen:

On behalf of the Asian Development Bank, I would like to express our sincere appreciation to the Government of Sweden for co–hosting the Mekong Development Forum. I would like to especially thank the Ministry of Foreign Affairs and SIDA for the excellent arrangements and the gracious hospitality. To the participants, a warm welcome to the MDF.

The first Mekong Development Forum was held in Europe nearly two years ago. We have since been asked to organize such Forums by a growing number of public and private sector development partners. After four successful Forums – Paris in June 2004, Tokyo in July 2005, New Delhi in November 2005, and Singapore in March 2006 – we have identified two main attractions of the MDF.

First: Development partners are convinced of the remarkable achievements of the Mekong countries, and with good reason. The Greater Mekong Subregion was until recently divided by conflict. But, in just a little over a decade, the GMS has witnessed stability, transformation, and progress. Today, the GMS joins the ranks of the world’s fastest growing and East Asia’s most rapidly integrating subregions.

Secondly: Despite the economic gains, the GMS remains challenged. The challenges, however, provide significant opportunities for public and private sector development partners to contribute, support and even benefit from participating in the development efforts of the GMS countries.

I am delighted that we are holding this Forum in the Nordic region. The Nordic countries have long been strong supporters of social and economic development in Asia. Most Nordic countries are also strong partners of ADB in the development of key sectors in the GMS. I also wish to refer to the Nordic countries’ long history of cooperation and the ages-old experience hold a wealth of valuable lessons and insights from which the GMS countries can learn.

Lessons from the Nordic Experience on Regional Cooperation and Integration

The concept of a Nordic community can be traced as far back as the Treaty of Calmar that lasted for nearly 2 centuries. It was, however, the decades following the end of the Second World War that brought a decisive breakthrough in Nordic cooperation. The establishment of the Nordic Council in 1951 formalized the inter-governmental cooperation, which was strengthened by the Nordic Council of Ministers in 1971. The GMS and the Nordic cooperation initiatives have similar objectives and these are technological development, cooperation with neighboring regions, environment and sustainable development, and cooperation to remove obstacles to the free movement of people and goods across borders.

Nordic cooperation has produced significant results, in some cases achieving goals much earlier than the European Community/European Union. For example, agreements on a common labor market and a passport union were reached in 1954, the social convention in 1955, and the environment agreement in 1976. Achievements in the field of legislation are noteworthy. Private and commercial laws are almost fully harmonized. Rules and penalties on criminal offenses are almost uniform. Joint rules regulate road traffic and the Nordic countries have also formed a joint traffic insurance area. Intra-Nordic cooperation in industry and energy is also notable.

The most interesting aspect of Nordic cooperation, in my personal view, is the capacity of the Nordic Governments to support agreements reached at the regional level with legislation at the national level. This shows a high sense of maturity in the approach towards regional cooperation.

Cooperation in Motion at the GMS

Let me now turn to the Greater Mekong Subregion. The Mekong Committee was established in 1957. For three decades, however, the region was embroiled in conflict. It was only in 1992 that cooperation gained substance when Cambodia, China, Lao PDR, Myanmar, Thailand and Viet Nam, with assistance from ADB, initiated an organized program of cooperation, called the GMS Economic Cooperation Program. The GMS Program is an intergovernmental cooperation similar to but less formal than the Nordic cooperation. GMS is a classic case of market as opposed to institutional integration. As a program of market-based integration, the GMS cooperation agenda is focused on improving connectivity and competitiveness of the subregion.

In the first decade of the GMS Program, cooperation was focused on infrastructure development to overcome the constraint of surface connectivity on an otherwise contiguous land area. Initiatives such as the east-west, north-south, and southern economic corridors are creating a network of roads that connect the region, making possible the movement of people and goods across GMS. Options for power interconnections and the development of fiber optic transmission provide further physical linkages within the GMS.

Apart from hard infrastructure, the GMS Program addresses complementary soft issues. These include facilitation of cross-border trade and investment and standardization of customs and quarantine rules, regulations, and procedures at selected border crossings. The GMS Program is also helping member economies prepare for a single GMS visa.

The direct impact of interventions through the GMS cooperation program is already being reflected in the trade performance of the subregion. Between 1992 and 2004, the proportion of cross-border trade to total trade has more than doubled. Thailand’s imports from its three neighboring countries – Cambodia, Laos, and Myanmar – have increased by an annual rate of almost 10%. More than two thirds of Laos’ trade is with other GMS economies. In 2004, Cambodia, Laos, and Myanmar, conducted more than 40% of their trade with each other.

Challenges of the GMS

Despite the significant gains, however, challenges remain. Although the number of people earning less than a $1 day in GMS has fallen by a dramatic 56% since 1990 about 50 million people still live in extreme poverty. Broad-based economic growth across borders remains key to poverty reduction.

Infrastructure development will continue to be a major component of the GMS development agenda. Investment needs are tremendous, and they far exceed government budgets and official development assistance sources. While this is a challenge for the governments, it is a major opportunity for the private sector. The private sector could come in either as sponsors, funders, implementers, or managers of key infrastructure projects. Development agencies, on the other hand, have a major role to play in building the economic, legal, and supervisory capacity of the GMS countries in the planning and implementation of infrastructure projects especially where it involves public-private sector partnership.

Managing the subregion’s environment and natural resources is a third key area where partnerships can help. The Mekong countries have a rich natural heritage. The subregion’s great river systems, its watersheds, forests and wetlands, support an unbelievably rich biodiversity. Establishing frameworks and regulatory systems, and mainstreaming environmental protection and management into the GMS development agenda is what must seize our attention. I believe that the Core Environment Program, of which we will hear more later, is an initiative whose time has come.

Stronger Partnerships: The Way Forward

Ladies and Gentlemen:

Addressing the major challenges and tapping the emerging opportunities in the GMS, requires collective action. Effective partnerships are needed, not only among the GMS governments, but also between them and other stakeholders, particularly the bilateral and multilateral development institutions, the private sector and civil society.

The challenge for us all is to determine how best to deepen and strengthen partnerships so that the momentum of inclusive and synergistic growth in the GMS can be sustained. We in ADB are fully committed to this mission. We invite you to join us and the GMS countries, as partners, to build a thriving and caring community in the Mekong.

Thank you.