Speech by ADB Vice-President for Operations 2 Stephen P. Groff at the Euromoney Greater Mekong Investment Forum on 28 May 2015 in Bangkok, Thailand
Your Excellency, Prasarn Trairatvorakul, Governor of the Bank of Thailand, Tony Shale, Chief Executive Officer of Euromoney Institutional Investor in Asia, distinguished guests:
Good morning. It’s a pleasure to be able to join you for the opening of today’s Greater Mekong Investment Forum.
The GMS: Asia’s next great manufacturing hub
2015 is a major milestone for the ASEAN Economic Community. Regional integration will take center stage in the AEC’s inaugural year. And the Greater Mekong Subregion is a key building block in these efforts.
The GMS is a testament to the fact that economic cooperation works. Through the GMS economic cooperation program, the six nations sharing the Mekong River have, for more than 20 years, been steadily moving towards ever-increasing, and freer, regional and multilateral trade and investment. The results have been nothing short of amazing.
Little more than two decades ago, cross-border trade between Mekong nations was negligible. Take Viet Nam and China, for example. In 1992 there was no official trade at the Lao Cai – Hekou border at all. Last year, just at this one border point, trade surpassed $2.1 billion. In the early 1990s it was virtually impossible to ship goods overland between Bangkok and Kunming, China. It would take six-weeks, via Hong Kong, to get goods from one city to another. Today the overland trip only takes two days, and trade between Thailand and its neighbors to the north is booming. With the opening of Myanmar, and rapid development of the final segments of the GMS East West Economic Corridor, we expect trade between Myanmar and Thailand to similarly ascend to new heights in the coming years.
Under the GMS Economic Cooperation Program, 17 billion dollars of regional investment projects have helped propel growth in the Greater Mekong Sub region. Today the GMS road network spans over 900,000 kilometers – enough to encircle the globe 22 times over. In just the past five years, over 100,000 kilometers have been added to this network. Better infrastructure is paving the way for growing trade, with imports and exports having quadrupled over the past 10 years, and intra-regional trade growing nearly 70%, providing a major boost to the subregion’s one trillion dollar GDP.
With better connectivity and the continued lowering of barriers, the GMS is poised to become Asia’s next great manufacturing hub. With one of the world’s youngest labor forces, and tens of millions expected to join the middle class in coming decades, a period of great promise lies ahead. In the next decade new rail lines will dramatically improve freight logistics, new ports will be constructed across the subregion, and new free trade zones will be introduced in Myanmar, Thailand and other areas.
The world is looking East, and if GMS nations play their cards right, the region could set the pace for global growth, and be the next great hub of global commerce.
The central role of CLMV
Yet amidst this seemingly boundless promise, all of us here today are aware of the many challenges Mekong nations must overcome to realize their full potential. Healthy integration requires confidence between nations and their peoples that the new order will benefit everyone. Somewhat like Europe and its periphery, ASEAN needs to better meld its newer members, Cambodia, Lao PDR, Myanmar and Viet Nam – the so-called CLMV nations – with the region’s more economically developed nations. Cambodia, Lao PDR, and Myanmar, in particular, are key to the region’s advancement. The ASEAN Economic Community will only be as strong as its smallest economic links. The development of these nations, ensuring their growing productivity and prosperity, should therefore be a key focus of ASEAN’s post-2015 agenda. From better infrastructure to more efficient trade policies and better-developed capital markets, these nations need our support to become fully integrated members of the ASEAN Economic Community.
Growing partnership between governments and the private sector
I’ve emphasized transport connectivity this morning, because it will continue to be a key driver of the Greater Mekong’s growth. The GMS still suffers from an infrastructure deficit, but it has been very encouraging to see GMS nations actively embrace this challenge. Last year GMS nations identified a pipeline of 92 major development projects worth over 30 billion dollars that should commence within the next 4-5 years. These projects will help transform the region, but they will only come to fruition if countries can more actively tap financing from the private sector and capital markets. This is where all of you come in.
To fully develop a modern infrastructure network, the GMS needs not only the capital but also the expertise, innovation and efficiency of the private sector. We need to forge new cooperative partnerships between governments and the private sector to make these projects happen. Through these partnerships, we can usher in a new era in the Mekong, with modern railways and expressways crisscrossing the region, linked to world-class ports and multi-modal terminals. An era marked by expanding regional energy grids, complemented by off-grid power development, that will ensure the sub region has the energy it needs to power its development. An era of growing ICT development, including a modern GMS information superhighway, where e-commerce increasingly takes hold as it has in North America and Europe.
Cutting the red tape
For this to happen, however, it will take more than just top-notch infrastructure. Before GMS nations can move forward, the fundamentals, the foundations for growth, need to be fully in place: not only infrastructure, but also good logistics systems, and an enabling policy environment.
The solution is straightforward. Governments need to continue streamlining rules and regulations to make travel and trade between nations more seamless and efficient. They need to cut the red tape. At present, trade costs in the GMS are much higher than other regions of the globe. Reducing non-transport costs and improving border procedures will improve the bottom line. The early successes of the GMS happened because nations put aside past differences for the greater good. With the ASEAN Economic Community now upon us, there’s no better time for Mekong nations to once again join forces in a concerted effort to enhance regional prosperity by eliminating barriers to trade and job creation.
Conclusion
With modern infrastructure, clear and well-implemented guidelines facilitating cross-border transportation and trade, and strong political will to make this happen, the coming decade could be the most prosperous ever seen in the Mekong. There’s every reason to believe this can happen. For decades GMS nations have found ways to overcome barriers to advancement. With the creation of a better enabling environment for the private sector to do what it does best – growing businesses and creating more jobs for the region’s people – the road ahead should lead to unprecedented opportunity.
The Greater Mekong’s future lies in shared prosperity. I hope that today, as you discuss new opportunities in infrastructure, energy, capital markets development and trade, new possibilities will present themselves that will bring greater prosperity to you, your business, and the people of the Greater Mekong.
Thank you.