The Greater Mekong Sub-region is Asia's new economic frontier. Opportunities to shape its future are attracting the best resources and talents. India's business community should not miss this opportunity
The rapid growth of the Indian economy creates new opportunities for development in many areas. As India and its business community assess these opportunities, the experience of the Greater Mekong Sub-region (GMS) warrants close inspection.
A little over a decade ago, the GMS initiated a program of regional economic cooperation that has sparked off one of the most extraordinary turnarounds in recent times. Once divided by longstanding conflicts, the six countries that share the Mekong River - Cambodia, People's Republic of China (PRC), Laos, Myanmar, Thailand and Viet Nam - now form one of the world's fastest growing regions and East Asia's most rapidly intergrating sub-region.
The GMS experience offers lessons on building trust and transforming it into action. For Indian businesses moving on the global stage, the subregion offers a rapidly developing and integrating market of over 250 million people.
Perhaps the greatest accomplishment of the GMS program so far has been the confidence it has built - the confidence of each member country, and the confidence of the strong sense of community that has emerged. The program was crucial in helping war-torn countries initiate an informal dialogue that has evolved into market-driven economic cooperation. It is concrete proof that sub-regional cooperation can benefit all participating countries, resulting in a stabilising peace dividend.
This new confidence has helped the sub-region achieve remarkable growth rates, despite the Asian financial crisis, the outbreak of Sars and avian flu, and escalating oil prices. In 2004, GDP growth in GMS countries ranged from 6 per cent in Cambodia to 7.5 per cent in Viet nam.
Nowhere is the sub-region's economic transformation more dramatic than in its export performance, with total exports growing more than 300 per cent from 1992 to 2004. Intra-regional exports increased even more dramatically. In 2004, intra-regional trade was 11 times greater than in 1992. Promotion of the GMS as a single tourist destination resulted in tourist arrivals rising at a rate that makes GMS the fastest growing tourist destination in the world.
A principal objective and major accomplishment of the GMS program is improving physical connectivity with the subregion. Member governments, with the help of development partners led by the Asian Development Bank, are enabling surface connectivity by investing in transport networks that will eventually criss-cross the east-west and north-south axis of the sub-region.
The most advanced of these networks is the east-west economic corridor. When completed, all-weather travel will be made possible on a 1,500-km stretch of road connecting Da Nang Port in Viet Nam on the South China Sea to Mawlamyine Port in Myanmar on the Andaman Sea. Work is already completed on connections between major hubs along the route. When the full corridor is done, travel time from Mawlamyine to Da Nang will be cut in half to about two days.
While connectivity is critical, GMS countries are focused on the need for supporting investments in trade and investment facilitation. GMS countries have forged a Cross-Border Transport Agreement that is expected to further boost the flow of goods, people, and investments across borders and spur growth. More than 60 foreign and domestic companies have already invested in the special economic zone on the Laos-Viet Nam border. In the energy field, the countries have signed an intergovernmental agreement on regional power interconnection and trade. Buying and selling power in ways that benefit all will become increasingly easy.
Individual countries are also liberalising their economies. Major economic reforms have taken shape and open-door policies have been adopted to boost competitiveness of the sub-region. GMS offers a unique location advantage as a land bridge between the huge market of PRC and the rest of the Asean countries, as well as emerging markets in South Asia. With tariff barriers steadily being lifted, the GMS countries are now concentrated on formulating common strategies to harmonise and streamline policies affecting customs, immigration, and quarantine.
The GMS is expected to continue to enjoy dynamic growth in the next ten years as the countries steadily transmit from centrally planned to full-pledged market economies. Building infrastructure will be crucial to sustaining growth. Conservative estimates place the funding requirement for infrastructure in GMS at between $10-$15 billion in the next 5-10 years. A major test for the GMS countries is raising these resources. Given the huge requirement, it is clear government budgets and official development resources alone cannot address the demand.
Infrastructure development provided a major opportunity for the private sector. Investment opportunities abound especially in the transport, power generation, and telecom sectors. GMS governments are progressively implementing reforms to create the policy environments that would encourage more dynamic private sector participation.
Exploring these new opportunities and the potential for partnerships will be the focus of the Mekong Development Forum jointly organised by ADB and the CII in Delhi on November 9-10.