05/10/2015

Development in the Greater Mekong Subregion:

Connectivity, Community, and Competitiveness

Asian Development Bank Institute

5 October, 2015
Tokyo, Japan
James Lynch
Asian Development Bank
05/10/2015

Presentation Outline
1.

Overview of the Greater Mekong Subregion

2.

Increasing Connectivity in the GMS

3.

Improving Competitiveness of the GMS

4.

Achieving a Greater Sense of Community

5.

Expanding Investment Opportunities in the GMS

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What is the GMS?

The Greater Mekong Subregion
(GMS) is a natural economic
area bound together by the
Mekong River, covering 2.6
million square kilometers.
The GMS countries are
Cambodia, the People's Republic
of China (PRC, specifically
Yunnan Province and Guangxi
Zhuang Autonomous Region),
Lao People's Democratic
Republic (Lao PDR), Myanmar,
Thailand, and Viet Nam.

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Quick Facts about the GMS

Total population of 334 million in 2013

Total GDP of about $2.5 trillion in 2013 (PPP, current US$)
Total exports of $411 billion in 2013
Total imports of $432 billion in 2013
Inward FDI flows near $150 billion in 2013

More than $17 billion in investment projects under the

GMS Program since 1992.

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2013 GDP per capita (PPP,current $)

8000

6000

6,233
4,917

4000

4,034
2000

1,908

1,581

1,025

Sources: ADB Key Indicators and China Statistical Yearbook, various issues and ADB Staff estimates.
Data for Myanmar not available at cutoff date.
GDP per capita converted at official exchange rate, average of period.

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GMS Exports, Imports and Trade Balance

Exports

Imports

450

X-M
432
411

400

billion $

350
281

300
250

262

200
150

109

100
50
0

-0.6

-19.2

-20.3

-50
Sources: ADB Key Indicators and China Statistical Yearbook, various issues and ADB Staff estimates.
GMS members: Cambodia, Guangxi PRC, Yunnan PRC, Lao PDR, Myanmar, Thailand , Viet Nam

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The GMS Programs 3 Cs:

Increased
Connectivity

Improved
Competitiveness

Greater Sense of
Community

The 3 Cs are also the keys to unlocking the

investment opportunities in the GMS.
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The 3 Cs are integral for the GMS to realize its vision of

a prosperous, integrated and harmonious subregion
Increased Connectivity through sustainable development of
physical infrastructure and transformation of transport corridors into
transnational economic corridors.
Improved Competitiveness through efficient facilitation of
cross-border movement of people and goods and the integration of
markets, production processes, and value chains.
Greater sense of Community through projects and programs
that address shared social and environmental concerns.

How can the private sector help advance this vision?

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PHYSICAL CONNECTIVITY IN THE GMS IS

INCREASING:
Countries are increasingly linked via
roads, railways, telecoms, and
power lines.
Nearly 7,000 kilometers of roads
constructed, upgraded, or improved
under the GMS Program.
Nearly 20GWh of electricity traded
within the GMS in 2013

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GMS Connectivity
Infrastructure in 1992

Roads

Telecommunications

Power Transmission
Line

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GMS Connectivity
Infrastructure in 2010

Roads

Telecommunications

Power Transmission
Line

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Future GMS Connectivity

Infrastructure 2015-2020

Roads

Telecommunications

Power Transmission
Line

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THE GMS IS ALSO COMMITTED TO IMPROVING CONNECTIVITY

SOFTWARE TO FACILITATE CROSS-BORDER TRANSPORT & TRADE

1.

The GMS Cross Border Transport Facilitation Agreement (CBTA)

provides a subregional framework for making cross-border transport
faster, easier and cheaper.

2.

GMS countries have successfully implemented a number of bilateral

and/or trilateral traffic rights agreements at key border crossings.

3.

The second phase of the GMS Transport and Trade Facilitation Action
Plan and other technical assistance projects will further support efforts
to facilitate cross-border transport and trade in the GMS.

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Cross-Border Transport & Trade Facilitation in the GMS

IMPACT

PRIORITY COMPONENTS & APPROACHES

OUTCOME

Adopt and apply

updated Legal
Framework for
Transport & Trade
Facilitation

LAND-BASED INTRA-REGIONAL TRADE INCREASES WITHIN THE GMS

CROSS-BORDER TRANSPORT AND TRADE IS FASTER, EASIER AND CHEAPER

Provide modern
cross-border
Logistics
Infrastructure

Harmonize and
enforce Transport
Regulations

- Computerized
customs transit
system

- Border crossing/
inspection
facilities

- Designated
routes and entry/
exit points

- Commercially
viable guarantee
system

- Designated fasttrack lanes for

qualifying
commercial
traffic
- Trans-shipment/
multi-modal
facilities

- Operations
manuals for
traffic rules &
safety

- Accredited
Economic
Operators/ MRAs
- Advance rulings
on classification,
origin & value
- Efficient and
effective dispute
resolution system
and procedures

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- Warehousing/
cold storage
facilities
- Cross-border/
special economic
zones

Strengthen
Institutional
Coordination at
and beyond the
borders

Improve
Operations &
Services at border
crossings

Improve
Transparency
and Monitoring
of Transport &
Trade Facilitation

- Coordinated
border
management

- Customs
modernization &
capacity building

- Transparency of
rules, regulations
and procedures

- Operator
licenses, permits
and quotas

- Single stop
inspection
procedures

- Vehicle standards
and specifications

- Automated
national
coordination
committee

- Modern risk
management
systems/
procedures

- Disclosure of
permit
applications and
utilization rates.

- Streamlined preshipment
inspection and
post-clearance
audit procedures

- Time release
studies

- National single
window regime
- National/
subregional
freight forwarder
associations
- Trade-related
private sector

- Harmonized SPS
measures &

procedures

- Computerized
control &
management
systems

- Time-costdistance studies
(i.e. corridor
performance
measurement/
monitoring)
- Business process
analysis

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INSTITUTIONAL CONNECTIVITY IS ALSO PROGRESSING

1. GMS Business Forum established in 2000.

2. Mekong Tourism Coordinating Office established in 2006.
3. GMS Freight Transport Association established in 2012.
4. Greater Mekong Railways Association established in 2014.
5. GMS Regional Power Trade Coordination Committee is
working to establish the GMS Regional Power Coordination
Center in 2015.
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HAS INCREASED CONNECTIVITY CONTRIBUTED

TO IMPROVED COMPETITIVENESS IN THE GMS?
Country Rankings by Global Competitiveness Index (2014-2015)
(rankings against 144 countries)
PRC

28

Thailand

31

Vietnam

68

Lao PDR

93

Cambodia

95

Myanmar

134
0

50

100

150

Source: World Economic Forum, The Global Competitiveness Report (2014-2015)

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COMPETITIVENESS AND LOGISTICS PERFORMANCE ARE

INTERRELATED
Country Rankings by Logistics Performance Index 2014
(rankings against 160 countries)

2014
PRC

28

Thailand

35

Vietnam

48

Cambodia

83

Lao PDR

131

Myanmar

145
0

50

100

150

Source: World Bank, Logistics Performance Index 2014

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HOW EASY IS IT TO DO BUSINESS IN THE GMS?

Country Rankings by Ease of Doing Business Index 2015
(rankings against 189 countries)
Thailand

26

Vietnam

78

PRC

90

Cambodia

135

Lao PDR

148

Myanmar

177
0

50

100

150

200

Source: World Bank, Ease of Doing Business Index 2015

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THE GMS IS ALSO BECOMING MORE INTEGRATED AS A COMMUNITY

INTRA-GMS FOREIGN DIRECT INVESTMENT ($)
25

23.4

billion

20
15
10

8.5

5
-

2001-2006

2007-2012

Sources: UNCTAD Bilateral FDI database, ADB ARIC Database and ADB Staff estimates
No data for Guangxi and Yunnan, PRC. National data for the PRC is used.
All inflows are reported by host country ; for Viet Nam inflows are reported by country of origin

Intra-GMS foreign direct investment increased to $23.4 billion from 2007-2012.

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THE GMS IS ALSO BECOMING MORE INTEGRATED AS A COMMUNITY

INTRA-GMS TRADE (% OF GDP)
8.0

7.4

(% of GDP)

7.0
6.0

4.6

5.0

5.9

4.0

4.0
3.0
2.0
1.0
0.0

Intra-GMS trade now comprises about 7.4% of total GMS trade.

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THE GMS IS ALSO BECOMING MORE

INTEGRATED AS A COMMUNITY
GMS is now recognized as a single tourist destination with a
record of 52 million arrivals in 2013.
GMS countries are working together to address community
wide concerns such as:
Controlling communicable diseases,
preventing HIV/AIDS and promoting
safe migration
Managing land-use, natural resources
and the environment to ensure
sustainable development of the GMS
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WHY IS THE GMS A GOOD DESTINATION FOR INVESTMENT?

ASEAN
BIMP-EAGA
BIMSTEC
CAREC
GMS
IMT-GT
PIF
SAARC

Association of Southeast Asian Nations

Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area
Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation
Central Asia Regional Economic Cooperation
Greater Mekong Subregion
Indonesia Malaysia Thailand Growth Triangle
Pacific Islands Forum
South Asian Association for Regional Cooperation

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The subregion is strategically located

between South Asia and Southeast Asia

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WHY IS THE GMS A GOOD DESTINATION FOR INVESTMENT?

The subregion has a:
Strategic Framework

Regional Investment Framework

Implementation Plan

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GMS REGIONAL INVESTMENT FRAMEWORK

IMPLEMENTATION PLAN FOR 2014-2018

Identifies 92 priority
projects across
multiple sectors
Estimated investment
cost exceeds $30
billion
90% of all investment
projects are in the
transport sector

All projects will contribute to increased connectivity, improved

competitiveness and a greater sense of community.
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Developing Economic Corridors

is a Strategic Priority for the GMS

Transform 9 priority
transport corridors

into economic
corridors to boost
cross-border trade
and investment and to
stimulate jobs and
growth.
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Developing GMS Economic Corridors

1. Requires a multi-sector approach to maximize the
economic and social benefits of physical infrastructure:
a. Cross-border and Special Economic Zones
b. Corridor Town Development
c. Logistics Centers and Dry Port Facilities
d. Agro-processing Zones and Market Centers
2. Requires private sector participation to:
a. Identify investment opportunities
b. Contribute to project financing
c. Create viable public-private partnerships
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ADB Support for Private Sector Investments

Equity

Direct investments in enterprises and financial institutions through common shares,

preferred stock, and/or convertibles
Investments in private equity funds as a general partner (GP) or limited partner (LP)

Guarantees

Political Risk Guarantee (PRG): protection against political risks, including foreign
exchange restrictions, expropriation, political violence and contract dispute
Partial Credit Guarantee (PCG): protection against credit risks, including non-payment by
the borrower of the principal and interest due

Technical
Assistance &
Concessional
Capital

Technical assistance funding for project preparation, capacity development, R&D, etc.
Attractively priced and structured capital via 3rd-party concessional sources for targeted
industries / geographies

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STRICTLY CONFIDENTIAL

Debt

Direct loans: market-based pricing in major international and/or local currencies

B-loans: ADB acts as Lender of Record and administers the loan, but it is funded by 3rdparty financing
Unfunded risk participations: fronting arrangement with IFIs and/or commercial banks /
insurers

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KEY POINTS
1.

Increasing Connectivity in the GMS still requires massive

investments in physical infrastructure, software and capacity
building.

2.

Improving GMS Competitiveness requires greater focus on

addressing the challenges and constraints faced by the CLMV
countries.

3.

Sustaining the GMS Community requires collective efforts to protect

the environment and manage public goods and bads.

4.

The GMS Strategic Framework, Regional Investment Framework

and Implementation Plan respond to the challenges and
opportunities facing the GMS in the coming years.

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LAST WORDS

Subregional cooperation is a means to create a whole

that is greater than the sum of its parts.

The GMS Program is contributing to a better investment

climate in the subregion.

The private sector is an essential partner to achieve the

GMS vision of an integrated, prosperous and harmonious
subregion.

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THANK YOU

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