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Mekong Subregion: Development and Cooperation Status

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Mekong Subregion: Development and Cooperation Status Background Paper 1 Mekong Subregion: Development and Cooperation Status Nguyen Anh Duong, Dinh Thu Hang and Vo Tri Thanh November 2020 This chapter should be cited as Nguyen, A.D., T.H. Duong and T.T. Vo (2020), ‘Mekong Subregion: Development and Cooperation Status’, in Kimura, Fukunari (ed.), Subregional Development Strategy in ASEAN after COVID-19: Inclusiveness and Sustainability in the Mekong Subregion (Mekong 2030). Jakarta: ERIA, pp.BP1–BP23. Background Paper 1 Mekong Subregion: Development and Cooperation Status Nguyen Anh Duong, Dinh Thu Hang, and Vo Tri Thanh 1. Introduction The Mekong River flows through five mainland countries – Cambodia, the Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, and Viet Nam – which shape the Mekong Subregion (MSR). Since 1992, the MSR countries have embarked on various subregional economic cooperation mechanisms to enhance their economic relations. These have put each country and the MSR as a whole in a dynamic but complex web of economic links, in the broader context of regional and plurilateral integration in the Asia- Pacific region in the past two decades. In recent years, MSR countries have witnessed significant socio-economic achievements. However, the development gap between the MSR and other ASEAN Member States (AMS) remains sizeable. Rapid economic growth in MSR countries has not always been accompanied by improved well-being of their citizens. The MSR therefore needs to search for a new cooperation mechanism to ensure that regional and individual economic and social transformations contribute more to inclusive and sustainable development. Such a new cooperation mechanism must also be effective in the new regional and international context (with major aspects such as the Fourth Industrial Revolution (IR 4.0), Society 5.0,1 trade conflicts amongst major economies, geopolitical tensions in many regions, and non- traditional security challenges such as climate change, infectious diseases, etc.). For such a new cooperation mechanism, reviewing the state of economic development and cooperation mechanisms amongst MSR countries would be essential to help identify major objectives and characteristics. This chapter aims to provide a review of the current development status of the MSR. It focuses on (i) comparative analysis of economic growth in the MSR vis-à-vis the Association of Southeast Asian Nations (ASEAN), with emphasis on the importance of the 1 In Japan’s 5th Science and Technology Plan, Society 5.0 is defined as ‘a society that can be expected to facilitate human prosperity. Such a society is capable of providing the necessary goods and services to the people who need them at the required time and in just the right amount; a society that is able to respond precisely to a wide variety of social needs; a society in which all kinds of people can readily obtain high-quality services, overcome differences of age, gender, region, and language, and live vigorous and comfortable lives’ (Government of Japan, 2016). BP-1 wwMSR for regional development and inclusive growth; and (ii) ongoing mechanisms for economic cooperation in the MSR. The remainder of the paper is structured as follows. Section 2 provides a comparative analysis of inclusive development-related aspects of MSR countries. Section 3 then elaborates on inclusive development of the MSR countries. Section 4 concludes with some recommendations. 2. Inclusive Development in Mekong Subregion: A Comparative Analysis 2.1 Economic Growth As a whole, ASEAN witnessed a high gross domestic product (GDP) growth rate during 2010–2018, averaging 5.4% per year (Figure 2). Cambodia, the Lao PDR, Myanmar, and Viet Nam (CLMV) grew at a faster pace than the rest of ASEAN. The economic size of the MSR countries has more than doubled in 10 years, from $431.7 billion at current prices in 2008 to $866.1 billion in 2018 (Figure 1). This impressive result was partly attributed to the low GDP base of most MSR countries (i.e. the catch-up effect). By economic sector, the GDP structure of CLMV countries saw a modest shift to a higher share for industry (an improvement of about 2–3 percentage points over 2015–2018). Thailand reflected the opposite, with a decreased proportion for the industry sector in GDP (34.7% in 2018 vs. 36.4% in 2015). Figure 1: GDP at Current Prices in ASEAN, Figure 2: GDP Growth Rate in ASEAN, 2008–2018 ($ billion) 2009–2018 (%) 152,105.0 3,000.00 13 1,843.7 1,863.7 1,754.1 11 2,500.00 1,999.8 1,414.4 1,821.3 1,768.0 9 1,666.7 2,000.00 7 1,124.3 1,500.00 5 1,120.3 3 1,000.00 1 500.00 -1 785.3 866.1 516.8 583.8 638.1 681.1 689.9 687.6 717.8 431.7 431.0 -3 0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Brunei Darussalam Cambodia Indonesia Lao PDR MSR ASEAN-5 Malaysia Myanmar Philippines Singapore Thailand Viet Nam ASEAN ASEAN = Association of Southeast Asian Nations, GDP = gross domestic product, Lao PDR = Lao People’s Democratic Republic, MSR = Mekong Subregion. Note: MSR countries include Cambodia, the Lao PDR, Myanmar, Thailand, and Viet Nam. The ASEAN 5 includes Brunei Darussalam, Indonesia, Malaysia, the Philippines, and Singapore. Source: ASEAN (2019). BP-2 Table 1: GDP Structure by Economic Sector in ASEAN, 2015–2018 (%) 2015 2018 Country Agriculture Industry Services A+I+S Agriculture Industry Services A+I+S Brunei 0.9 63.4 37.6 101.9 0.8 62.9 38.0 101.8 Darussalam Cambodia 22.2 32.1 39.6 93.9 16.3 32.1 43.1 91.6 Indonesia 13.0 41.0 42.8 96.8 12.5 39.8 43.6 96.0 Lao PDR 16.5 32.2 41.3 89.9 14.5 35.7 39.6 89.8 Malaysia 8.3 38.4 52.0 98.8 7.3 37.5 54.0 98.8 Myanmar 28.9 30.0 41.1 100.0 24.6 32.1 43.2 99.9 Philippines 9.5 33.5 57.0 100.0 8.1 34.1 57.8 100.0 Singapore 0.0 24.3 65.7 90.0 0.0 25.1 64.4 89.5 Thailand 6.4 36.4 56.8 99.6 6.1 34.7 58.7 99.5 Viet Nam 15.3 32.5 36.4 84.2 14.3 35.6 38.8 88.7 A = agriculture, ASEAN = Association of Southeast Asian Nations, GDP = gross domestic product, I = industry, Lao PDR = Lao People’s Democratic Republic, S = services. Notes: (i) agriculture comprises fishing and forestry; (ii) industry comprises mining and quarrying, manufacturing, construction, and utilities; (iii) services comprise wholesale and retail trade, transportation and storage, accommodation and food services, information and communications, finance and insurance, business services, and other service industries; and (iv) the sum of GDP shares of A+I+S may not equal 100% in some ASEAN countries, mainly due to the separate treatment of GDP associated balancing items from the total GDP, including items on taxes, and subsidies on particular products and services. Source: ASEAN (2019). Despite the downward trend in the share of GDP, agriculture, forestry, and fishing still exhibited positive growth in terms of value added for all AMS (Table 2). During 2011– 2018, value added from the agriculture, forestry, and fishing of MSR countries grew at an average rate of 1.8% per year. In terms of growth rate, however, Viet Nam and the Lao PDR were amongst the countries with the highest growth rates of agriculture, forestry, and fishing value added (2.9% per year and 2.7% per year, respectively, in 2011–2018). BP-3 Table 2: Added Value of Agriculture, Forestry, and Fishing in ASEAN, 2000–2018 (2010 constant prices, $ billion) Country 2000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Brunei 0.08 0.10 0.10 0.11 0.10 0.11 0.12 0.11 0.11 0.11 Darussalam Cambodia 2.32 3.81 3.93 4.09 4.16 4.17 4.18 4.23 4.33 4.37 Indonesia 74.83 105.18 109.33 114.34 119.15 124.20 128.87 133.21 138.37 143.78 Lao PDR 1.13 1.61 1.62 1.66 1.71 1.78 1.84 1.90 1.95 1.99 Malaysia 19.28 25.73 27.49 27.76 28.31 28.89 29.31 27.79 29.79 29.66 Myanmar 9.15 18.26 18.14 18.44 19.11 19.64 20.31 20.22 20.47 20.73 Philippines 18.55 24.58 25.22 25.93 26.22 26.66 26.70 26.37 27.41 27.66 Singapore 0.12 0.09 0.09 0.09 0.10 0.10 0.10 0.09 0.09 0.09 Thailand 29.04 35.90 38.16 39.19 39.47 39.36 36.89 35.99 38.23 39.59 Viet Nam 15.18 21.31 22.21 22.86 23.46 24.27 24.85 25.19 25.92 26.89 ASEAN 169.68 236.56 246.28 254.48 261.79 269.18 273.15 275.09 286.68 294.87 ASEAN = Association of Southeast Asian Nations, Lao PDR = Lao People’s Democratic Republic. Source: https://data.worldbank.org/indicator/NV.AGR.TOTL.KD (accessed 10 April 2020). GDP per capita mostly showed an uptrend in AMS during 2009–2018 (except Brunei Darussalam). The GDP per capita of the individual MSR countries witnessed significant increases (1.8–2.9 times during 2009–2018, Figure 3), but remains far below that of the remaining ASEAN 5 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, and Singapore).
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