Integrating CLMV countries through trade and investment

This chapter examines the experience of the so-called CLMV countries – Cambodia, Lao PDR, Myanmar and Viet Nam – in opening up their once centrally planned economies to trade, foreign direct investment (FDI) and the global market. The result has been fast growth and macroeconomic stability for Viet Nam, Cambodia and Lao PDR. They even bounced back from the global crisis of 2008-09 because their export growth in apparel, tourism, agricultural products and hydropower is sound and their trade and investment linkages with their big regional neighbours have strengthened their economies. Today, however, they must explore the agenda for future, better growth and engage in a second generation of microeconomic reforms to support human and social development. Myanmar is at a different stage altogether – it is only now following up tentative political freedoms with economic liberalisation. The first section of this chapter sets the scene, tracing the history of CLV’s gradualist approach to economic transition over the past 20 years. The following two sections explore the trade-FDI nexus, i.e. the relationship between economic liberalisation and strong trade and FDI growth (which accounts for higher shares of gross domestic product (GDP) than in ASEAN-6) and also look at how CLV have eased into the global market, joining the World Trade Organization (WTO) and signing trade agreements. The next section considers major changes in the product composition and market distribution of CLMV’s exports and how their big neighbours have been engines of growth. The chapter then looks to the future arguing that CLV countries now need to usher in further reform by improving infrastructure and skilled labour through educational reform, and sharing the benefits of growth across society. The chapter concludes by arguing that CLV must address poverty and income disparities, while Myanmar still has its economic transition ahead of it.