Regional Cooperation and Integration in the Mekong Region

• DOI: http://doi.org/10.1111/aepr.12015
• Author: Jean‐Pierre A. Verbiest
• Published date: 01 June 2013
• Date: 01 June 2013

Regional Cooperation and Integration in the

Mekong Region

Jean-Pierre A. VERBIEST†

Mekong Institute

Over the past two decades, several regional cooperation programs were initiated by multilateral

and bilateral donors to address concerns about the development gap in the Mekong subregion.

Programs such as the Greater Mekong Subregion program of the Asian Development Bank and the

Mekong–Japan Cooperation program focused first on improving physical connectivity through

transport corridors, regional power development and grid connection, and telecommunications

linkages, and were successful. However, as transport and trade facilitation became a priority, the

weak institutional capacity of Cambodia, Lao People’s Democratic Republic, Myanmar, and

Vietnam resulted in a slow progress and is a major challenge to regional cooperation. Other chal-

lenges are the pressure on the use of Mekong water resources and the planned construction of

mainstream dams, which could threaten the Mekong RiverCommission’s role, the regional rivalry

for energy sources, and the lack of attention to unskilled labor issues. The relations between

Mekong regional cooperation programs and China are also a main issue to address if cooperation

programs are not to become instruments of geopolitical rivalry.

Key words: economic cooperation, foreign aid, Mekong region,regional integ ration

JEL codes: F15, F55, F35, O19

1. Introduction

The Mekong River, 4350 km in length, is a vital economic and trade artery for the five

countries of Southeast Asia, namely Cambodia, Lao People’s Democratic Republic (Lao

PDR), Myanmar, Thailand, and Vietnam.Orig inating in the Tibetan Plateau, it also links

these countries with China’s Southwestern province of Yunnan. This part of Asia, gener-

ally referred to as the Mekong region, has enjoyed cultural and economic ties that date

back centuries. Yet its history has often been turbulent, particularly during the second

half of the 20th century.

Political developments during this period have had a profound impact on the coun-

tries and have contributed to the diverse development of the region. Cambodia, Lao

PDR, and Vietnam suffered considerably from the long Indochina conflict, which only

ended in 1975. Cambodia experienced an internal conflict and political instability up to

the early 1990s. Lao PDR, Vietnam, and Cambodia lived under strictly planned socialist

economic systems until the second half of the 1980s. The Yunnan Province of China also

remained closed to trade and investment until the early 1980s. Myanmar has had a diffi-

cult political history since the 1960s effectively cutting the country from the rest of the

world. It was only in 2011 that wide-ranging political and economic reforms were set in

†Correspondence: Jean-Pierre A. Verbiest, Mekong Institute, Khon Kaen 40002, Thailand. Email:

jpverbiest@gmail.com

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doi: 10.1111/aepr.12015 Asian Economic Policy Review (2013) 8, 148–164

© 2013 The Author

Asian Economic Policy Review © 2013 Japan Center for Economic Research

148

motion. Finally, while always pursuing a market-based economic system, Thailand ben-

efited substantially from the conflict in Indochina, but also experienced significant

domestic insurgency and political instability until the end of the 1970s.

In the 1980s, as significant world economic realignments occurred, the most impor-

tant one being the 1985 Plaza accord and the depreciation of the US dollar, a large wave

of production relocations driven by foreign direct investment (FDI) from Japan in par-

ticular (Asian Development Bank Institute [ADBI], 2013) started to take place and was

mainly directed at ASEAN-6 countries,1which were considered the “new frontier” at the

time. In the Mekong region, only Thailand benefited hugely from these early FDI

inflows. After their market reforms in the late 1980s, and particularly after joining the

Association of Southeast Asian Nations (ASEAN) in mid-1990s, CLV2countries also ben-

efited from significant FDI inflows, in particular Vietnam. However, it was clear that the

development gap between the CLMV3countries and other ASEAN countries4would not

narrow unless specific initiatives were introduced to accelerate economic and social

development. The so-called ASEAN development divide was also perceived as a drag on

ASEAN integration itself, and its narrowing became a priority program for ASEAN. But

long before becoming an ASEAN issue, addressing the difference in development levels

within the Mekong region itself was seen as a policy priority to foster peace and prosper-

ity in this important strategic subregion. Famously, in 1989, Prime Minister Chatchai

Choonhavan of Thailand called on Vietnam to start regional cooperation and move

“from battle fields to market places”(Rajaretnam, 2006). Since then, a number of impor-

tant regional cooperation initiatives have characterized the Mekong region.

This paper reviews the main multilateral and bilateral regional cooperation programs

addressing the various challenges to growth and economic integration within the

Mekong subregion, and ultimately in ASEAN.Section 2 reviews in detail se veral regional

cooperation programs, both multilateral and bilateral. Section 3 outlines some of the

main challenges to Mekong regional cooperation moving forward.

2. Regional Cooperation in the Mekong Region

A unique feature of the recent history of the Mekong region is that most of the key issues

associated with the development gap between the countries of the region, whether they

are related to infrastructure, human resource development (HRD), and institutional

capacity (Pomfret, 2013), have all become the focus of various regional cooperation pro-

grams initiated by development partners from outside the region. However, in more

recent years, several ASEAN countries and China have also become important contribu-

tors to such programs, or have started their own bilateral programs. Most interesting too

and attesting to the economic, geopolitical, and strategic importance of the region, such

programs have expanded and multiplied in recent years.

The seeds of Mekong regional cooperation date back from the immediate

postcolonial period in Indochina and the ensuing political developments. It is the United

Nations Economic Commission for Asia and the Far East that initiated in 1957 the cre-

ation of the “Committee for Coordination on the Lower Mekong Basin,” later to be

Jean-Pierre A. Verbiest Mekong Regional Cooperation

© 2013 The Author

Asian Economic Policy Review © 2013 Japan Center for Economic Research 149