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Mekong nations commit to more intra-regional trade
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08:43, March 31, 2008

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Business leaders from the six countries sharing the Mekong River in Vientiane on Sunday held the GMS Business and Investment Dialogue (BID) aimed at addressing the key challenges in enhancing trade and investment in the Greater Mekong Subregion (GMS).

The GMS countries, namely Cambodia, the People's Republic of China, Lao People's Democratic Republic, Myanmar, Thailand, and Vietnam, have registered strong economic performance over the past decade, growing by an average of over 7 percent during the period 1996-2005.

The subregion's economic performance was driven in part by increased trade, resulting from the transition to market-based systems and closer integration with external markets.

Trade expanded both within and outside the subregion. Over the period 1994-2006, intra-GMS exports, excluding to China, grew at an annual average rate of 19 percent, while exports to other countries increased at an annual average rate of 11 percent.

However, the low level of intra-regional trade is a key challenge to the GMS. The share of intra-GMS trade (excluding China) to total trade has risen from 2.2 percent in 1994-1996 to 5.4 percent in 2004-2006. This is still way below the share of non-GMS AFTA members of 15.3 percent, other East Asian countries of 19.2 percent, and the rest of the world of 52 percent.

AFTA is a free trade zone in Southeast Asia where member countries include Malaysia, Singapore, Thailand, the Philippines, Indonesia, Vietnam, Laos, Myanmar, Cambodia and Brunei.

Among the GMS countries, there is considerable variation in the geographic orientation of trade. The larger economies, which have a more established foothold in global trade, have geographic trading patterns that indicate a relatively smaller share of intra-regional trade, which the smaller transition economies have trading patterns that show a relatively larger share of intra-GMS trade.

Laos, being land-linked, depends on GMS trade most, with 45 percent of its exports going to and 72 percent of its imports coming from the GMS countries. Laos' trade dependence on the GMS, however, is declining as the country becomes more integrated with regional and global markets.

Cambodia's specialization in garments exports, targeted mainly for the U.S. market and to a lesser extent Europe, has caused a decline in the share of its exports to neighboring GMS countries.

Vietnam's trade with the GMS has increased moderately, with China emerging as an important export destination and source of imports.

The comparative advantage of the GMS countries continues to evolve over time. The level of technological advancement, the quality of the workforce and the capacity of institutions are dynamic factors that are making the difference in a country's competitive position, well beyond its geographic features and natural resource endowments.


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