International Context

INTERNATIONAL CONTEXT AND ISSUES RAISED IN DEVELOPMENT COOPERATION

AMONG THE THREE COUNTRIES

1- International context

Over the past decades, the world has experienced very swift and unforeseeable changes that have great impacts on socio-economic development cause in developing countries. All countries are seeking for the benefits in conformity with their own conditions. The struggle for new technologies including that for markets by economic powers has taken place with great tension. The combination of competition and cooperation to protect interests for a group of countries and for each country has been carried out worldwide. The trend of international integration brings about both great opportunities and challenges to economic development in the region. Southeast Asia, after getting out of the financial and monetary crisis, has been entering the recovery stage with a relatively good development thanks to economic structure transformation and gradually improved competitiveness. This is one of the factors to put pressures on economies that remain weak.

Although in some regions of the world there still exist racial conflicts as well as trade and economic disputes, the trend of cooperation for development in each region, among regions and countries with different political regimes is growing and become a common tendency for all nations.

The impacts of scientific and technological progress, particularly information technology, serve as one of the significant factors that bring about economic and international relations changes. This is also one of the factors that enable the provinces in the Development Triangle whose infrastructure remains poor to access to the outside world in a rapid and inexpensive manner.

The new scientific, technical and technological revolution has had the impacts on all aspects of the social life. Countries in different regions have established alliances for international cooperation and competition. In the future, the Asia - Europe relationship will be further developed. Asia needs to absorb advanced technological achievements by the EU and the EU wants to have markets to sell their products and import goods from Asia. The cooperation of the two blocks will ensure the region’s stability and security.

Before 2010 the Association of Southeast Asian Nations with 11 member countries will become the ASEAN Free Trade Area (AFTA) with an aim of promoting economic development cooperation, securing peace and stability in the Southeast Asian region and at the same time expanding trade cooperation with other great potential countries in Asia like China, Japan and Korea. ASEAN countries have been giving much attention to the development of the area comprising South of Laos, Northeast of Cambodia and the Central of Vietnam with the construction of the West - East corridor.

International financial and banking institutions have made positive commitments to provide financial support for the infrastructure development in the less developed countries. This policy is relatively suitable to the border area of the three countries whose infrastructure remains poor and underdeveloped.

The market in general has been affected by many economic and political factors and requires increasingly better quality and categories of products. This in turn has strongly affected export-producing countries. For the Triangle, exports mainly are agro-products with unstable price in the world market. Under such a context, the Triangle not only has the advantage and potential for expanding cooperation with and integration into the world for creating a highly developed area, but also faces great challenges in the process of integrating into the region and the world market.

1.1- Global trends

Globalisation, interdependence and trade liberalisation: Globalisation of production process and financial markets combined with progresses recorded in transport and telecommunication technology has lead to the changes in the nature of business activities, resulting in increased interdependence by economies in the world. Trade liberalisation process has also attained considerable achievements as reflected in the agreements on accession to WTO and AFTA.

Similar to the results by globalisation, interdependence and trade liberalisation brought about both economic and political risks. This can be seen in the Asia’ financial and economic crisis in 1997: the interdependence of the economies could create a chain of effects. Sound economic management and policy coordination have become vitally important.

Investment trends: During 2000-2003, FDI flows were subject to a strong decline with an annual average rate of 23.4%. FDI inflows to developing countries currently account for only less than 20% of total world investment as compared to 40% in the mid of the 90s. Competing to attract FDI, the three countries of Cambodia, Laos and Vietnam shall have to adapt to new investment determinants, to technological advances in transport, post-telecommunication and information technology. Abundant natural resources and cheap labour costs are no longer efficient conditions. FDI attraction will depend on the extent that the three countries can provide additional resources, satisfactory infrastructures and excellent suppliers as well as make use of technology in an efficient manner. In the long run, it is forecasted that FDI inflows will increase and have the trend to strongly shift from production toward services. Indirect investment flow will have the tendency to rebound.

Global supply, production and distribution network: Another trend is the increased linkages via trans-national corporations (TNC) as part of the global supply, production and distribution network.

Production and technology: Two out of the most important production and technology trends are the shortening of product life and rapid advances in information technology (IT).

1.2- Regional trends

The future establishment of ASEAN Free Trade Areas with China, Japan, Korea, India, Australia and New Zealand will basically redefine the role of ASEAN and bring both opportunities and challenges to ASEAN members, especially to Cambodia, Laos and Vietnam. The three countries should formulate special development and cooperation programmes by sharing capitals, experiences, technology and balanced resources in order to benefit from ASEAN economic cooperation with dialogue partners. The reduction of tariff and non-tariff barriers to trade is considered as an important factor to promote intra three countries trade and to respond to the competition requirements.

ASEAN expansion: The expansion of ASEAN membership creates opportunities and challenges for Greater Mekong Sub-region (GMS) countries, especially for new ASEAN members (Cambodia, Laos, Myanmar and Vietnam). The possibility of ASEAN plus three (Korea, Japan and China) might basically redefine the role of ASEAN, bringing about important suggestions for Cambodia, Laos and Vietnam development cooperation programme. The three countries must have the capacity to take advantage of this expansion such as economy of scale, shared resources and other initiatives to improve productivity and product quality. The reduction of tangible and non-tangible barriers to trade and shared resources are important to respond to competition requirements.

WTO membership and increasingly important role of China in the region: The three countries of Cambodia, Laos and Vietnam need to improve their competitiveness and conduct researches for supplementing their linkages with domestic and foreign companies currently operating in China. China’s economy has played an increasingly important role in the region.

Newly emerging markets in South Asia, especially India, have important advantages, including advantages in advanced technology and a large number of labour forces having university degree. In the near future, the three countries of Cambodia, Laos and Vietnam will act as a bridge between China, Southeast Asia and South Asia.

2. Problems and challenges

Following are the five big problems and challenges that should be taken into consideration in developing the strategic framework for economic cooperation within the Development Triangle.

Creation of a conductive environment for trade, investment and development of the private sector. Institutional reforms should be continued and sped up, including consolidation of the financial market, equitisation of state-owned enterprises, trade liberalisation and reform of investment regimes. Barriers to cross-border trade must be removed, notably ineffective customs licensing procedures, absence of transparent regulations and processes and improper infrastructure.

Acceleration of regional integration. In order to early realise the contents of cooperation within the Development Triangle, efforts should be concentrated on taking practical measures at local level, including upgrading of transport - telecommunications infrastructure and implementation of cross-border agreements with an aim to facilitating the flow of people and goods.

Human resource development. Developing the skills and upgrading the education level of the workforce in general is an extremely important task to be fulfilled so as to achieve poverty reduction and to turn the potentials of the Development Triangle into reality. Initiatives of individual countries will be predominant means to this end and economic cooperation in the Development Triangle, in addition, would likely make important contributions to other sectors. The education – training network should be strengthened to facilitate technology transfer. Common healthcare issues such as community health care, should also be mentioned.

Environmental protection and equitable development. In order to provide the Development Triangle with sustainable development, Social and Environmental Impact Assessment Reports of the proposed investment projects should be produced in order to ensure that greatest efforts be made to alleviate undesirable effects and impacts. A pro-poor sustainable economic growth requires a broad environmental strategy that is fully integrated into the development process and involves all strata of the population into the decision making process. A pro-poor sustainable economic growth also requires that those who are affected most by investment decisions must be fully respected.

Resource mobilisation. Mechanisms for mobilizing resources should be in place. Greater involvement of the private sector is needed for it to play a role in providing resources as well as attracting financial resources.

3. Impacts of each of the nations on socio-economic development of the Development Triangle

3.1- Cambodia: In recent years, Cambodian socio-economic development has been stable. Many economic sectors have regained their high rate of growth, typically tourism and foreign investment. The country has been assisted and supported by a number of foreign organisations in its transition to a market-oriented economy. The Government of Cambodia has undertaken many reforms in the country’s financial sector. A typical example is the promulgation of the Tax Law in February 1997 which has had positive impacts on the development of Cambodia in general and that of its two border provinces in particular.

3.2- Lao PDR have already developed a national socio-economic master plan for the period up to 2020. In recent years, the economy of Laos has been confronted with hyperinflation (the inflation rate reached 140% per annum), creating difficulties for the implementation of the formulated economic development plans. Following the Government of Laos’ adoption of many resolute solutions to contain the hyperinflation, the country’s inflation is now kept under control and tends to decrease, favouring the development in the country itself and that of the two border provinces of Se Kong and Attapeu. Laos’ external and internal lines clearly make its people and both domestic and foreign investors confident about its development direction and its cause of making the country prosper.

3.3- Vietnam: Having adopted the policies of multilateralisation and diversification of external relations, the international relations of Vietnam have been expanded. Following its official accession to ASEAN (in July 1995) and the ASEAN Free Trade Area (AFTA), Vietnam’s official membership in APEC approved at the Summit Meeting in November 1998 held in Malaysia marked a new step in its international integration, manifesting the country’s increasingly enhanced role and position in the regional and international arena.

Vietnam is also improving its management mechanism and renovating its economic management mechanism. Many measures have been adopted to accelerate the process of creating linkages among the provinces and to step by step promote the link between specialised cultivation areas and the market. Many policies regarding economic development of the Central Highlands have been approved by the Government and investments are being made to develop this area.

Source: clv-triangle.vn

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