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Why should CMLV be integrated into ASEAN?

The integration of CMLV countries into ASEAN is due to rapidly changing

socioeconomic global landscape showed the sense of urgency in the group to meet the

challenges. The older ASEAN members felt that they need to assist the less developed

nations to ensure effective economic integration and to cope up with the competition due

to globalization. CMLV accounts for more than one-fourth of the ASEAN population; thisshows the importance of these markets for the growth of ASEAN countries. CMLV

countries are driven by garment exports, agriculture, tourism and construction

The share of agriculture in G.D.P for all these countries is very high.Huge opportunities

in key growth industries such as agri business, automobile, construction,renewable

energy and manufacturing.

The CMLV countries are strategically located, having borders with India, China and

remaining ASEAN countries. Only Laos is land-locked country. Thus the location of

these countries plays a major role in the economic flow of goods and services across the

nations.

They share border with countries like India, China and Thailand whose economy is

growing at a rapid pace and these countries have become the geo-political powercentres.

Structural constraints that hinders the integration

The political stability and long term economic growth could only be attained if they all

cooperate.

F.D.I inflows are very low due to low openness to business.

There are structural constraints like infrastructure gap, institutional gap, income gap

which makes the integration of the CMLV countries into ASEAN difficult.

There are still widening income inequalities and depleting natural resources. Government

should tackle economic policies that are more inclusive and sustainable to stamp out high

poverty rate, large income gap and low production base, and inadequate human resources.

The structural issues hindering the integration of CMLV into ASEAN include:

Difference in stage of development creates gaps in economic structure

CLMV are just at early stage of industrialization process and the agricultural sectors account for

23% to 52% of the GDP

Large gaps in economic structure between the groups of older ASEAN members and that of the

new ones, which would generate potential domestic conflicts among different interest groups

and industries during the process of deeper and wider ASEAN integration

Poorly developed infrastructure in the CLMV countries, transportation system and utilities are

barriers to factor mobility and technological transfer into the new ASEAN members, which inturn would widen the development gaps between the ASEAN-6 and the CLMV groups

All the ASEAN-6 members have accessed to the WTO for long, while the CLMV are approaching

this overarching international institution on world trade, with the accession of Cambodia and

Vietnam only recently. The ASEAN-6 have been experienced in participating in various regional

and global economic arrangements, whereas the CLMV have just made their very first moves in

regional and international integration within the last decade.

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The CLMV are all transitional economies, which have been undergoing a dual-shift from

centrally-planned to market-oriented economies and from an agricultural to an industrialized

ones

The capital markets of the ASEAN-6 are more finance-based, while those of the CLMV are more

dependent on the banking system.

Differences in financial deepening levels and the development of financial markets could alsolead to asymmetric effects in terms of intra-regional financial market integration. Monetary and

exchange rate policy, therefore, is difficult to coordinate

There exist large gaps among member countries in terms of public administration, law

enforcement and governance effectiveness, which would hinder the deeper integration among

ASEAN economies.

To fully realise the benefits of these changes, the middle-income ASEAN countries,

China and India will all need over time to foster the progressive transformation oftheir manufacturing industries towards more sophisticated and demanding activities

with higher productivity and greater dependence on technology. Individual countries

face specific challenges that differ according to their stage of development and

intrinsic comparative advantages