Economic Integration in the Greater Mekong Subregion and Cross-Border Transport Infrastructure, Journal of GMS Development Studies, Vol. 4, pp. 21-41

Abstract

This paper examines the past trends, current situation, and future prospects of economic integration in the Greater Mekong Subregion (GMS), with particular focus on progress in regional trade in the GMS and the role of cross-border transport infrastructure. First, progress in trade integration among the GMS member economies is described. While GMS members are in different developmental stages and had different initial conditions, regional economic integration has advanced noticeably in recent years, reflected in the increased share of intra-GMS trade and dependence of GMS economies on external trade. Second, an empirical analysis based on a gravity model of the impact of cross-border road infrastructure on regional trade shows that development of cross-border road infrastructure—distinct from domestic road infrastructure—has had a positive effect on intra-GMS trade. Third, the paper provides six case studies of local economic corridors and discusses the development of transport infrastructure and its economic impact and prospects along each route. Some general implications drawn from the case studies are: (i) the expansion of trade and economic integration requires a specific size of economies (or markets) at expected “nodes” along the corridor; (ii) expansion also requires some form of resource complementarity between such nodes, e.g., between resource richness and availability of processing technology, or between labor abundance and capital abundance; and (iii) integration requires cooperation among the concerned governments, both in physical and nonphysical aspects of cross-border transport infrastructure.