Those caught up in the hype over the Asean Community (AC) and its three pillars of political-security (APSC), economic (AEC) and socio-cultural (ASCC) by end 2015 are fixated on the wrong places. Integration from connectivity, where borders are proving increasingly irrelevant, is happening less on paper and more on the ground in mainland of Southeast Asia. Beyond the agreements and scorecards of the AC, mainland Southeast Asia is where real integration will take place.
Mainland Southeast Asia used to be known more for a colonial contest between Britain and France during imperialism and a geopolitical grapple between the United States and the Soviet Union during the Cold War. No more. This group of countries comprises Cambodia, Laos, Myanmar, and Vietnam, formerly known as the newer "CLMV" members of Asean. Cambodia, Laos and Vietnam constituted French Indochina, while Myanmar was part of British India. Add Thailand to this mix as a colonial holdout, and the mainland half of Southeast Asia (CLMTV) is coming together for the first time in the modern era.
Its future looks more like its past, minus imperialism, when its mainly Buddhist peoples crisscrossed the land for better livelihoods, mixing and enmeshing across ethnic and linguistic lines. Borders were not drawn then, as they matter less now. War and conquest were rife and part of life but trade and commerce were also brisk and prevalent. This mainland sub-region would not be complete without China's southern Yunnan province, known as the Nanchao kingdom in the distant past, bordering Laos, Myanmar and Vietnam. Yunnan traditionally defined the ethnicity and lineage of many parts of mainland Southeast Asia, its history interwoven with those of other mainland countries.
These mainland Southeast Asian economies coalesce into a consumer and labour market of 300 million with rising income and a combined GDP that is headed above $1 trillion by 2020. This sub-region is a global pivot, connecting Northeast, South and Southeast Asia, with more than a three-billion population altogether. Poised to grow as a nexus of the Asian landmass on the back of Asean's more incremental integration efforts, mainland Southeast Asia has entered an unprecedented period of promise and expectation, revolving around Myanmar's transformation and the Myanmar-Thailand gateway. It is a sub-region being wooed, as in the Central Asian great game of the 19th century, by China as the resident superpower and the United States with its staying power, with Japan heavily invested and India as a civilisational cradle. In view of global economic volatility and fluid geopolitical uncertainty, no sub-region beckons quite like mainland Southeast Asia, as a hedging strategy and smart diversification for investors from near and far.
The solid sources of growth in these mainland economies go beyond headline numbers. True, the macroeconomic figures are considerable. Cambodia, Laos, Myanmar, and Vietnam have clocked and are on course to maintain a 5-7% or higher growth trajectories through the 2010s, while Thailand is expected to hover lower in the 3-4% range due to its domestic problems. With a population of 50 million, a US$200 billion GDP, and economic expansion well above the Chinese national average, Yunnan province could pass as an impressive economy elsewhere. Inflation is in check in these economies, higher in some than others, but nowhere near a runaway problem. All have healthy international reserves, sustainable external accounts and manageable debt profiles. Except Thailand's minor GDP contraction in 2009, all stood up well and maintained their trajectories in the face of the Global Financial Crisis. Yet the growth potential of these mainland economies is more than headline numbers.
The shared history and convergent destiny of these five mainland countries and a large Chinese province are bound by geography. The Greater Mekong Subregion (GMS), a Japan-backed initiative administered by the Asian Development Bank (ADB) since 1992, has harnessed the potential and promise of the Mekong economies through road and rail infrastructure development straddling the mainland in multiple directions. The GMS also includes Guangxi Zhuang Autonomous Region in China's deep south, next to Yunnan and north of Vietnam. Guangxi adds a 50-million population and a US$250-billion economy to the GMS market. Current roadways in GMS economies exceed 540,000 miles (865,594km). Its rail equivalence is around 12,000 miles (19,200km). The highways and railways will significantly lengthen both within and across the GMS economies as development continues to make headway. According to a recent ADB study, the corridors of GMS road transport will reduce transaction costs and expand markets to achieve GDP gains between 1.1 to 8.3% for the rest of this decade.
The road and rail connectivity in mainland Southeast Asia is creating an integrated market on the ground without too much trying and without the AC's fancy documents and pronouncements. Mainland Southeast Asia just connects and integrates.
For example, more than 2.5 million mostly undocumented migrant workers from Myanmar and 250,000 Cambodians take up low-income jobs in Thailand, without whom the Thai economy would sink to its knees. Thailand, in turn, is a leading investor in Cambodia, Laos and Myanmar. Bangkok is the aviation and tourism hub of this sub-region. Tourists, diplomats, development specialists and sundry NGOs are enticed and romanticised by the prospect of work and making a difference in Cambodia, Laos and especially Myanmar but when they need down time they flock to the Thai capital and outlying resorts. Likewise the presence of Chinese workers and capitalists can be felt increasingly in the CLMTV countries, especially in their northern provinces and townships.
Known as the "battery" of this sub-region, Laos is dominated by three economies, Yunnan to the north, Thailand on its western flank, and Vietnam on the eastern side. Sharing a Buddhist and linguistic heritage with Thailand, Laos is a major hydropower exporter, and sells almost all of its excess electricity to Thailand. Lao also speak the northeastern Thai dialect and tune in to Thai soap operas for prime-time entertainment.
Cambodia's government, on the other hand, is beholden to the Chinese the most, as Beijing has been the largest investor and aid donor to the country. Sandwiched between the Vietnamese and the Thais, Cambodia is spawning more economic activity in light manufacturing and the tourism industry in an effort to rely less on aid and more on productivity and competitiveness, buoyed by a young workforce most of whom were born after the Cambodian peace process was in place in the early 1990s.
Although hounded by macroeconomic challenges, Vietnam's GDP expansion remains in the 6-8% range. Its large internal market of more than 90 million people makes Vietnam one of the largest regional recipients of foreign direct investment so far this decade.
Thailand is well known for being in the middle-income trap, stuck in the US$5,000 per capita income range. But the trap talk may be overstated if the Thai economy can keep diversifying and expanding on a combination of labour-competitiveness, incremental upgrading, and limited productivity gains, especially in services.
Geography will lead the way for the GMS economies. Rich natural resources, ample labour, expansive and fertile land, and growing capital from within and outside, all pack a promising growth punch. Their relative low-base effects leave much room for at least another decade of upward-sloping trajectories when they will need to get the basics right for longer-term expansion.
Their location between Japan and South Korea on one hand and India and South Asia on the other, and between China and maritime Southeast Asia, makes this a compelling region. A young working population, unlike the ageing dilemma of OECD economies, bodes well for future growth.
But it is not all robust and rosy for these mainland economies. They are beset by environmental degradation, human and drug trafficking, transnational crime, and other non-traditional security concerns, which need to be adequately addressed individually and in a regional framework. If these problems can be managed, the mainland growth story will continue to unfold.
Accordingly, those interested in Asean economic integration should reframe their focus. Mainland Southeast Asia is poised to be a major locomotive for regional growth and development irrespective of what happens with the Asean Community at the end of this year and beyond.
Maritime Asean will become more connected over time but the mainland is where the real action of connectivity and integration will be.
Thitinan Pongsudhirak is associate professor and director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University.