With the Covid-19 pandemic expected to leave long-term impacts on global investment patterns and consumer behaviour, the CLMVT countries are counting on closer economic cooperation within Southeast Asia to help them benefit from each other's strengths.
Joe Horn-Phathanothai, Founder and CEO, Strategy613
That cooperation will help the region keep up with megatrends such as persistent geopolitical tension, fast changing technology and the impacts of climate change as they chart a sustainable future.
Representatives of the CLMVT countries -- Cambodia, Laos, Myanmar, Vietnam and Thailand -- came together last week to discuss ways to achieve a resilient economic recovery in the post-pandemic period, in the CLMVT+ 2021 Forum, organised by the Trade Policy and Strategy Office of the Thai Ministry of Commerce.
Although the CLMVT countries have promoted cross-border trade and investment through enhanced transport connectivity and streamlined regulations on trade and e-commerce, the pandemic has disrupted cross-border economic activity. Meanwhile, they have a pressing need to cope with uncertainty in the world market.
Thai Commerce Minister Jurin Laksanawisit said the CLMVT countries must aim to achieve a sustainable and resilient economic recovery from the pandemic to maintain competitiveness as one the world's most attractive investment destinations.
With underlying strengths including an established global supply chain, a highly skilled workforce and a growing market of 240 million consumers, the CLMVT countries are poised to recover from the pandemic crisis in a resilient manner in his view.
"Against the backdrop of the pandemic, the CLMVT countries are being forced to rethink their collaboration in trade and investment," Mr Jurin said. "Although the next normal post-pandemic will bring about changes in globalisation, pushing global investors to refocus their investment within their countries and regions, I believe the CLMVT region has many opportunities."
To ease the impacts of the pandemic on cross-border trade, Thailand is promoting paperless transactions while ensuring proper healthcare assessments are in place to prevent further contagion. Countries should also collaborate to assess the impacts the pandemic has had on sectors such as retail and logistics, while also improving welfare protection for informal labour, to foster collaboration.
Priorities should also include accelerating an environment-friendly framework for development of trade and investment, stepping up support to small and micro enterprises, as well as using blockchain technology to improve market access.
Bangkok-based Strategy613, which provides blue-chip corporate clients with strategic advice on cross-border investments with a focus on China, believes the CLMVT region is poised to reap benefits from geopolitical tension between China and the United States, which have escalated amid the pandemic and are expected to persist in the foreseeable future.
Outbound investment by Chinese state enterprises and corporations has declined in the US and Europe but Asean is getting more attention from Beijing as an investment destination, said Joe Horn-Phathanothai, the company's founder and CEO.
Asean last year became China's largest trading partner, followed by the European Union (EU) and the United States. The EU was China's largest trading partner, followed by Asean and the US, in 2019, he added.
In 2020, Asean was also the top recipient region of investment under China's Belt and Road Initiative (BRI) at approximately two-fifths of the total, followed by West Asia at one-fifth, sub-Saharan Africa, the Middle East and North Africa, South America and Europe.
"By and large, China views the CLMVT countries as being economically and politically friendly, and they are on the way to everywhere," Mr Horn noted.
"There has also been a pause in investment from China because of the pandemic and restricted cross-border travel and quarantine requirements for people coming back in. But once the restrictions are over, the area that will benefit the most is the CLMVT, which is the area China is most comfortable with."
Somprawin Manprasert, chief economist at Bank of Ayudhya, encouraged the CLMVT countries to build on each other's strengths as they prepare to face the megatrends reshaping the world economy after the pandemic. These include impacts from climate change, possible new pandemics, fast-changing technology, and ageing demographics.
"A pandemic-induced industrial transformation is going on; therefore the world after the pandemic will never be the same," he said. "Countries should rebalance the need to address economic shocks and long-term investment to move forward on economic transformation."
Mr Somprawin said the global supply chain after the pandemic would be shorter, more diverse and regionalised as investors focus on risk diversification. Thus, the CLMVT countries should push forward partnerships with countries they can benefit from at the sectoral level.
"The CLMVT as a region has a great diversity of economic factors, be it differences in their leading industries, levels of industrial development, sophistication of exports and demographics. We should push forward collaborations that leverage from each other's strengths."
Other panelists observed that the world market has become a place of great uncertainty in light of the disruptive force of digital technologies such as blockchain, quantum computing, automation and artificial intelligence (AI). These could undermine the development of trade and investment in CLMVT countries. They urged the countries to step up collaboration to benefit from connectivity in trade and investment.
Dr Chheng Kimlong, director of the Asian Vision Institute, said that continued investment to enhance connectivity in the region through both the physical and digital infrastructure is important in deepening connectivity, given to huge gap of technological capability among business sectors in the five countries.
The CLMVT countries, he said, should make more efforts in strengthening small and medium-sized enterprises and micro enterprises, which form most of the the region's supply chain and employ the largest share of the workforce.
"There has been a shift even prior to the pandemic," Dr Chheng said. "Micro businesses are growing in importance for the strengthening and resilient recovery of the supply chain in the CLMVT, contributing to 65-70% of the region's exports and manufacture. This role of SMEs (small and medium enterprises) and micro businesses has picked up over the past ten years."
Sthabandith Insisienmay, vice-president of the National Institute for Economic Research in Laos, said improvement of digital cross-border trade systems in the region is important to the economic recovery, as imports of raw materials and people movement have been restricted by pandemic prevention measures.
"CLMVT governments should facilitate movement of goods and people by using digital technology," he said. "Governments can digitise trade documents and administrative procedures to fix problems in the supply chain."