1As part of post-cold war reconstruction of the world, US-led global financial institutions had swung into action seeking structural adjustments and economic reforms in planned economies of yesteryear. This was projected as the potent strategy to promote private sector led public development, especially in the least developed and developing countries. It was in this new context that, in year 1992, the Asian Development Bank (ADB) launched an Economic Cooperation Program for what is described as the Greater Mekong Sub-region (GMS).* The official history though believes that this was the result of ASEAN efforts that had resulted in putting together a Mekong Working Group (MWG) which eventually created a Greater Mekong Sub-region forum in 1992 that launched the ECP.†

2Launched formally by the GMS countries, the GMS-ECP presented itself as an ADB ‘supported’ and ‘facilitated’ high-profile program of five riparian states of the Mekong River and Yunnan province of China. This was presented as one most powerful vehicle for promoting social and economic development projects heralding a new era in the Mekong river basin. In year 1995, the long-dormant Mekong River Committee – a well-known international forum for development of the Indo-China region that was set up in 1957 but had become dysfunctional over years–was revived as the new Mekong River Commission that was set up through an agreement of the aforementioned Mekong Working Group.1 Member states were to soon set up their own national level Mekong River commissions to coordinate their active participation and policies at the multilateral level.

3This new economic momentum was soon followed by a historic political transformation: four of these riparian GMS countries were to become members of the Association of South East Asian Nations (ASEAN) during second half of the 1990s. All this was not only to boost their self-confidence but also revive the strategic interests of all the major players like Australia, China, Japan, India, Russia and the US. All these external State and non-State stakeholders were to be seen jostling for influence and access in this region.2 And, this time round, the method was not the one of selling weapons and promoting insurgencies (as had been the case earlier) but by engaging in partnership with this rapidly developing Mekong river basin. Even the ADB – which is seen as the guided force behind the GMS – has been suspected for ulterior motives in promoting this ‘regional market economy’ framework.3

4On the negative side, the East Asian financial crises of 1996-1999 were to briefly dent this newfound enthusiasm amongst the GMS and delay these initiatives by several years. Secondly, this episode had also resulted in shifting the lead from the US and financial institutions to the People’s Republic of China. China, for some reason, survived unscathed from these financial crises and was first to come to rescue of these neighboring countries, especially the worst affected Kingdom of Thailand. This was to make China far more acceptable amongst GMS countries. Thirdly, this episode had briefly revived the continued problems of divisive politics in most countries of the GMS thereby increasing their inclination to engage Beijing.‡ However, the region has ushered in several new experiments in seeking rapid industrialization and modernization and, despite these hiccups these last two decades have witnessed a kind of a transformation in their economies, politics as well as in the lifestyle of the GMS.4

5It is this new era of socio-political and economic dynamism in the GMS – and the promise and potential of its people that has completely transformed the matrix of both intra-and inter-regional interactions. And, it is this backdrop that has created strong new motivations and opportunities for the GMS and its external stakeholders and resulted in evolving a range of multi sectoral and functional cooperation. It is in this new context that India’s engagement with the GMS seeks to create a niche for a lasting and positive relationship of mutual benefit, trust and cooperation.

1-From Battlefield to Marketplace

6The transformation in the GMS has though not been an exclusively externally driven experiment. This has had it own share of local wisdom, contributions and acceptance. It was in the late 1980s that then Thailand Prime Minister, Chatichai Choonhavan, had advocated turning Indochina “from a battlefield to a marketplace”. This was later re-enforced by the World Bank and ADB deliberations with officials and experts from this region. The driving objective was to knit this region into one and to generate a sense of cohesion and interdependence for their rapid and sustainable development. It is in this framework, that their deliberations had come to underline buzzwords like reductions in tariffs and non-tariff barriers, foreign direct investment and free trade areas and so on. In operational terms, the focus came to be on building physical and social infrastructure to enhance cooperation, connectivity and mutual goodwill amongst their people. The cornerstone of this new framework were to be three highways: (a) East-West Economic Corridor, (b) North-South Economic Corridor, and (c) Southern Economic Corridor (see map p. 52) And many more transport and communications and other development projects were to be added to it later.

7The first and foremost was the northern East-West Economic Corridor project that was conceived comprising of highways and bridges across the Mekong. This East-West corridor was to link Mukdahan in northern Thailand and the South China Sea port of Da Nang in central Viet Nam. The highway was expected to be ready by year 2006 and it has been completed on time. It is now being extended to the west to Mawlamyine in southern Myanmar. Meanwhile, a second East-West highway i. e. the ‘Southern Economic Corridor’ had also been conceived and work is currently ongoing to build this road link connecting Bangkok, Phnom Penh and Ho Chi Minh City. Both projects were originally expected to be completed by year 2006 but this second one has been delayed in parts in Cambodia.5 The third highway i. e. the Chinaled ‘North-South Economic Corridor has also been under discussion for long time. Indeed, the road has been completed except for one bridge across the Mekong (in Houayxay). This was finally approved at the 14^th GMS Ministerial Meeting in Manila on 21^st June 2007 and this road is expected to be up and running by 2011.

8These nearly two decades full of zest for transformation have seen the GMS countries moving towards a more diversified and trade-driven development. The region has, for example, witnessed a noticeable rise in mutual economic engagement and its engagement with the rest of the world. Total exports of the GMS quadrupled from USD37 billion in 1992 to USD182 billion in 2006. Similarly, the annual foreign direct investment (FDI) inflows rose from USD3 billion to USD7 billion during this period. The annual tourist arrivals more than doubled from USD10 million in 1995 to over USD22 million in 2006.6 Even their intra-regional exports rose from USD1 billion to about USD12 billion during 1992-2002. The share of their inter-regional trade within GMS (as part of their booming total foreign trade) nearly doubled from 2.4 per cent at the beginning of reforms and opening up in 1990 to 4.54 per cent at the end of the East Asian financial crisis in year 2000.7 These statistical citations can be exhaustive and reflect but only part of the nature and magnitude of transformation which has had multiple triggers and motivations that underwrite these windfalls in the GMS

9Firstly, the region has especially benefited from the FDI provided by the Peoples’ Republic of China which has since emerged as a major player in GMS. Indeed, China is sometimes seen as pushing too hard. Secondly, Thailand has been the other major player that has become increasingly significant regional source of capital and it has already become the largest trading centre in the GMS. Thirdly, the sub-regional level engagement has also witnessed a boost in almost all important sectors that include cross-border trade, investment, labor mobility, energy planning, and also cooperation in the field of environment protection and promotion of tourism. All this alludes to the fact that their dependence on external world remains as yet limited and that they remain relatively safe from suffering any sudden bubble burst or from any other pitfall like the East Asian financial crisis of the late 1990’s.

10Much of the change remains as yet triggered by intra-regional initiatives. However, this pace of various intra- and extra-regional and other multilateral trade partners and FDI inflows – juxtaposed with their domestic reforms – have accelerated the pulling down of various tariff and non-tariff trade barriers amongst GMS countries making it possible to visualize free trade regime in this region. Initiated in 1992, at the fourth ASEAN Summit in Singapore, the ASEAN Free Trade Area (AFTA) has provided an impetus to these processes about gradually reducing their intra-regional tariffs in GMS.8 The AFTA has also facilitated intra-regional mobility of goods by embarking on activities including efforts to eliminate non-tariff barriers like quantitative restrictions, as also assisting in harmonizing customs nomenclature, valuation, and procedures, and to develop common product certification standards, known as “AFTA plus” measures. But relatively developed ASEAN members have also been sensitive to the special needs of the GMS members and have, for instance, deferred deadlines for their lowering of tariffs and other non-tariff barriers as part of ASEAN Free Trade Area initiative. All this has opened doors for their political integration with the larger region and beyond.

2-Integration of GMS into ASEAN

11Since its establishment in 1967, the original members of ASEAN had hoped to unite the entire region – including Indo-China – under its auspices.9 Though Brunei was inducted in 1984, it was the end of Cold War that was to trigger the final enlargement of ASEAN with Viet Nam joining in 1995, Laos PDR and Myanmar in 1997 and Cambodia in 1999. The absence of any specific political or economic conditions for admissions was to greatly facilitate new candidates in becoming integral part of ASEAN. But this was not how the story of ASEAN had begun. To begin with, North Viet Nam used to describe ASEAN a political fraud and part of American policy of containment of communism in Asia. Even after its formal unification in July 1976, Viet Nam had refused the repeated invitations to attend ASEAN meetings.10

12Staring form 1990s, however, correcting this so-called Cold War ‘ASEAN divide’ was to become a high priority for ASEAN as it accelerated its economic integration with an ultimate goal of create fully integrated ‘ASEAN Economic Community’ by 2020. Apart from Cold War politics of yesteryear, this political segregation had also been circumscribed by huge gap in their respective prosperity levels. Per capita income in Myanmar, for example, has generally been less than one hundredth of that of Singapore. Secondly, ASEAN had to deal with this new post-Cold War reality where it is no longer the same as it was before the induction of CLMV and this has transformed the very character and agenda of ASEAN.11 Besides, external powers, like the United States, Japan and China – with their assistance in the development of the poorer ASEAN nations – were using their aid and trade linkages as a channel to strengthen ties with the entire GMS.

13What is interesting is that some of these powers had begun jockeying for leadership role in this cumbersome task of Economic Community building in East Asia. For instance, China was initially trying to hold the first meeting of the East Asian Summit in Beijing and is believed to be the force behind the exclusion of the United States from this forum. This had really alerted Asean leaders. ASEAN may not, even put together, have the economic prowess of big countries (like the United States, China or Japan), yet they wield strong voice in asian affairs and can play one of these external powers against the other. But ASEAN has had its own share of difficulties and limitations which often complicate their policy options. During 1997-1998, for instance, the onset of financial crisis hit Thailand – which had been the main proponent and beneficiary of Mekong basin’s development – and then it spread to rest of the East Asia slowing down this momentum and delaying these GMS related initiatives by several years.

14This enthusiasm was revived in November 2000, as was seen in the launching of the ASEAN Integration Initiative (IAI). This was evolved in view of new challenges emerging from the integration of Indo-China and Myanmar into ASEAN. This has though only further contributed to the revival of the focus on Cambodia-Laos-Myanmar-Viet Nam (or CLMV countries). Most external stakeholders, for instance, have since projected their proposals as meant to strengthen the IAI. But often promises have not been followed by substantial commitment. As first initiative towards this social and economic integration of GMS into ASEAN, e.g. ASEAN’s Fund for Mekong Basin Development, was initiated in 1996. But it remains quite ineffective as yet. It is also interesting to note that China and Myanmar were not invited to become part of this Fund though this was not only why it did not become very effective and why its remits remain limited so far.

15More than mobilizing, it is coordinating and utilizing financial resources that remains the main requirement of the development of the GMS, to make it reach the level where it comes closer to the general ASEAN indices of human development. The ADB estimated that the GMS projects will require USD40 billion in next 25 years. Of this amount, about USD20 billion is expected to come from private sector funding. Accordingly, development in GMS has since moved away from its traditional reliance on donor funds and embarked on aggressive strategies to mobilize private sector capital.12 Meanwhile, private lending agencies especially those working with the Asian Development Bank and the Mekong River Commission (MRC) had emerged as dominant players.13 This has witnessed international financial institutions again getting interested and taking initiatives in lending and project evolution.

16It is in this new context that stakeholders like India have also accelerated the pace of their engagement with the GMS countries providing both financial and technical assistance and building closer political cooperation.