SBR- Content.pmd - INBO

State of the Basin Report - 20032.1 Trade and diversificationFormal recorded trade between countries in the whole Greater Mekong Subregion is growingsignificantly. As an example, the combined value of exports and imports between Thailand and LaoPDR has grown by an average of 33 percent per year during the last decade. The growth in formaltrade is taking place despite significant official barriers to transactions between the four LMBcountries.Informal trade and short-term migration between LMB countries are also growing. The LMB isgenerally characterised as having fairly porous borders that allow significant amounts of goods, rawmaterials and labour to move from one LMB country to another. It seems that informal trade flowsrespond more rapidly to shortages or higher prices in one country. Labour migration is a response todifferences in wages from one country to another.The goods, which are traded between LMBcountries both formally and informally,reflect differences in levels of development.The less developed countries of Cambodiaand Lao PDR mainly export raw materialsand agricultural products such as wood, gum,rubber, live animals and fish to Thailand andViet Nam. Low-skilled labour also movesout of the poorer countries to seekemployment in Thailand. Processed ormanufactured goods move from the moredeveloped to the less developed countries.These products include cement,construction steel and sawn timber fromViet Nam and vehicles, machinery, fuels,fertiliser and pharmaceuticals fromThailand.Goods are traded between LMB countries on an informalas well as a formal basisBecause of their proximity to large industrial production centres in Thailand, Viet Nam and Yunnan inChina, it will likely be difficult for Lao PDR and Cambodia to expand their own manufacturingsectors. The markets of the two smaller countries (some 5 million people in Lao PDR and 13 millionpeople in Cambodia) are small relative to the more than 60 million people who are consumers inThailand and nearly 80 million in Viet Nam. This means that producers of processed or manufacturedgoods in Lao PDR and Cambodia will find it difficult to compete with larger producers in neighbouringcountries that benefit from economies of scale because they have a much larger internal market.Unfortunately the tendency is for goods from Thailand and Viet Nam to cross both legally andillegally into the smaller neighbouring countries and thereby undermine their attempts to diversifyproduction and add value by setting up manufacturing and processing industries.It thus seems that economic growth in Cambodia and Lao PDR in the short-to-medium term willcome mainly from increasing agricultural output as the sector becomes more productive. ForCambodia, the sources of potential growth are likely to be agriculture, natural resources, lightindustry and tourism. 46 For Lao PDR, the same sectors have potential, and the country also haspotential to earn revenue from the production of electricity from hydropower. Viet Nam willcontinue its industrialisation process, but to some extent focus on internal markets. Thailand is onthe threshold of entering a yet higher level of economic development. This will involve replacing94