SBR- Content.pmd - INBO

6 - Macroeconomic trends in the Lower Mekong Basincurrent production, which is based primarily on relatively cheap labour and abundant naturalresources, with production that is more technologically advanced and requires more highly skilledhuman resources. 47 For both Thailand and Viet Nam, the driving forces behind their economicdevelopment are located in parts of the country that lie outside the LMB.2.2 Investing in the futureIn order to achieve economic growth, it will be necessary for the countries in the LMB to provide astable macroeconomic framework that will encourage investments. Increasing labour productivity,either though improvements in agricultural production or though increasing employment andproduction in the industry and service sectors, can only be achieved if investment in better productionfacilities, upgrading of labour skills and the like is made.Because the people of the LMB are poor, the levels of aggregate savings are generally low. Theregions of the LMB are thus looking for foreign direct investment (FDI) as a source of capital. Withthe exception of Thailand, the overall investment climates are not especially positive. The nationallydefinedinvestment regimes across the LMB vary considerably, but they all share the characteristicsof high transaction costs, uncertain land and property rights, and in the case of Cambodia, a poorlegal framework. 48 As a result, the LMB is generally not viewed particularly favourably by investorsfrom outside the region. For the less developed countries of Cambodia and Lao PDR, the situation isfurther worsened by the fact that the countries within the LMB (again with the exception of Thailand)compete against each other in attracting foreign investors.The LMB countries have all experienced a decline inFDI since 1997. Most of the FDI was previously comingfrom crisis-affected countries such as Japan and Thailanditself. The scale of contraction can be seen in the factthat by 1999, FDI approvals in Lao PDR and Viet Namhad fallen to about 10 percent of their 1996 levels.Likewise, Cambodia’s boom years from rapidly-growinginvestments in the textile industry are likely over, andthere too, FDI has fallen over the last few years. NewFDI projects in 2001 dropped by about 50 percentcompared to 2000. 49Cambodia and Lao PDR may find it increasinglyhard to compete with the much larger economiesof Viet Nam, Thailand and China95