The subregional economic integration and the economic transition the case study of the greater mekong subregion (gms) and the economic transition in vietnam m a

The Subregional Economic Integration and the Economic Transition: the case study of the
Greater Mekong Subregion (GMS) and the Economic Transition in Vietnam
By

Tran Thi Le Dung

A thesis submitted in partial fulfillment of the requirement for the degree of
Master of Arts (International Relations)
Faculty of Political Science, Thammasat University
September 2010


The Subregional Economic Integration and the Economic Transition: the case study of the
Greater Mekong Subregion (GMS) and the Economic Transition in Vietnam
By

Tran Thi Le Dung

A thesis submitted in partial fulfillment of the requirement for the degree of
Master of Arts (International Relations)
Faculty of Political Science, Thammasat University
September 2010


ABSTRACT
After the Cold War, the world has entered a new phase in history: the phase of
cooperation and integration. However, the former centrally planned economies find it hard to
fully integrate into the world’s economy due to their unreadiness. And the emergence of subregionalism has facilitated the process of economic integration of transitional economies. The
main objective of this paper is to explore the contribution of the sub-regional scheme in assisting
members to integrate into the regional and multilateral markets. The case studies of the Greater
Mekong Sub-region and Vietnamese economy can be considered as a noteworthy example of the

impact of the sub-regional cooperation on the economic transition of a country.
Qualitative methodology is employed including documentary research and in-depth
interviews. The East West Economic Corridor (EWEC) is used as the artery to analyze its direct
and indirect impacts on two selected nodes along the EWEC, namely junction node: Lao Bao
International Border Gate (Quang Tri Province) and gate way node: International Seaport of Da
Nang (Da Nang City).
The role of the GMS program towards to economic transition in Vietnam was
investigated under two main aspects: the relationship between the central government and the
local government, and the participation of the private sector.
In conclusion, the GMS program, particularly the EWEC, has played the catalytic role in
assisting Vietnam to develop its economy towards a more market one. The implementation of the
EWEC initiative has facilitated the Vietnamese government to pilot and adjust the legal
framework concerning to cross-border movements, trade facilitation and economic development,
to improve infrastructure systems and investment environment serving the economic
development, and to change the administrative practices. The GMS program is a testing ground
for Vietnam to apply new regulations, policies and learn to harmonize with other countries
before fully integrating into the regional as well as the world economy.

[2]


ACKNOWLEGEMENT
It is a pleasure to thank those who made this thesis possible. I am heartily thankful to my
adviser, Assoc. Prof. Dr. Siriporn Wajjwalku, whose encouragement, guidance and support from
the initial to the final level enabled me to develop an understanding of the topic. I own my deep
gratitude to Assoc. Prof. Dr. Kajit Jittasevi, who has made available his support in a number of
ways. In addition, I would like to thank Asst. Prof. Dr. Kanokwan Manorom for her
recommendations of the two interesting books about the transition in Lao PDR and her sharp
comments on the thesis.
Furthermore, I would like to express my thanks to all the staff of the MIR office for

helping me continuously at the very beginning. Moreover, I would like to thank the officials of
the organizations and people concerned, in Vietnam, who were generous in granting me
interviews and providing crucial data. My thanks also goes to Sean Meadows, who helped me
check grammar of my thesis.
And most importantly, I would to also thank my family and my husband for cheering and
inspiring me.
Lastly, I offer my regards and blessings to all of those who supported me in any respect
during the completion of the project.

[3]


CONTENTS
Chapter 1.

Introduction ............................................................................................. 1

1.1

Significance of the problem ...................................................................................................... 1

1.2

Questions for research and objectives for research .................................................................... 6

1.2.1

Questions for research ...................................................................................................... 6

1.2.2

Research objectives .......................................................................................................... 6

1.3

Main argument and hypothesis ................................................................................................. 7

1.4

Research methodology and scope ............................................................................................. 7

1.4.1

Methodology .................................................................................................................... 7

1.4.2

Scope ............................................................................................................................... 7

1.5

Conceptual framework ............................................................................................................. 8

1.6

Literature review .................................................................................................................... 14

1.6.1
The evolution of the gms economic cooperation and the economic cooperation within the
gms framework .............................................................................................................................. 14

1.6.2

The socialist market-oriented economy and the economic integration of vietnam ............ 18

Chapter 2. Vietnam’s economic transition process from centrally planned
economy to socialist market-oriented economy.......................................................... 22
2.1

The 1954-1975 economy ........................................................................................................ 22

2.1.1

Industrialization.............................................................................................................. 22

2.1.2

Trade and investment...................................................................................................... 29

2.1.3

Structure of labor force ................................................................................................... 33

2.2

The centrally planned subsidized economy (1975-1986) ......................................................... 35

2.2.1

Centrally controlled economy ......................................................................................... 35

2.2.2

Industrialization.............................................................................................................. 38

2.2.3

Trade and investment...................................................................................................... 42

2.3

Socialist market economy (1986 – now) ................................................................................. 44

2.3.1

Factors contributed to the economic reform .................................................................... 44
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2.3.2

Economic liberalization .................................................................................................. 47

2.3.3

Industrialization and modernization ................................................................................ 50

2.3.4

Trade and investment...................................................................................................... 52

Chapter 3.
Subregional economic cooperation in southeast asia and the needs to
cooperate: the greater mekong subregion and vietnam ............................................. 61
3.1

Subregional economic integration in southeast asia: ............................................................... 62

3.1.1

Subregionalism: aims and mechanisms ........................................................................... 62

3.1.2

The emergence of subregional integration in southeast asia ............................................. 65

3.2

Vietnam and the greater mekong subregion ............................................................................ 66

3.2.1

Vietnam and the needs to integrate into the mekong subregion ........................................ 67

3.2.2

The greater mekong subregion – a solution for the puzzle ............................................... 70

Chapter 4. The catalytic role of the GMS program to the process of economic
transition in vietnam ................................................................................................... 75
4.1

The interaction between the central and local governments in implementation the ewec initiated
by the Greater Mekong Subregion (GMS) .......................................................................................... 77
4.1.1

Description of vietnam’s nodes and administration structure ........................................... 77

4.1.2

The response to GMS scheme on infrastructure development of the EWEC .................... 80

4.1.3

The development of the special border zone, the seaport, and software harmonization..... 84

4.1.4

Development challenges ................................................................................................. 95

4.1.5

Human resource development ......................................................................................... 99

4.2

Participation of the private sector ......................................................................................... 101

4.3

Conlusion............................................................................................................................. 107

Chapter 5.

Conclusion and challenges .................................................................. 109

5.1

Conlusion............................................................................................................................. 109

5.2

Challenges of the research .................................................................................................... 113

[5]


Appendix .................................................................................................................... 115
Bibliography .............................................................................................................. 117

[6]


LIST OF TABLES
Table 1: GDP and sectoral growth during 1977-1979 (percent) ................................................. 37
Table 2: Targets and actual performance for selected economic indicators of second Five-YearPlan........................................................................................................................................... 39
Table 3: Contribution of state and private sectors in total retailing turnover (%), 1976-1985 ..... 43
Table 4: Export-import during the pre-Doi Moi period .............................................................. 44
Table 5: Some major economic indicators, 1991 – 2009 ............................................................ 49
Table 6: Economic structure from 1990-2008 (percent) ............................................................. 51
Table 7: Main milestones of legal reform in Vietnam under Doi Moi policy .............................. 54
Table 8: Milestone of Vietnam's economy integration ............................................................... 55

Table 9: FDI investment projects licensed in period 1998-2008................................................. 56
Table 10: Index of export and import of goods .......................................................................... 57
Table 11: Means of transport in Quang Tri province, 2001 -2008 (Road way) ........................... 84
Table 13: Main indicator for Trading Across Borders, GMS ..................................................... 91
Table 12: Foreign Direct Investment projects licensed in Da Nang, 2000 – 2008 (Thous. Dollar)
................................................................................................................................................. 94
Table 14: Number of establishment in transportation (road, inland water ways and maritime
transport) of Da Nang City, 2003-2007 ................................................................................... 105

[7]


LIST OF FIGURES
Figure 1: Vietnam's Gross Domestic Growth Rate (1975-1986) (1990 constant price, percent) ....2
Figure 2: US economic assistance to South Vietnam by fiscal year, 1955-1975 (million dollar)26
Figure 3: Industrial development index from 1962 to 1973 (percent) ......................................... 28
Figure 4: Proportion of industrial activities in the total industrial output value of RVN in 1973 . 29
Figure 5: Index of import and export turnover of the Republic of Vietnam, 1956-1975 (Million
Dollar ........................................................................................................................................ 32
Figure 6: Students in Universities in the South Vietnam, 1954-1972 (in thousands)................... 34
Figure 7: Industrial growth: 1977 - 1985 (1982 price, percent) .................................................. 41
Figure 8: Industrial output value at current prices by ownership (1996-2007) ............................ 50
Figure 9: Share of intra-regional trade to total trade of Vietnam (1992-1997) ............................ 68
Figure 10: Total capacity of major ports in Vietnam, 1998 ........................................................ 79
Figure 11: Administrative structure of Vietnam, based on the 1992 Constitution ....................... 80
Figure 12: Volume of freight implemented of Da Nang Port (thousand tons) ............................. 88
Figure 13: The share of SOEs and private enterprises in 6 IZs in Da Nang .............................. 104

[8]

LIST OF ABBREVIATIONS

EWEC:

East West Economic Corridor

FDI:

Foreign Direct Investment

GMS:

Greater Mekong Subregion

IZ:

Industrial zone

LB-SECA:

Lao Bao Sepecial Economic and Commercial Area

SBZ:

Special border zone

SOE:

State owned enterprises

[9]


CHAPTER 1. INTRODUCTION
1.1

Significance of the problem
After the reunification in 1975, the Vietnamese government quickly applied a socialist

centrally planned economic system in the whole country in 1976. Under this system, private
ownership was not recognized but state and collective ownerships were. The government's
ambition for rapid industrialization and economic growth led to the massive state investment. But
the investment efficiency was exceptionally low due to the economic mismanagement,
administrative inefficiency, and bureaucratic inertia. (Phan 2008). The first efforts at
rehabilitation and reconstruction which were embodied in the Second Five-year Plan (1976-1980)
failed. The growth rate was at only 0.4 percent per annum, far lower than the target set by the
government (13-14 percent). Food production in 1980 reached only 14 million tons, which was
lower than the plan target by 7 million tons. Moreover, Vietnam experienced a number of
disasters over two successive years in 1978 and 1979, all of which resulted in a miserable
situation in the whole country 1.
Being aware of these facts, the government decided to adjust the development model after
1981. The economic policies were more open to allow more participation of private ownership
and individuals in production and circulation of goods. The new incentives brought some positive
effects on the economy. The average of GDP growth during 1981-1984 was 7 percent, however,
the economic recovery did not continue for long as the partial relaxation of economic
management system and partial adjustment of the pricing system brought a huge budget deficit
and high inflation together with income disparity. In addition, the macroeconomic crisis in 19851986 prompted the government to implement more radical measures to reform the economy In
general, the centrally planned economy in Vietnam gradually proved its ineffectiveness as the
growth rate remained very low for many years. The average growth rate of GDP in the period of

1975-1986 was only at 3.85 percent. (See Figure 1)

1

Masahiko Ebashi, Vietnam joins the world (New York: M.E Sharpe, 1997).
1


2
Figure 1: Vietnam's Gross Domestic Growth Rate (1975-1986) (1990 constant price, percent)

Source:

Based

on

the

data

downloaded

from:

(The United Nations) on 9th December 2009
General Statistics Office. Statistical Yearbook of Vietnam 1985 - 1986,
Statistics Publishing House
Therefore, there was a wave of pro-reformation within the government, who advocated
drastic reform with an open policy and transformation of the economic management system from

central planning to a market mechanism.
Moreover, the international environment changed dramatically and that significantly
affected the thinking of the Vietnamese government in many ways:
1.

China's open-door policy in 1978 was effective, which drew the

attention of Vietnamese government due to the similarity between the two states'
conditions, though the relations between two states were tense and were not
normalized yet.
2.

The reformation of the Soviet Union revealed some bad signals

which urged Vietnamese leaders to reconsider the state's situation.
3.

The success of newly industrialized countries (NICs) in East Asia

was the good examples of developmental methods for the agricultural based
economies. The foundations for the development were such as: promoting the
national capacity, opening the market, export-oriented economy and attracting


3
foreign investment.
4.

Confrontation among states was rapidly replaced by cooperation

and competition. This made states including Vietnam reorient their thinking about
development. The open-door policy should be replaced the close-door and selfsufficient economy.
There are, of course, some other causes that led to the decision to transform the economy,
which will be discussed further in the following chapter. Consequently, the 6th Vietnamese
Communist Party Congress (12/1986) introduced a comprehensive reform policy, or renewal
policy known as "Doi Moi" (Đổi mới) policy. The first two year of the reform policy, saw only
part of the program was implemented and on a gradual basis. The comprehensive program was
implemented in 1989.
The essence of the Doi Moi policy was setting up the market economy under the
guidelines of the state, which is commonly known as the "socialist market economy" or "socialistoriented market economy". The socialist market-oriented economy is defined by the National
Party as a multi-sectoral commodity economy, which is regulated by the market, under the state
management. The combination of a planned economy and market economy used to be thought as
an unusual combination due to their contrary characteristics. However, the initial success of China
has somehow shown this combination's advantages. The socialist market economy places
emphasis on innovating the mechanisms and structures of the economy including opening the
economy for the participation of various economic sectors, establishing infrastructure serving to
develop the country, upgrade the legal systems in order to be compatible with the new economic
system, and to change the state administrative methods towards the economy and so forth. Viet
Nam’s transition from centrally planned to a socialist-oriented market economic system has
involved the liberalization of markets, recognition of private property rights, and a gradual
opening up of the economy to external markets for trade and investment. The growth of the
private sector has been a significant feature of economic development.
Over 20 years, the Doi Moi policy has helped Vietnam gain achievements in many fields.
High and sustainable rates of economic growth have been achieved. Intraregional trade and
investments have been playing an important role in accelerating the pace of economic growth in
Vietnam. Therefore, the Government of Vietnam recognizes the importance of regional
cooperation and integration in attaining Vietnam's development goals, which is always stated in


4

the annual socioeconomic Development Plan of the Government.
With globalization, international dependency has become more pervasive and complex
than ever before. In response to this tendency, economic groupings have been established
occurring throughout the world and Southeast Asia is not excluded. The sub-regional economic
zones have become a prominent trend in Asia. To promote regional cooperation and integration,
Vietnam has been participating in various initiatives such as: The Association of Southeast Asian
Nations (ASEAN), the Greater Mekong Subregion (GMS), Ayeyawaddy - Chao Phraya - Mekong
Economic Cooperation Strategy, Development Triangle Initiative and so forth.
In 1992, with ADB's assistance, six countries named as Cambodia, the Lao People's
Democratic Republic, Myanmar, Thailand, Vietnam and the Yunnan Province of the People's
Republic of China entered into a program of sub-regional economic cooperation, designed to
enhance economic relations. The GMS program has contributed to the development of
infrastructure to facilitate the development within the sub-region.
The primary goals of the GMS are promoting freer flow of goods, services and people in
the sub-region and linking the region to other markets. The GMS vision is being pursued through
the 3Cs strategy of enhanced Connectivity, increased Competitiveness, and a greater sense of
Community. Priority GMS projects and activities with the support from the Asian Development
Bank and other development partners are in nine sectors of cooperation, namely transport, energy,
telecommunication, telecommunications, environment, agriculture, human resource development,
trade facilitation, investment, and tourism.
Vietnam has been an active participant in the GMS Program since 1992. As of the end of
the December 2008, Vietnam has participated in 13 loan projects with a total amount of $2,475.6
million. For these GMS projects in Vietnam, ADB extended $1,571.5 million. (ADB 2008)
Vietnam has also been involved in 108 regional technical assistance (RETA) projects, these
include subregional initiates which assist Vietnam in developing and integrating the national
economy into the regional and international markets such as: (i) GMS Cross-Border Transport
Agreement (CBTA), (ii) Development of a Strategic Framework of Action on Trade Facilitation
and Investment (SFA-TFI), (iii) Capacity building program for GMS officials under the Phnom
Penh Plan for Development Management (PPP), and (iv) Support to Trade Facilitation and
Capacity Building in the GMS. One of the most important functions of GMS initiatives in

assisting members to develop national economy and competitiveness is facilitating trade among


5
members. This function is obviously manifested through CBTA and SFA-TFI.
The GMS Cross-Border Transport Agreement (CBTA) is a multilateral instrument to
facilitate cross-border transport of goods and people. GMS countries agreed to take initial
implementation of the CBTA on a pilot basis at 5 of the 16 crossing points, among which 3
crossing points are in Vietnam named as: (1) Hekou (PCR)-Lao Cai (Vietnam); (2) Bavet
(Cambodia)-Moc Bai (Vietnam); and (3) Dansavanh (Lao PDR)-Lao Bao (Vietnam). However,
up to the present the implementation of CBTA has only commenced at the Dansavanh-Lao Bao
Border crossing. The full implementation of CBTA is hoped to promote closer cooperation
between border agencies of the two countries, share of advanced information to allow faster
clearance for low-risk cargoes, and improve processing times of peoples, vehicles, and cargo
which then move toward an open market for transport services. Strategic Framework of Action on
Trade Facilitation and Investment (SFA- TFI), which was endorsed at the Second GMS Summit,
will guide Vietnam's efforts at trade facilitation and investment. SFA-TFI covers four priority
areas: (i) customs procedures, (ii) inspection of quarantine measures, (iii) trade logistics, (iv) and
mobility of business people.
The GMS initiatives have been playing the catalyst role in assisting and facilitating the
process of economic transition from Vietnam from the centrally planned economy into a socialist
market-based economy. In order to take full advantage of infrastructure investment, Vietnam has
to accommodate her policies with other members, notably to eradicate the physical barriers to the
cross-border movements. The border- checkpoint areas play as a model for the government to
pilot the new trade and investment policies in order to harmonize with the policies within the
subregion. Moreover, the subregional initiatives also promote and encourage the development of
Free Trade Zones, Special Economic Zones and Special Commercial Zones that require the
government of Vietnam to be more flexible in management methods to create more opportunities
for cooperation, competition and private sector participation in the economic activities, which are
considered some of the main characteristics of the market-based economy. In addition, provinces,

such as Quang Tri Province and Da Nang City, which are directly involved in the GMS Program,
are trying hard to improve the investment environment with the view of attracting more domestic
as well as foreign direct investment, which is one the sources of economic development in the
transition process. In order to implement GMS initiatives, the Vietnamese government also
changed the state administrative methods by authorizing the local authorities more autonomy in


6
development plan and administrative polices to gain the most benefits from the GMS Program.
What drove me to carry on this thesis was the real function of the GMS within the
subregion- how can it contribute to the development of its members? And I know, of course, it is
not easy to answer this question as not many people believe in the effectiveness of the GMS, apart
from building infrastructure funded by the ADB to connect countries. Therefore, I urge myself to
do this thesis to explore the real function of the GMS. In my point of view is when an
international scheme, a regime or organization comes into existence, it must have some role.
Moreover, I was born just two years before the Doi Moi Policy's implementation, thus the
centrally planned economy is still ambiguous in my mind. Taking advantage of carrying on this
thesis, I would like to discover more about the nature of a centrally planned economy and how the
Vietnamese government has been trying hard to transform the economy.
The thesis explored the significance of the Doi Moi policy towards Vietnam's economy
and how the GMS as a catalyst facilitating the process of economic transition in Vietnam.
Besides, I also believe that the GMS could be a testing ground for Vietnam and other countries to
apply new regulations, policies and learn how to harmonize with other countries before being
fully integrated into the world's economy.
1.2

Questions for research and objectives for research

1.2.1 Questions for research
1. How has Vietnam been transforming itself from a centrally planned economy to a

market economy in terms of trade and investment since the implementation of the Doi Moi
policy?
2. How has the GMS scheme assisted Vietnam in the process of economic transition?
3. How has the integration into the sub-regional scheme helped Vietnam in the process of
economic transition?
1.2.2 Research objectives
To understand the process of economic transition from a centrally planned economy to a
market-based economy;
To explore the contribution of a sub-regional scheme in assisting members to liberate and
integrate themselves into the regional and global market;
To benefit students and people those who are interested in the sub-regional integration


7
process and economic transition in Vietnam.
1.3

Main argument and hypothesis
It is believed that the sub-regional integration process plays a catalytic role in facilitating

the national market to transform its economic model and in paving the way for integrating itself
into regional as well as multilateral economies. The Greater Mekong Sub-region and Vietnamese
economy has been a noteworthy example.
1.4

Research methodology and scope

1.4.1 Methodology
The research employed a qualitative methodology. It included documentary research
including primary and secondary sources. Primary sources comprised of information from indepth interviews, the speeches of Vietnamese leaders, government official documentaries and

news. Secondary sources included works such as books, theses and articles. In-depth interviews
were conducted with officials, professors and individuals in Vietnam such as:


Provincial authorities of Quang Tri Province and Da Nang City



Ministry of Planning and Investment



Lao Bao Special Economic Border Area, Da Nang Port



Faculty of International studies– Da Nang University



Traders, truck drivers, shop owners, money exchangers and

residents at Lao Bao Special Economic and Commercial Area
1.4.2 Scope
1.4.2.1 Unit of analysis
The thesis focused on 2 levels of governments to analyze the impact of the GMS Programs
on Vietnam's socio-economy, namely,
Central government: the focus was on the guidelines and policies issued by the central
government which involve into the cooperation and coordination with other partners within the
GMS framework.

Provincial and district’s governments: the thesis looked at the coordination and
adaptation of each province (Quang Tri province and Da Nang City) in the order to promote their


8
pro-activity and creation to get the most benefits from the GMS Program.
1.4.2.2 Case studies
The research timeframe covers the year 1986 to present. The scope of the thesis analyzes
the significance and impact of the GMS scheme in economic transition, macroeconomic policies
and some relevant factors.
Due to the limitation of a thesis, I did not try to look at every aspect of Vietnamese
economy in the process of transition but only at trade and investment. Accordingly, the catalytic
function of the GMS was framed within trade and investment facilitation. The thesis viewed trade
facilitation broadly, which encompasses customs procedures, trade infrastructure, transportation
and trade logistics (international trade among GMS countries), and measures designed to facilitate
the movement of goods and people.
As mentioned above, the process of transforming from the centrally planned economy to
the socialist market-oriented economy includes the opening economy for the participation of
private sectors, establishing infrastructure serving for developing the countries, upgrading the
legal systems in order to be compatible with the new economic system, and changing the state
administrative practices towards the economy. And all these things can only happen if there is
good coordination between the central and the local governments at different levels. Therefore,
the two aspects that the thesis wanted to focus on are: the changing in the relationships of the
governments at different levels, and the participation of the private sector.
The thesis chose the East West Economic Corridor, a GMS initiative, as the backbone to
study the impact on the two local economies, namely Quang Tri province and Da Nang City.
Basically, the thesis is organized to manifest the following points.
 The performance of the Vietnamese economy since the implementation of the Doi
Moi policy
 Subregional economic cooperation in the Southeast Asia and the needs to

cooperate.
 The catalytic role of the GMS program to the process of economic transition in
Vietnam
1.5

Conceptual framework
The thesis employed two concepts in order to analyze the role of the sub-regional


9
integration process, namely, (1) regionalism under the functionalist approach, and (2)
interdependence.
Regionalism under the functionalist approach
The GMS is viewed as a regional grouping hence the theory of regionalism, specifically
functionalist approach, is used to understand the nature and the process of this form of regional
cooperation. Regionalism has become a pervasive feature of international affairs. Regionalism has
been evident in the processes of developing international organizations and institutions for
governance. Historically, there are two waves of regionalism over the last fifty years. The first
wave began with the initial stages of European integration in the 1960s. The second wave of
regionalism began in the late 1980s, accompanying the European moves toward the single market
and European Union in 1992 and the new regionalism in North America.
The rationale for regionalism is that states within a given geographic area or region can
more easily and effectively address common problems. Region is a spatial concept. It is defined
by a combination of geographical proximity, density of interactions, shared institutional
frameworks, and common cultural identities. Regions can be identified empirically by relying on
data on mutual interactions such as trade flows, similarities of actor attributes, and shared values
and experiences. Generally speaking, regions are dynamic entities. The term 'regionalism' actually
captures the dynamics aspect of regional cooperation defined as the growth of economic
interaction and regional identity and consciousness2. In this sense, regionalism results from the
increasing flow of goods, people, and ideas within a spatial entity which thus becomes more

integrated and cohesive.
Regionalism is defined differently. Traditionally, regionalism has involved the formation
of interstate groupings that are less than global in scope. In short, regionalism can be defined as
"sustained cooperation, formal or informal, among governments, non-government organizations,
or the private sector in three or more countries for mutual gain" (Alapappa 1994 :158)3. Basically,
there are two sorts of factors driving regionalism such as: political factors and economic factors.
Regionalism includes regional cooperation and regional integration. Regional cooperation means
area-based cooperation. Governments can choose the particular areas which they want to
cooperate and it is not necessary to harmonize the domestic rules. On the contrary, formal
2
Martin
3

Griffths et al, International Relations: The key concepts(New York: Routledge, 2008)
Margaret P. Karns and Karen A. Mingst. International organizations. The Politics and Processes of
Global Governance (London: Lynne Rienner Publishers, 2004), p.148.


10
regional integration refers to processes by which states go beyond the removal of articles to
interaction between their countries and create a regional space subject to some distinct common
rules4.
In this thesis, the cooperation of countries within the GMS framework is considered as a
kind of regional cooperation which is driven by economic factors. There are various forms of
regional cooperation, among which is functional cooperation or functionalism.
Functional cooperation refers to limited arrangements which are agreed between states in
order to work together in particular areas, for example, in transport, energy, or health. Economic
cooperation here does not require any obligation for common action in international affairs. It is
not necessary to entail political cooperation. Functionalists believe that international cooperation
and social cooperation is a prerequisite for political cooperation. Generally, functional regional

cooperation is defined as one that promotes economic, social or political collaboration with little
or no regard to security factors5. Most of the functionalists believe that it is possible to overcome
the political rivalries of states and build habits of cooperation in nonpolitical economic and social
spheres by addressing areas requiring cooperation for resolutions. The form, organization's
mandates, and the scope of membership of a specific functional organization are determined by
issues. Generally, the functionalist approach is used to describe a kind of regional cooperation that
has specific mandates, links to economic issues and limited memberships, often related to
geographic region.
In the case of the GMS, six Mekong countries were grouped together with the aim of
promoting economic and social development by strengthening economic linkages between and
among them. The political and security issues are not included in its agenda. The main functions
of the GMS are improving the quality of life and promoting the welfare of people in the region.
The regional cooperation and integration is very important to Vietnam in attaining the
developmental goal and market-based economy. This was reiterated in the Socioeconomic
Development Plan of the Government. The GMS projects and activities are implemented in order
to facilitate the trans-border movement of people and goods and development of regional power
trade and more importantly, to promote market-based integration. The participation of Vietnam in
4

John Baylis et al, The globalization of world politics. An introduction to international relations (London:

Oxford University Press, 2008).
5

Leroy Bennett, International organizations. Principles and Issues (New Jersey: Prentice-Hall, Inc.,
Englewood Cliffs,1984).


11
the grouping allows Vietnam to transform its economy to socialist market-based economy more

advantageously. Moreover, the intraregional trade and investment, which are considered as a
standard in evaluating the liberalization of the market, have also been playing an important role in
accelerating the pace of economic growth in Vietnam.
There is debate about regionalism whether it is leading to a more polarized or more
cooperative world economy and world order and it is not easy to compromise due to the
complexity of the relationship between regionalism and multilateral systems. There are two kinds
of regionalism, namely, open regionalism and closed regionalism. Open regionalism ensures that
regionalism and multilateralism grow together, while closed regionalism states regionalism and
multilateralism are divergent.
I believe in the convergence of regionalism and multilateralism. Regionalism may be
helpful to strengthening of an open world economy.
According to Griffiths, et al (2008), first, regional arrangements can enhance the
awareness of interdependence between trading partners, thereby enhancing the acceptance of
international rules. Second, regional arrangements face a wide range of challenges faced by
multilateral trading system. Therefore, experiences in solving problems can be useful in
overcoming similar difficulties in multilateral process. Finally, increasing inter-regional
cooperation mechanisms can serves as a building-block for the strengthening of multilateralism.
Generally, there is a mutually supportive relationship between multilateralism and regionalism.
In summary, it is reasonable to apply functionalism to understand process of cooperation
within the GMS. And the cooperation within the GMS will equip Vietnam with adequate
knowledge and measures to deal with ranges of issues on the way of joining the regional and
international market.
Interdependence
The term 'independence' was coined in the late 1960s in order to describe the rapidly
growing interdependence of national economies cross the world, especially among the advanced
industrial economies. Interdependence means mutual dependence. Normally, mutual dependence
is often understood as mutual benefit, however, in this context, dependence does not just mean
that.. The meaning of dependence will be discussed further below. In the context of economic
development, each country has to face with an array of disturbances yet each has limited capacity
to deal with it. Therefore, countries come closer together to create a truly global economy via

12
deepening trade, investment and monetary ties. However, interdependence debilitates the national
autonomy. In short, interdependence creates a paradox as it produces incentives for both
cooperation and competition. (Crane and Amawi, 1997).
In order to have a true cooperation, the ultimate outcome is the coordination of domestic
policy. And vice versa, the policy coordination can bring about the best outcome of transnational
economic relations.

Nevertheless, in interdependent relationships, each country still tries to

secure its national interests. There are different types of interdependence in which they will
assume the different roles of politics and technological changes to market changes. Some
optimistic liberal analysts believe that global economic forces such as transnational corporations
will subsume politics and sooner or later, states must give way to politics.
On the other hand, other interdependence analysts propose a different mix of politics and
economics. Like Robert Keohane and Joseph Nye, they argued that politics will not give way to
markets but economic changes will create a new type of politics. This kind of interdependence is
the combination of realism and liberal international political economy. In the traditionalist view,
military power is important in the world politics and nation- states always play an important role.
While the modernist school recognizes the power of technology and the role of non-state actors
Robert Koehane and Joseph Nye do not deny the ability of the domination of military power over
economic relations, but they emphasize that military forces may be irrelevant to the issues. The
influence of military force is different from issue-area to issue-area.
According to them, mutual dependent relationships do not limit to mutual benefit but it
embraces a broader framework. The interdependence will always involve costs since the
interdependence restricts autonomy of states. The nature of the relations and values of the actors
will influence the benefits and costs of each relationship. The interdependent relationships are
complex and often occur within networks of rules, norms, and procedures that regularize behavior

of states. The sets of governing arrangements that affect relationships of interdependence are
international regimes.
Since the World War II, many specific rules and procedures have been developed to guide
states and transnational actors in a wide variety of areas such as aid to less developed countries,
environmental protection, international monetary policy, international trade, etc. The regimes can
be formal and comprehensive, or informal and partial. International regimes provide political
framework in which international economic processes occur. Together with the development of


13
the world's economy, international regimes have changed. They argued that international regimes
have changed due to many factors hence the explanation of international regimes' changes can be
different. Basically, there are 4 models of international regimes named as: (1) economic
processes, (2) the overall power structure in the world, (3) the power structure within issue areas,
and (4) power capabilities as affected by international organizations. The structure of international
system and the regime can mutually affect to each other. The international system affects the
nature of the regime while the regime can affect to the political bargaining and daily decisionmaking of states in the system, Hence, changes in international regimes are very important as the
new rules or practices laid by the regime must be respected by parties.
Due to the complex of international regimes, the nature of interdependence is complex
either. There are three main characteristics of complex interdependence listed by Koehane and
Nye as follows:


Multiple channels: There are not only formal ties but also informal ties

between governmental and non-governmental elites. These channels include interstate,
trans-governmental, and transnational relations. Different actors do not act solely due to
their interests but they act as transmission belts, making government policies in various
countries more sensitive to one another as well. Now the domestic policies are being
concerned by other countries and foreign economic policies touch more domestic

economic activity than in the past.


The absence of hierarchy among issues because military security is not

consistently dominant in the agenda any longer.


The role of military force is minimized as it is not used by governments

toward governments within the region.
The complex of interdependence enhances the significance of international regimes as
well as international organizations. In the world of coalition and multiple issues like today,
international organizations help set the international agenda and act as a catalyst in cooperation.
Koehane and Nye stated that government must organize themselves to cope with the flow
of business generated by international organizations. "By defining the salient issues, and deciding
which issues can be grouped together, organizations may help to determine governmental
priorities and the nature of interdepartmental committees and other arrangements within
governments." (Koehane&Nye, 1997:35). International organizations help bring countries


14
together regardless of the size of the countries.
The thesis looks at the cooperation within the Greater Mekong Sub-region constituted by
complex interdependence. Interdependence theory will be used to analyze the nature of the
cooperation within the GMS.
1.6

Literature review
The issue of the Mekong development can be traced back to the last four decades when

the Mekong Committee including Vietnam, Lao PDR, Cambodia and Thailand was established
in 1957. However, there has been not much research focusing on the evaluation of the Mekong
development, the Greater Mekong Sub-region in particular. Concerning to this topic, readers can
merely find to the Asian Development Bank's publications (ADB) which are books, articles, and
booklets proceeding from conferences, researches. Apart from the ADB, academics in some
countries including Vietnam have written articles and books as well as conducted research
concerning GMS issues but the number is limited. The existing body of knowledge is about
either economic transition or the impact of GMS on socioeconomic aspects. Up to now I myself
cannot find any documents related to investigating the impact of GMS programs on economic
transition, particularly on Vietnam. Hence, it is a bit difficult for this thesis at the starting point
as there is no reference to be compared with.
The following substantial literatures are categorized into two main aspects.


The evolution of the GMS economic cooperation and the economic

cooperation within the GMS framework


The socialist market-oriented economy and the economic

integration of Vietnam

1.6.1 The evolution of the GMS economic cooperation and the economic cooperation within
the GMS framework
Dosch and and Hensengerth6 wrote an important article about the evolution of the Greater
Mekong Sub-region (GMS) in 2005. The authors looked at the evolution of the GMS by focusing

6

Jorn Dosch and Oliver Hensengerth, “Sub-regional cooperation in Southeast Asia: The Mekong Basin”,
European Journal of East Asia Studies, Vol.4, 22, (2005), p. 263:285.


15
on the security dimension, hence this article did not emphasize on economic cooperation among
riparian states. They tried to show how economic cooperation was followed in the pursuit of
security and stability in the region which used to have a lot of conflicts. However, the historical
part of the article is valuable for showing the evolution of GMS economic cooperation.
The history of Greater Mekong Sub-region dated back to 1957, when the Mekong
Committee was established at the initiative of the UN Economic Commission for Asia and the
Far East (ECAFE) and four riparian countries of the Lower Mekong Basin (Cambodia, Laos,
Thailand and South Vietnam). The principle policy goals of the Mekong Committee were tackled
the pressing problems of poverty and political instability along the lower river basin to promote
peace, progress and prosperity through the effective joint utilization of the Mekong's resources.
(Hori, 2000)7
However, the implementation of sub-regional integration was delayed until 1992 because
of war and conflict in the region. With the assistance of the Asian Development Bank (ADB), the
six riparian states of the Mekong River, namely, Cambodia, China, Laos, Myanmar, Thailand,
and Vietnam entered into a program of sub-regional cooperation. These cooperative initiatives
are called the Greater Mekong Sub-region program. The GMS program has been directed to the
facilitation of sustainable economic growth and improvement of the standard of living in the
Mekong region.
Nguyen Tran Que (and other authors) in his book Cooperation within the Greater
Mekong Sub-region: Present and Future8 also introduce to readers the history of the GMS. The
book begins by providing the reader with some facts about the Mekong River. The Mekong is
the world's twelfth largest river and Southeast Asia's largest water way. The Greater Mekong
Sub-region (GMS) including 5 countries and 1 province of PRC covers some 2.3 million square
kilometers and a population of about 245 million. In short, the Mekong region is a potential

region for economic cooperation.
They stated that the foundation for establishing the GMS is as follows.
7

, Hiroshi Hori, The Mekong: Environment and Development (Tokyo: United Nations University Press,
2000)
8
Nguyen Tran Que et all. Hop tac tieu vung Me Cong mo rong: hien tai va tuong lai (Ha Noi: Publishing
house of Social Sciences, 2007)