The need to narrow gaps in economic development of South-East Asia is particularly pressing given that deepening of subregional integration structures to fully realize the ASEAN Economic Community has already begun. Failure to close development gaps would run the risk that the economies of the laterentrant countries − Cambodia, the Lao People’s Democratic Republic, Myanmar and Viet Nam (CLMV) may be overwhelmed by more developed neighbours and may not take full advantage of the opportunities emanating from integration. Narrowing the income and development gap will require measures that increase the availability and quality of physical capital, as well as improve workers’ skills and the availability of decent and productive jobs. In addition, there is a need to improve the economic fundamentals, wage and social protection systems and the effectiveness of fiscal policy.

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