Policy Brief

Project Development & Facilitation Framework: Opportunities in Trade & Investment for India in CLMV Countries

Cambodia, Lao People’s Democratic Republic (Lao PDR or Laos), Myanmar and Vietnam, which form the acronymn, ‘CLMV’, are an integral part of the Association of South East Asian Nations (ASEAN) region, covering 32 percent of its geographical area, and accounting for around 10.5 percent of its gross domestic product in 2013. Besides the ASEAN market, which is likely to integrate in the form of an ASEAN Economic Community, business association with the CLMV countries also gains prominence for India, as the ASEAN has economic partnership agreements with other Asian giants like China, Japan and South Korea. Further, Vietnam along with The United States and 10 other countries [Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, and Singapore] are working to craft a Free Trade Agreement, called the Trans Pacific Partnership (TPP) Agreement that is likely to open up additional business opportunities with North America, and Australian markets. CLMV countries have also been proactively pursuing FTA with the European Union. All these factors make CLMV countries that of strategic interest to India, as it allows preferential market access to other countries through investments into CLMV, in addition to reaping the potential of bilateral economic co-operation with these countries. These countries have been undergoing economic transition from Central Planning to that of Market Economy, from inward looking to outward oriented economic development strategies and policies. The CLMV economies, which are considered among the fastest growing economies in the region, are primarily agrarian, and have enjoyed certain degree of macroeconomic stability in recent years, with vast potential for future development. Opportunities that could be explored, besides trade potential include: investments in potential sectors, through joint ventures with local or foreign partners or wholly owned subsidiaries; infrastructure creation which increases the connectivity with India that facilitates trade and investment, like ports, maritime routes, roads, warehouses, exclusive economic zones, industrial clusters/ corridors, etc.; and creation of institutional capability and development facilities in the region. These economies are endowed with abundant natural resources and low-waged labour forces. Among the CLMV countries, Vietnam has the largest volume of trade, followed by Myanmar and Cambodia, while Lao PDR has a relatively small volume of external trade. Trade openness, as measured by trade/GDP ratio is very high for Cambodia and Vietnam (over 100 percent); moderate for Lao PDR, while Myanmar is relatively less open. Trade deficit in the CLMV countries amounted to US$ 18.2 billion in 2013. Under the ASEAN Free Trade Area (AFTA) agreement, the CLMV countries are to eliminate duties on all the products within the FTA framework by 2015.

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Export - Import Bank of India (EXIM BANK)