The greater Mekong subregion (GMS) could become Asia's new low-cost production hub as the region becomes more integrated, experts say.
The GMS comprises Vietnam, Myanmar, Cambodia, Laos and Thailand as well two regions in China: the Yunnan province and the Guangxi Zhuang Autonomous Region.
"With China's industrial heartland in the coastal regions of the Pearl River Delta and Yangtze River Delta facing increasing pressures on competitiveness due to rising labor costs, the GMS offers considerable potential as an alternative location for the establishment of low cost manufacturing," Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, said in a note last week.
Biswas estimates the region's combined gross domestic product (GDP) at $1.1 trillion this year, larger than in Indonesia, Southeast Asia's most populous country. By 2015, the region is forecast to grow 6.2 percent and hit a combined GDP of $3 trillion by 2024. The area currently accounts for less than 5 percent of global manufacturing in value-added terms, but IHS notes that infrastructure is key to realizing the region's potential.
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"If infrastructure connectivity is strengthened in Southeast Asia to allow high-speed rail networks and modern roads to link provinces such as Yunnan in southern China to the Indian Ocean via Thailand and Myanmar, this could significantly improve freight logistics...and create significant opportunities for the development of major ports and free trade zones in Thailand and Myanmar, boosting their economic development as entrepots."
While China still enjoys retains its reputation as the world's leading production center, its slowing economy and double-digit wage increases are causing foreign firms to look to Asia's frontier economies.