GO
Loading...

This region could become the China-India gateway

A motorbike crossing a bamboo bridge across the Mekong River in Kompong Cham, Cambodia.
Guido Dingemans, De Eindredactie | Moment | Getty Images
A motorbike crossing a bamboo bridge across the Mekong River in Kompong Cham, Cambodia.

Five Southeast Asia countries are set to bridge China and India - Asia's two largest economies - but whether or not they boost economic development remains to be seen, according to analysts at ANZ bank.

Cambodia, Laos, Myanmar, Thailand and Vietnam - which ANZ calls the Greater Mekong 5 (GM-5) - have the potential to connect South, Southeast and East Asia, which could help the region become one of the world's fastest growing, it said.

The GM-5 have a combined population of 300 million, are strategically located and have rich natural resources, but remain underdeveloped and predominantly rural economies, said ANZ.

Read MoreThe emerging market to watch in 2014

"Improving the transport connection within the GM-5 should link the varied natural resources of the countries, encourage specialization, develop a supply chain, and ultimately transform the transport corridors into effective economic corridors," said the ANZ analysts.

Thanks to a plan launched by the Asian Development Bank (ADB) over 20 years ago, huge progress has been made in improving transport infrastructure to link the more developed urban areas to the inner rural zones and develop the isolated borders as key economic zones.

The Transport Master Plan launched in 1995 - by the ADB and other partners - involved the creation of a transport network consisting of three main corridors with several routes. The North-South Economic corridor (NSEC), the East-West Economic Corridor (EWEC) and the Southern Economic Corridor (SEC), all oriented toward seaports and giving land-locked countries access to world markets.

Read MoreChanos vs Roach over China's economic growth

Success is not guaranteed

However, ANZ analysts pointed out that the success of these transport networks hinges on how quickly they can be used to boost trade between the countries.

"Now that the three major transport corridors have been significantly completed, it remains to be seen how fast they will be transformed into arteries of economic activity," said ANZ.

It's not enough to just be physically connected, the analysts said; the countries need to cultivate cooperative deals at a national level while also rallying community involvement on the ground.

The GM-5 have already ratified a Cross-Border Transport Agreement, which is likely to encourage trade between Myanmar, Lao, Thailand, and Vietnam via the EWEC in a first positive step.

Read MoreWorld's biggest election: Game changer for India?

Now, the extent to which local communities and small businesses engage across borders will be key.

"Access to transport corridors is a necessary but hardly sufficient condition for economic development," said ANZ.

In the absence of these two elements, ANZ said there is a risk that economic enclaves will emerge leaving local communities isolated on the fringes of the corridors.

The SEC, completed in 2006, includes the Phnom Penh-Ho Chi Minh Highway Project, a network of arteries from Bangkok through Cambodia reaching destinations along the Vietnamese coast.

Meanwhile, the EWEC, also completed in 2006, is the only direct and continuous land path stretching the Indian Ocean on the west to the Pacific Ocean on the east. It passes through the less populated and poorer areas of Myanmar, Thailand, Laos and Vietnam.

Read MoreEntrepreneur Asia Profile - Henry Nguyen

Finally the NSEC, a 1,000 kilometer road linking Kunming in China's Yunan Province to Bangkok in Thailand, provides entry to the shipping routes in the ASEAN region from Southwestern China to Northern Thailand. This is the first time in history that Southern China has been linked to South East Asia, the bank said.

And following on from the Transport Master Plan, the Transport Sector Strategy plan, launched in 2006 is now targeting six further corridors covering most of the GM-5.

According to Eugenia Fabon Victorino, an economist at ANZ who worked on the report, the trade relationships between the GM-5 and China are more developed in contrast to India.

She said the routes connecting Bangkok and Southern China are likely to be profitable as Thailand and China have higher gross domestic product compared to the rest of the region.

"The greater potential is for India. Myanmar connects the region to India, so as we gradually see the opening up of Myanmar then we will see better connections there," he added.

Contact Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More