Inclusive Development and Chinese Foreign Direct Investment in the Greater Mekong Subregion

 

Over the past two decades, the Greater Mekong Subregion has become increasingly integrated. The region includes Cambodia, Laos, Thailand, Vietnam, and China's Yunnan Province. This integration is in line with market-oriented reforms in China, moves toward establishing an ASEAN economic community, and trend toward greater regional economic integration, including the China-ASEAN Free Trade Agreement.

One of the key consequences of this trend has been the significant growth of foreign direct investment from China in the region, particularly in the low-income countries of Laos, Cambodia, and Burma. Chinese investment has grown rapidly for the following reasons:
-China's proximity to the region;
-increased ease of cross-border trade, investment capital, and people flows; and,
-attractive regulatory and policy environment.

Investment from China has generally involved production of low-tech, labour intensive, and land intensive products which have directly and indirectly affected the course of economic development, industrial structure, and local labour market and enterprise development.

This research project looks at the impacts of Chinese investment on local economies and on local enterprise development in Laos and Cambodia. Both countries have challenges managing, promoting, and maximizing the benefits of foreign direct investment, especially in terms of employment and building local economic activity. However, there are few studies examining the impacts of foreign investment on local enterprises in the region, and of the positive and negative spillover effects.

China's size and the nature of these interventions, policies, and incentives make its investments particularly interesting from a policy perspective. The project will broaden understanding of the impact of Chinese investment at the industrial structure and local enterprise levels. It will review existing policies and regulations within each of the countries, assess the impact of Chinese investment on industrial structure, examine spillover effects on local enterprises, and provide policy recommendations to maximize benefits and mitigate negative impacts.

Researchers from the School of Economics and Management at Kunming University of Science and Technology will collaborate with researchers at the Faculty of Economics and Business Management at the National University of Laos, and the Cambodia Economics Association. The project will help increase researchers' capacity to conduct economic analysis and apply research methods. Activities will include short courses for emerging young researchers, mentorship, technical advisory support, and collaborative research.