 Chapter 2
The Vitality of the ASEAN Least Developed
Countries (The CLMs)
Mai Onozawa
Deputy Director, Asia and Oceania Division, Overseas Research Department
Japan External Trade Organization (JETRO)Key Points


Large investments related to resources such as mines and energy are active fromcountries such as China, South Korea, Vietnam, and Thailand to the CLMs
(Cambodia, Laos, and Myanmar). Amidst this situation, investments by Japanese
corporations are increasing in the manufacturing sector centered on garment
manufacturing, and this is diversifying to automobile parts and electronic
components as well.



There has been progress in developing hard infrastructure such as roads and bridges
in the Mekong region including the CLMs, and the building of a cross-borderproduction network, such as a division of production with Thailand, has become
possible in the region. With an increase in personal income level centered on theurban areas, the potential of the CLMs as a market is also drawing attention



The CLMs have many problems in the investment environment such as undeveloped
institutions and rules, an insufficiency in human resources, and the like, but there areabundant business opportunities as a destination of new business deployment, andactive engagement by Japanese corporations is called for. An attitude ofcontributing to the nation-building of the CLMs in the cultivation of human resources
and the like is also necessary.

Japanese companies expanding to the CLMs are increasing(number of Japanese members of chambers of commerce in each country)

Note: Cambodia is official members.
Source: Japanese chambers of commerce for each country
CenterforofEconomic
Research2012 “Asia
Research”
ChapterJapan2 │ TheVitality
the ASEAN
Least Developed
Countries(TheReport
CLMs)
29

1. The growing presence of the CLM countries

Of the 10 ASEAN member countries, the five (Cambodia, Laos, Myanmar, Thailand, andVietnam) positioned in the Indochinese peninsula are often referred to collectively as the “Mekong
region.” Exchanges of goods in this Mekong region are increasing in activity.

While the value of

trade in the ASEAN region from 2000 to 2011 grew by about a factor of 3 from about $101.5
billion to about $309 billion, it grew in the Mekong region by about a factor of 8 from about $3.1
billion to about $25 billion. Although small in absolute terms, this rate of growth greatly exceedsthat for the ASEAN region. With Thailand as the primary trading partner, the increase in the valueof trade by Vietnam in addition to the three countries of Cambodia, Laos, and Myanmar, which canbe considered emerging countries in the region (referred to with the acronym “CLM”) is theprimary reason for this.

This reflects the situation where the economies of the CLM countries areheightening their presence in the region. Below, in this section the current state of the CLM
economies will first be examined.

1.1 Trade and investment exhibiting brisk activity
There are large economic disparities among the ASEAN member countries. There is about ahundredfold gap in nominal GDP, and about a sixtyfold gap in GDP per capita. The CLM
countries have had political scenes including civil wars and military dictatorships, and were
especially delayed in economic development, but have sustained a high growth rate in recent years(Figure 1).

The average growth rate from 2001-2011 was at least 7% for each country, and theaverage growth rate in GDP per capita also has continued at over 10%, with Cambodia at 11%,
Laos at 16%, and Myanmar at 22% (Figure 2).

The economic growth rate for 2012 and 2013 isalso expected to be high.

Figure 1: Real GDP growth trends

Figure 2: GDP per capita trends

Note: 2012 onwards are partly estimates
Source: IMF (WEO Oct. 2012)

Note: 2012 onwards are partly estimates
Source: IMF (WEO Oct. 2012)

Japan Center for Economic Research “Asia Research” Report30

(Cambodia)
According to the Council for the Development of

Figure 3: Inward direct investment
and exports of Cambodia

Cambodia (CDC), the value of inward direct investment

Inward direct investment by industry[Cumulative total for 1994-2011,
Total value: ~ $26 billion](on an approval basis) in 2011 was $5.23 billion, roughly
double the value from the previous year. 1 The greatest
amount, $2.238 billion, came from the UK, but in thiscase a single large investment pushed up the total.
Meanwhile, the second greatest amount, $1.223 billion,
came from China, which also had the greatest number ofdeals at 28 (tied with South Korea), and a 72%
year-over-year increase in total value.

In particular,

investments in large deals in the real estate industry(developing hotels, business centers, and the like) andmine development stood out.

Note: When calculating fractions, Cambodian capital
was included in the parameters for the 1994-2009
statistics. Investment in SEZs is not included
Source: Cambodian Investment Board (CIB)

Looking at the cumulative value for direct investment
from 1994-2011, China is ranked first ($8.97 billion), at

Exports by industry[2011 total value: ~$4.7 billion]a magnitude about 2.2 times that of the second ranked
country, South Korea ($4.093 billion). The industriesof real estate development (hotels and the like) andenergy development make up about 80% of the total(Figure 3). 2
Within the foreign direct investment to Cambodia, forwhich large-scale deals stand out, investment in the
manufacturingindustry

centeredon

garment
Source: National Bank of Cambodia

manufacturing has been increasing in recent years. Thisgrew from about threefold (on a value basis) from 40 deals totaling $120 million in 2010 to 80
deals totaling $370 million in 2011. These values do not include investment in SEZs, and if these
are included as well, the value would have increased yet more.

1
2

Including deals occupying Special Economic Zones (SEZ).
Investment deals in SEZs are not included in the parameters.

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
31

(Laos)The value of inward direct investment (on an
approval basis) to Laos in 2011 was $1.623 billion,a year-over-year decline of 18.2%.

Therecontinued to be much investment from neighboring

Figure 4: Inward direct investment
and exports of Laos
Inward direct investment by industry[Cumulative total for 2000-2011
Total value: ~17.163 billion]

countries including China, Vietnam, and Thailand,these three countries constituting 76.5% of the total
amount (investment from Japan stood at $2.32
million, ranking ninth). Much of the investment
was in mine development, the service industry,large-scale agriculture/afforestation, and the like.
Of the cumulative 2000-2011 total of $17.163
billion, 3 28% went to electrical power-related

Note: Including investment of Laotian capital
Source: Laos Ministry of Planning and Investment

industries, centered on hydroelectric power, 22%went to mine development, 13% went to agriculture
and

the

naturalresources

sector,

Exports by industry[2011 total value: ~$2 billion]

togetherconstituting over 60% of the total (Figure 4). The
investment sources in order of ranking were: 1)
Vietnam ($3.455 billion), 2) China ($3.235 billion),
3) Thailand ($3.03 billion), and 4) South Korea($594 million).
The total value of exports from Laos in FY
2011 4 was about $2 billion.

Of this, minerals

Note: The fiscal year is October 2010-September 2011
Source: Laos Ministry of Industry and Commerce

were about $1.08 billion, which is 55% of the total.
With a high reliance on natural resources for exports, Laos contrasts with Cambodia, for which
textiles make up 90% of the total.

34Including investment of Laotian capital.
October 2010 through September 2011.

Japan Center for Economic Research “Asia Research” Report32

(Myanmar)
Inward direct investment to Myanmar in FY 2011 5(on an approval basis) totaled 13 deals and $4.6445
billion, a major decrease of 76.8% rebounding fromFY 2010, when the record high of $19.998 billion was

Figure 5: Inward direct investment andexports of Myanmar
Inward direct investment by industry[Cumulative total for 1989-2011
Total value: $40.699 billion]

recorded. Of this, $4.344 billion (over 90% of thetotal) was investment by China in hydroelectric powerin Chibwe in the state of Kachin.
In the breakdown by industry of the cumulative
total inward direct investment from 1989-2011,energy- and resource-related investments such ashydroelectric power, oil/gas, and mining play a central
role just like in Cambodia and Laos (Figure 5).
Much

of

the

investment

comes

from

Note: The fiscal year is April-March
Sources: Myanmar Central Statistical Organization,
Directorate of Investment and Company Administration

thecountries/regions of China, Thailand, Hong Kong, andExports by industry[2011 total value: ~$9.1 billion]

South Korea.
The total value of exports from Myanmar in FY
2011 was about $9.1 billion. Of this, natural gas rose
year-over-year by 35.2% to about $3.5 billion, whichwas 38% of the total.

Practically all of this wasexported to Thailand. A natural gas pipeline linking
Kyaukpyu in Rakhine state to Yunnan province in
China is planned to be completed in 2013, and soexports to China are expected in the near future. The

Note: The fiscal year is April 2011-March 2012
Source: Myanmar Central Statistical Organizationnext largest component is legumes, much of which isshipped to India and which grew 19.4% year-over-year to about $980 million (about 11% of thetotal).

In recent years, new and expanded investment from South Korea, Japan, and the like in thegarment manufacturing industry have begun to stand out, and exports of garments are steadilyrising.

5

April 2011-March 2012

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
33

1.2

Investment from Japan also expands

Investment from Japan to the CLM countries has been expanding significantly since the latter
half of the 2000s.

This investment is characterized by much of it being in the manufacturingindustry centered on garment manufacturing.

Since the value per investment is smaller than forreal estate investment or mine development investment, the figures for Japan from the perspectiveof the share per country of direct investment are still small, but the investment value itself has
trended upward since 2009. 6

Figure 6: Trends for direct investment value by Japanese corporations in the CLMs

Source: Council for the Development of Cambodia, Laos Ministry of Planning and Investment,
Myanmar Central Statistical Organization, Directorate of Investment and Company
Administration

The number of Japanese members of chambers of commerce in the CLM countries also reflects asign that Japanese corporations are increasing investment.

Although far behind that in Thailand

and Vietnam in absolute numbers, the rate of growth in the number of Japanese members ofchambers of commerce (full members) in Cambodia grew by about 2.8-fold from 35 companies in2009 to 98 companies in October 2012, a rate much greater than that in Thailand and Vietnam. In
Laos as well, this number is expected to exceed 50 companies during 2012, and the rate of growthhas been marked for the past few years. Also, in Myanmar, membership had been in a downward
trend from a peak (86 companies) in 1998, but is now increasing.

6

There was a spike in investment in Laos in 2006 due to an investment in hydroelectric power, andin investment in Cambodia in 2007 and 2008 due to an investment in resort development.

Japan Center for Economic Research “Asia Research” Report34

(Cambodia)
In order to distribute the risk of a monopolar concentration in China, Japanese corporations
including major clothing retailers and major supermarkets looked to Cambodia starting in the latter
half of the 2000s as a contract manufacturing destination country for clothing and shoes, and havebeen expanding local production and trade. As a result, a majority of Cambodian exports to Japan
have become shoes and clothing, the scope of which has been expanding rapidly since around 2009.
Also, with parts makers such as manufacturers of small motors and wire harnesses for household
appliances and automobiles expanding to Cambodia one after another and the acceleration of thepenetration by the service industries supporting the manufacturing industry in the areas of finances,
construction, taxes, and accounting, the reality is that there is a diversification underway in industry
types.

(Laos)
Investment by Japanese corporations in Laos is also trending upwards centered on manufacturing.
Representative industries are garment manufacture, wire harnesses, processing of agricultural
goods, and the like, and much investment is in the form of “Thailand plus one” aiming for adivision of production with Thailand and an avoidance of the risk from China. In Laotian exports
to Japan as well, clothing products are increasing significantly, having grown by about a factor of
10 from 2006 ($1.18 million) to 2011 ($11.9 million). Non-seasonal items including suits andwhite dress shirts are being produced for Japan.

(Myanmar)
Inward direct investment (on an approval basis) from Japan to Myanmar consisted of a total of
two deals that were approved respectively for $3 million and $1.32 million in the garment
manufacturing sector in January and February 2012. These were the first new investments in 10
years.

One was by the apparel manufacturer Honeys (based in Fukushima prefecture) , launchinga wholly owned women’s clothing manufacturing subsidiary “Honeys Garment Industry” in anindustrial park in Yangon starting in May 2012.

Up until then, Honeys had entrusted the

manufacturing of products to subcontract factories in China, but the company pressed ahead withproduction in Myanmar with an eye towards future retail network expansion.

The otherinvestment was in a casual clothing manufacturing factory, which will be constructed in the city ofBago, located about 70 kilometers north of Yangon.
The move by Japanese corporations towards new investments is expanding alongside theprogress of democratization in Myanmar, and there has started to be an increase in announcements

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
35

of new plans since around February 2012. For example, in March, Foster Electric announced amanufacturing and sales base for speakers, headphones, and the like, and in April, NTT Dataannounced the establishment of an offshore development center for Japan.

1.3 The background to the CLMs garnering attention
As seen above, the CLM countries have come to be positioned as a new investment destination
for Japanese corporations. What lies behind this development?
First, there is the change in the labor environment in the neighboring countries of China,
Thailand, and Vietnam.

For the past 1-2 years, the legal minimum wage has been raised in thesecountries. Moreover, the rate of increase has become large. Based on the real annual cost of aworker in the manufacturing industry, China has already become five times as expensive as
Myanmar (China: $5,765, Myanmar: $1,137). 7。
In China and the like, the fact is the popularity of the service industry has risen alongsideeconomic development, and it is becoming difficult to secure factory workers.

Compared toChina, Thailand, Vietnam, and the like, the labor force of the CLMs is low-cost and abundant.
Next, the democratization of Myanmar can be cited.

In this country, with a population of over

60 million and abundant natural resources, a long-lasting military dictatorship had continued.
However, elections were held in November 2010 based on a multi-party system, and a newadministration launched in March 2011 led by President Thein Sein. Alongside democratization,
this administration has been engaging in a variety of reforms including in the area of economics.
The progress in building hard infrastructure such as roads in the Mekong region that includes the
CLMs is another factor behind the rise in interest in these countries. There are many international
aid frameworks for development of the region, but the most comprehensive and large-scale among
them is likely the Greater Mekong Subregion (GMS) program, which is an initiative of the AsianDevelopment Bank (ADB). The concept of an “economic corridor” was advocated at the 1998
GMS Ministerial Meeting, and three economic corridors were endorsed at the 2000 Ministerial
Meeting, the East-West Economic Corridor, the North-South Economic Corridor, and the Southern
Economic Corridor. After that, upgrading and developing roads for each corridor have been
carried out in a prioritized manner.

7“Survey of Japanese-Affiliated Firms in Asia and Oceania (FY 2011 Survey).” October 2011, JETRO.

Japan Center for Economic Research “Asia Research” Report36

2. Strengthening the production network.

One characteristic stands out from among the recent cases of foraying to the CLMs by Japanese
corporations, which is that there are notable cases of engaging in business expansion in the CLMs
under a region-crossing strategy that considers the Mekong region as a single plane.

As statedearlier, hard infrastructure development is proceeding centered on the East-West Economic
Corridor and the Southern Economic Corridor, which form cross-border links within the region.
With this, we are entering a stage in which has become possible to build a production network bylinking the CLM countries, where a low-cost labor force can be taken advantage of, and the
production centers in Thailand and Vietnam.

2.1 Taking advantage of the Southern Economic Corridor (linking Cambodia and Vietnam)
Swany Corporation (headquartered in Kagawa prefecture), which manufactures and sells gloves
and bags, has expanded to the Tai Seng Special Economic Zone in Svay Rieng in Bavet District inCambodia, which is near the Vietnamese border (Figure 7). Although Swany has a base in China,
but due to the sharp rise in labor costs in the country, the company sought a new base in Cambodia,
starting operations in February 2012.

The factory runs six days a week, employs 370 workers,

and manufactures 30 products including insulated gloves. The company has been sourcing raw
materials from Vietnam, and so the location was Bavet was chosen due to closer proximity to Ho
Chih Minh City in Vietnam than to the Cambodian capital of Phnom Penh. The distance over landto Ho Chih Minh City is about 90 km (versus about 160 km to Phnom Penh). All the products areexported to Japan via Ho Chih Minh City. Rather than use Sihanoukville port in Cambodia, it iscloser to go to Japan through Ho Chih Minh City, which also has direct flights, and it is said totake 10-14 days for arrival.
Also, at the Cambodia-Vietnam border (Bevat-Moc Bai) on the corridor, the mutual entry ofshipping trucks is in place by bilateral arrangement, although the number of licenses is limited.
Furthermore, in the case of Cambodia, for SEZs located within 20 km of the border, it is only
necessary to present a copy of the cargo contents at the border checkpoint, and it is not necessary tosubmit an import declaration or to have customs sign containers.
Meanwhile, by placing production bases in Cambodia, it is possible to enjoy not only low wages,
but also preferential treatment by the country in the form of of tax breaks to corporate taxes, rawmaterial importation taxes, and the like. Cambodia is a Least Developed Country (LDC), and so

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
37

LDC preferential duties 8 are applied, resulting in duty-free and quota-free exports to Japan. This
could be called a business confiugration that combines and cleverly links the merits of Vietnam andCambodia.

2.2 Taking advantage of the East-West Economic Corridor and the likeThailand and Laos have high linguistic similarities, factory leadership by Thais in Laos ispossible, the Laotian capital of Vientiane is near the Thai border, and so it is easy to make progressin division of production.
Tokyo Coil Engineering Co., Ltd. (headquartered in Tokyo), which produces camera strobe
components, was faced with needing to expand production in a Thai factory, and while
investigating factory locations in other countries, surveyed the investment environment in Vietnam
and Myanmar.

However, there were not felt to be significant benefits in terms of labor costs, andso it was decided to expand to Laos.
language is understood in Laos.

It was said that the greatest merit to this was that the Thai

The labor-intensive processes from the Thai factory weretransferred to Laos and the products were returned to Thailand totally duty-free, meeting thedemand from Japanese manufacturers of assembled goods in Thailand. Currently, the factory in
Laos is maintaining production volumes while furthering labor-saving efforts including automation.
There is no permanently resident Japanese manager, and a Thai President manages the factory (with460 workers).
The Yazaki Corporation expanded to Bangkok in 1962, producing wire harnesses, measurement
instrumentation, and the like, and began exporting to Europe, the US, and the like in 1984.
However, after the Asian Currency Crisis in 1997, the company put effort into outsourcing to
respond to the environmental changes of the aging of employees and the sharp rise in overhead
including building rents and wages accompanying the recovery of the Thai economy.

Afterestablishing four centers in the north of Thailand, the company went further north across the borderto Vientiane in Laos.

Technology, equipment, materials, and the like were supplied from Thailand

to a wholly-owned local company, and the processed goods are bonded 100% and all returned toThai factories.

This is indeed a “Thailand plus one” investment pattern. Aside from the twocompanies discussed above, production of electronic components, clothing products, and the like inthe form of placing the primary center in Thailand and then performing a portion of the
manufacturing/assembly process in Laos is becoming more common.

8

LDC preferential tariffs: Starting in 1980, Japan provided a zero-duty, zero-quota measure to the 48 LDCs for
special preferential items (about 2400 items) applied only to the LDCs in addition to all the general preferential
duty target items.

Japan Center for Economic Research “Asia Research” Report38

3. The hidden possibilities of the CLMs

3.1

An allure as a single “plane”
This section discusses the potention of the CLMs as an investment destination.

First, thesecountries have the attraction of being located in the Mekong region, where development isproceeding as a regional economic network.

In the region, through the support of internationalorganizations and foreign countries including Japan as well as the independent policies of eachcountry, there is an improvement underway of hard infrastructure such as roads, ports, and bridges,
as well as soft infrastructure including customs procedures at borders.

Furthermore, amidst theASEAN goal of building an economic community in 2015, the leading six countries have alreadyeliminated tariffs excepting a subset of exceptions under the ASEAN Free Trade Area (AFTA)
Trade in Goods Agreement (ATIGA). The plan is also for the CLMVs to essentially eliminate
tariffs.

Amidst various barriers in the Mekong region being lowered, the CLMs are heightening intheir attraction as a destination of business expansion within the “plane” of the Mekong region.
When expanding to the area, it is possible to link to further cost reduction and profit expansion
through surveying the entire region and considering the optimum combination of sources forcomponents and raw materials, manufacturing/assembly centers, distribution routes, and the like.

3.2 The allure as a market
Second is the allure as a market.

Traditionally, the CLMs were primarily manufacturing

centers, but they are drawing attention as a market as well. According to AEON Co., Ltd.,
88% of household incomes in Cambodia were no greater than $400 per month, but in theprincipal districts of Phnom Penh, 78% were at least $400, expanding the middle class.9 As aresult, large shopping malls from foreign companies have opened one after another in Phnom
Penh, and AEON also plans to open shop in 2014. Malaysian company Parkson also plans toopen a shopping mall in Phnom Penh in 2014. Cambodia has no equity participation limits orshop opening restrictions, and so it recognizes 100% foreign capitalization and it is possible tohave multiple stores.
The GDP per capita in Myanmar is $824 (IMF estimate), but in the Yangon region, thisfigure is nearly twice as high at $1693. In the large cities including Yangon and Mandalay,
shopping centers, restaurants, and such are opening one after another. Junction Square, which
opened in Yangon in March 2012, boasts the best array of products in the city, centered on
goods imported from neighboring countries such as Thailand and Singapore.
9

Japanese

From the Cambodia Investment Seminar (hosted by the ASEAN-Japan Centre), AEON report documents.

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
39

company Daiso also has a shop there, selling items for 1800 kyat each, and is bustling every
day with many Burmese shoppers.

3.3

AgrobusinessAgrobusiness can be cited as the third allure of the CLMs. According to JETRO’s “Survey on
Business Needs and Strategies in the Mekong Sub-region 2012,” 10 it was pointed out that aspromising industries in the Mekong region, in addition to manufacturing of garments, components,
and the like, the agricultural industry is particularly promising in the CLM countries.
In Laos, Oji Paper Co., Ltd. has been conducting an afforestation project since 2005, andTsumura & Co. established a wholly-owned local subsidiary in February 2010 in Champasak
province where the Bolaven Plateau is located. The company took advantage of a land concession
program 11 with an eye towards the quality natural resources on the plateau. To Tsumura, which
produces and sells Chinese and herbal medicine, full traceability (production history management)of the raw material herbal medicines is indispensible. In the future, the company will build an
herbal medicine processing factory, and steadily increase the number of cultivated items. 12 A
similar land concession program exists in Cambodia as well, and so if the necessary procedures arefollowed, it is possible to obtain large-scale land tenant rights.

4. Business environment issues

4.1

Cases of facing a labor shortfall

There is a mountain of issues in the business environment of the CLMs.
main ones.

Let us touch on the

In the hearings for the “Survey on Business Needs and Strategies in the Mekong

Sub-region 2012” mentioned earlier, one issue pointed out as needing to be resolved in the Mekong
region is “the need for appropriate support for cultivating labor and human resources.”
Specifically, there was the opinion that “since the minimum wage rose, it is necessary forcompanies and workers to increase productivity to maintain competitiveness.”

As discussed

earlier, even though the wage level in the CLMs is lower than that in China, Thailand, Vietnam, andthe like, its value is rising every year and so caution is needed.
10

An interview survey conducted from March-July 2012 regarding requests for investment environment
improvements and business strategies in the Mekong region of a total of 196 companies comprising 152 Japaneseand local corporations in the Mekong region (Thailand, Vietnam, Cambodia, Myanmar, and Laos) and 44 Japanesecompanies with bases in Japan, Singapore, and Malaysia. http://www.jetro.go.jp/world/asia/kh/reports/07001117
11
A program granting corporations and individuals large-scale and long-term land development and use rights. The
maximum term is 50 years for corporations.
12
However, as stated in 1.1, it must be kept in mind that there is a freeze on approval for new investments in natural
rubber and eucalyptus.

Japan Center for Economic Research “Asia Research” Report
40

There are also cases of facing a labor force shortfall. For example, according to the Phnom
Penh SEZ company in Cambodia, “the greatest issue is hiring difficulties” among the SEZ
administrative tasks.

From the start of occupancy in 2008 through 2009, it was possible to secure

the necessary labor force merely by putting up fliers in the SEZ, but it become much more difficult
starting in 2010.

One cause of this is the concentration of factories in the western portion ofPhnom Penh where the SEZ is located, the background to which is the lack of a human resource
supply network linking the population-rich rural areas and the factory zones. The Cambodian
government is currently founding a new organization aiming to promote employment, and is
attempting to further the sharing of employment information between the urban and rural areas.
However, in the future if companies begin to hire many migrant workers from the countryside, they
will be pressed to secure company housing and the like.

4.2 Transparency of the legal system is called for
There are also problems in the legal system.

Aid-providing countries are supporting thedevelopment of the laws themselves, and progress is being made a little at a time, but the problem
is a divergence from the state of enforcement.

In Cambodia there is an investment incentive

called a Qualified Investment Project (QIP). It has different contents by industry, but it provides
for corporate tax breaks, import duty breaks for raw materials, production equipment, and the like,
added value tax breaks, and the like. However, since the details have not been made clear, thereality is the contents of the measure provided differ by company.
As stated earlier, the legal minimum wage in Laos was raised starting on January 1, 2012.
Traditionally, a subsidy (allowance) was added to the legal minimum wage, and then disbursed, but
in the new system only the legal minimum wage is mentioned, and it is clear how to handle thesubsidy (allowance).

Thereafter, there has been a different response depending on corporation

without any notification from the government.
In Myanmar, a Labor Organization Law was announced in October 2011. The law mandates
that to form a union, a minimum of 30 workers must be employed, and that the participation of atleast 10% of all employees is necessary.

Furthermore, in addition to reviewing the Special

Economic Zone Law, the enactment of a new consumer protection law, minimum wage law, and thelike are planned.

It is hoped that Myanmar will continue down the path of reform and opening up,

further developing the legal system.

4.3

Facilitation of the soft infrastructure of logostics

The logistics infrastructure in the CLMs has been proceeding focused on hard infrastructure, but

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
41

many issues remain.

In the “Survey on Business Needs and Strategies in the Mekong Sub-region

2012” as well, there were many requests for both the hard and soft aspects centered on the
East-West Economic Corridor and the Southern Economic Corridor as primary transport routes.
For the East-West Economic Corridor, this includes in Myanmar the early development of the
Tirawa SEZ (2400 ha) and the development of access roads, and in Vietnam the development ofports (the Vung Ang port and the like) and such.

For the Tirawa SEZ, a Japan-Myanmar

Memorandum of Understanding (MOU) was concluded when Myanmar President Thein Sein
visited Japan in April 2012, and Japanese cooperation and the like were promised for creating amaster plan for development.
The need was high for development of access roads and the early development of the Dawei port
and surrounding SEZ (25,000 ha) at the starting point on the Myanmar side of the Southern
Economic Corridor. In particular, there are high hopes among companies in Thailand for it as anexport center to India and the Middle East.
Meanwhile, in terms of soft infrastructure, although an e-customs system was introduced forcustoms procedures, there are many who say that this has not led to actual simplification due tosuch situations as frequent system shutdowns, and paper applications still remaining.
There were also many calls for early realization of the Cross-Border Transport Agreement(CBTA), 13 which is one of the initiatives of the GMS. This agreement stipulates the introductionof a “single stop” that combines the CIQ 14 procedures performed twice at the country of departureand the country of entry into a single procedure, and the introduction of a “single window” thatcombines the CIQ procedures at a single window.

At each border (borders stipulated as the first to

introduce the CBTA), the border inspection time that currently takes 4-6 hours will be reduced by
30 minutes.

However, in actuality only a portion of the single window has been introduced at theVietnam-Laosborder(Lao

Bao-Dansavanh)

and

the

Thailand-Laos(Mukdahan-Savannakhet), the remainder not having progressed to introduction.

border15

5. Conclusion
According to a questionnaire survey 16 of Japanese corporations in Asian countries, the ratio of
those that responded that the direction of business development for the next 1-2 years will be
13

An agreement pertaining to the simplification of border procedures in the Mekong region, which is proceeding
centered on the Asian Development Bank (ADB). It arranges for standardization of the system among GMS
member states with the objective of simplification when carrying people and goods.
14
Customs, Immigration, and Quarantine procedures.
15
See Ishida (2010).
16“Survey of Japanese-Affiliated Firms in Asia and Oceania (FY 2011 Survey).” October 2011, JETRO.

Japan Center for Economic Research “Asia Research” Report42

“expansion” was 75% in Cambodia (ranked third among 18 countries), and 68.8% in Myanmar(ranked sixth). When combined with those that responded “maintain the status quo,” the ratio
becomes 100% for both countries, as no company responded “contract” or “transfer/withdraw to athird country (or region).”Although the CLMs have various issues, this indicates that there arehigh hopes for them as destinations of business expansion.
As touched on earlier, the countries of China, South Korea, Vietnam, Thailand, and the like havealready made large investments in the CLMs centered on large-scale hard infrastructure projects,
and so they have a large presence and influence in the region. Up to now, Japanese corporations
have been establishing mainly labor-intensive production bases in the CLMs, but in the future it
will be necessary to make efforts to broaden the scope of investment and to incorporate morebusiness opportunities.
Among the Japanese garment manufacturers that have made inroads in Cambodia, there havebeen cases of engaging in the cultivation of human resources, where before starting factory work,
the workers were provided basic training in linguistics and the like.

In order to increase

productivity in emerging investment targets such as the CLMs, such steady efforts are also
necessary. When engaging in business in the CLMs, which are behind in economic development, itis necessary to take a posture of contributing to nation-building.

An attitude that is conscious of“unification” with the region or country into which expansion is taking place will ultimately
rebound as profit to the company.

References

Ishida, Masami ed. (2010) Mekon chiiki kokkyo keizai wo miru [An Examination of the Border
Economy of the Mekong Region]. IDE-JETROJETRO. (2012) JETRO SENSOR. March 2012.

Chapter 2 │ The Vitality of the ASEAN Least Developed Countries (The CLMs)
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