Greater Mekong Subregional Econ. Cooperation

8/9/2019 Greater Mekong Subregional Econ. Cooperation

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SubSub--regional Economicregional EconomicCooperation : A Case ofCooperation : A Case of

IMTIMT--GTGT


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Regionalism: ConditionsRegionalism: Conditions

Countries must haveCountries must have

1. Geographical proximity1. Geographical proximity2. Cooperation of countries either in2. Cooperation of countries either ineconomic, political or social fieldseconomic, political or social fields

3. Setting up a regional cooperation for the3. Setting up a regional cooperation for theachievement of common purposesachievement of common purposes


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Regionalism:Regionalism:ContdContd

The cooperation of countries of geographyThe cooperation of countries of geographyproximity either in economic, political orproximity either in economic, political or

social fields by means of setting up asocial fields by means of setting up aregional organization for the achievementregional organization for the achievementof common purposes.of common purposes.


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ContdContd

Regionalism is an regional integration. ItRegionalism is an regional integration. Itis also defined as actions byis also defined as actions bygovernments to liberalize or facilitate on agovernments to liberalize or facilitate on aregional basis through detailedregional basis through detailed

negotiation (WTO). As mentioned above,negotiation (WTO). As mentioned above,regionalism institutional integration andregionalism institutional integration andtherefore, it could be characterised bytherefore, it could be characterised bylegal agreements and institutionallegal agreements and institutionalarrangements that promote trade amongarrangements that promote trade amongmembers of the agreement.members of the agreement.


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Regional Economic CooperationRegional Economic Cooperation

& Integration& Integration

1.1. MembersMembers: Transnational economic region (or: Transnational economic region (orsubsub--region) established by 2 or more countriesregion) established by 2 or more countries

or territoriesor territories

2.2. ObjectiveObjective: To promote free movement of factors: To promote free movement of factorsof production & effective distribution of outputsof production & effective distribution of outputs

3.3. MechanismMechanism: To gain from economy of scale: To gain from economy of scale


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ContinuedContinued

Definition: The transitional economicDefinition: The transitional economicregion established byregion established by 22 or more countriesor more countries

(or territories) to promote free movement(or territories) to promote free movementof factors of production and effectiveof factors of production and effectivedistribution of outputs to gain from thedistribution of outputs to gain from theeconomy of scale in the region.economy of scale in the region.


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Economic Cooperation and IntegrationEconomic Cooperation and Integration

6 stages from Economic Cooperation to Economic6 stages from Economic Cooperation to EconomicIntegrationIntegration

Harmonization: to adjust trade policies to minimizeHarmonization: to adjust trade policies to minimizediscriminationdiscrimination

Free Trade Area (FTA): to remove tariffs between theFree Trade Area (FTA): to remove tariffs between the

partners without adopting a common tariff policypartners without adopting a common tariff policy Customs Union (CU): FTA adopting a common tariff policyCustoms Union (CU): FTA adopting a common tariff policy

against third countriesagainst third countries

Common Market (CM): CU removing restrictions on factorCommon Market (CM): CU removing restrictions on factor

movementmovement Economic Union (EU): CM coordinating their policies on fiscal,Economic Union (EU): CM coordinating their policies on fiscal,

monetary, etc.monetary, etc.

Economic Integration: Extreme type of Economic CooperationEconomic Integration: Extreme type of Economic Cooperationwhen policy matters and their implementation is governed bywhen policy matters and their implementation is governed by

some suprasome supra--national agencynational agency


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Forms ofRegional EconomicForms ofRegional EconomicCooperation/IntegrationCooperation/Integration

FormsForms Free intraFree intra-- CommonCommon Free factor CommonFree factor Common

tradetrade trade policy trade policy mobility mobility monetary &monetary &

fiscal policyfiscal policy

FTAFTA YesYes NoNo NoNo NoNo

Customs UnionCustoms Union YesYes YesYes NoNo NoNo

Common MarketCommon Market YesYes YesYes YesYes NoNo

Economic UnionEconomic Union YesYes YesYes YesYes YesYes


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Free Trade Area (FTA)Free Trade Area (FTA)

DefinitionDefinition: Economic cooperation between two or: Economic cooperation between two ormore countries within the region or outside themore countries within the region or outside theregion by removing tariffs between partnersregion by removing tariffs between partners

without adopting a common tariff policy.without adopting a common tariff policy.

Objectives ofFTAsObjectives ofFTAs

Greater market access in goods and servicesGreater market access in goods and services Increased investment opportunitiesIncreased investment opportunities

Reduction in Business costsReduction in Business costs


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Formation ofFTAs in Southeast AsiaFormation ofFTAs in Southeast Asia

World TotalWorld Total 250250 ((20022002))300300 ((20052005) estimates) estimates

East Asia TotalEast Asia Total 7272 ((20032003))SignedSigned 2020Under negotiationUnder negotiation 2020Under studyUnder study 1919ProposedProposed 1313

Southeast AsiaSoutheast Asia 5151SignedSigned 1414Under negotiationUnder negotiation 2323Under studyUnder study 1212ProposedProposed 22


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Building Blocks forFTAsBuilding Blocks forFTAs

Push factorsPush factors Competition for export markets in the face of increasingCompetition for export markets in the face of increasing

FTAs in other regionsFTAs in other regions Rising of ChinaRising of China The end of the Cold War/Thawing of political tensionThe end of the Cold War/Thawing of political tension Obstacles in trade liberalization under GATT/WTO (eg.,Obstacles in trade liberalization under GATT/WTO (eg.,

Doha Round)Doha Round)

Pull factorsPull factors

Transformation of former command/controlledTransformation of former command/controlledeconomies into marketeconomies into market--oriented economiesoriented economies Increase or maintain market accessIncrease or maintain market access Promotion of economic or other types of cooperationPromotion of economic or other types of cooperation


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Conditions for enjoying benefitsConditions for enjoying benefits

Trade liberalizationTrade liberalization

Trade and Investment facilitationTrade and Investment facilitation

Economic cooperationEconomic cooperation

HarmonizationHarmonization


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Interdependence: IntraInterdependence: Intra--Regional TradeRegional Trade

(%)(%)**

19901990 19951995 20002000 20032003

ASEANASEAN 1818..00 2121..00 2222..88 2222..33

ASEAN+ASEAN+33 2828..66 3737..11 3737..33 3838..99

NAFTANAFTA 3737..33 4242..00 4646..99 4444..99

EU (EU (2525)) 6565..22 6565..22 6464..66 6666..11

MercosurMercosur -- -- 1717 --

* Total trade as % of their total world trade* Total trade as % of their total world trade


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SubSub--regional Economic Cooperation inregional Economic Cooperation in

Southeast AsiaSoutheast Asia

I. Economic GeographyI. Economic Geography

1. Growth Triangle1. Growth Triangle

(a) IMS(a) IMS--GT (IndonesiaGT (Indonesia--MalaysiaMalaysia--Singapore)Singapore)

(b) IMT(b) IMT--GT (IndonesiaGT (Indonesia--MalaysiaMalaysia--Thailand)Thailand)

2. Growth Quadrangle2. Growth Quadrangle

(a) Golden Quadrangle (Yunnan(a) Golden Quadrangle (Yunnan--LaosLaos--MyanmarMyanmar--Thailand)Thailand)

(b) BIMP(b) BIMP--EAGA (BruneiEAGA (Brunei--IndonesiaIndonesia--MalaysiaMalaysia--Philippines)Philippines)

Or (East ASEAN Growth Area)Or (East ASEAN Growth Area)


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Southeast AsiaSoutheast Asia (Contd)(Contd)

II. RiverII. River--based Cooperationbased Cooperation

1. GMS (Greater Mekong Sub1. GMS (Greater Mekong Sub--regional Eco.regional Eco.

Cooperation)Cooperation)(Cambodia(Cambodia--LaosLaos--MyanmarMyanmar--ThailandThailand--YunnanYunnan--Vietnam)Vietnam)

2. ACMECS (Cambodia2. ACMECS (Cambodia--LaosLaos--MyanmarMyanmar--ThailandThailand--Vietnam) Or (AyeyawadyVietnam) Or (Ayeyawady--Chao PhraChao Phra--MekongMekong

Eco. Cooperation Strategy)Eco. Cooperation Strategy)3. MG3. MG--EC (Mekong Ganga Eco. Cooperation)EC (Mekong Ganga Eco. Cooperation)

(Mekong Countries and India)(Mekong Countries and India)


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Southeast AsiaSoutheast Asia (Contd)(Contd)

III. CrossIII. Cross--subregional Cooperationsubregional Cooperation

1. BIMST1. BIMST--EC (Bay of Bengal MultiEC (Bay of Bengal Multi--SectoralSectoralTechnological Eco. Cooperation)Technological Eco. Cooperation)(Bangladesh(Bangladesh--BhutanBhutan--IndiaIndia--MyanmarMyanmar--NepalNepal--Sri lankaSri lanka--Thailand)Thailand)


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GROWTH TRIANGLEGROWTH TRIANGLE

ConceptConcept: To link three areas with different factor: To link three areas with different factor

endowments and different comparative advantages for aendowments and different comparative advantages for alarger region with greater potential for economic growth.larger region with greater potential for economic growth.

DefinitionDefinition: A sub: A sub--regional economic zone encompassingregional economic zone encompassinggeographically contigous areas of two or more countriesgeographically contigous areas of two or more countries

in the economic integration process which involves thein the economic integration process which involves theflow of goods, services, investment and people. GTsflow of goods, services, investment and people. GTsalso could be considered as crossalso could be considered as cross--border economicborder economiczones.zones.

RationaleRationale: To exploit the complementarities of the: To exploit the complementarities of thegeographically contiguous areas to achieve acceleratedgeographically contiguous areas to achieve acceleratedeconomic development by means of enhancingeconomic development by means of enhancingcompetitiveness of participating areas and of promotingcompetitiveness of participating areas and of promotingtheir exports in the global marketplacetheir exports in the global marketplace


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Types ofGrowth TrianglesTypes ofGrowth Triangles

11. Metropolitan Spillover into Hinterland. Metropolitan Spillover into Hinterland

(IMS(IMS--GT, IMTGT, IMT--GT)GT)

22. Joint Development of Natural Resources. Joint Development of Natural Resources

(GMS)(GMS)

33. Common Geo. Common Geo--political Interestpolitical Interest

(ASEAN before(ASEAN before 19971997))


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SubSub--regional Eco. Cooperation Arrangements:regional Eco. Cooperation Arrangements:

Growth Triangles and Other Cooperation ArrangementsGrowth Triangles and Other Cooperation Arrangements

GMS IMS-GT IMT-GT EAEG/ BIMP ACMECS BIMSTEC

Estb: 1992 1989 1993 1994 2004 1997

Popn:Mil 245 35 25 50 124 1,252

Area

(sq.km)

2.3 mil 0.33mil 0.23mil 1.56mil 1.61mil 4.69mil

GNP

($bil)

226.7 29.6 31.8 27.8 14.0 64.1

Type Formal,

state,

natural

Formal,

non-state,

natural

Informal, state,

natural

Informal, state,

constructed

Formal,

natural

Formal,

state

Actors Govts:,

ADB

Private Govts, ADB Govts, ADB Formal,

natural

Formal,

state

Objectives Infrastructur

e tradeFDI& devl.

Infrastr.

Trade,FDI

FDI, eco.

Develop.

Eco.

Develop-ment

Infrastr.,

Trade,FDI

Infrastr.,

Trade.Tourism

Achieve-

ments

Infrastruct,

Hydropower

Navigation

management

tourism

Infrastr.

FDI,

jobs

Eco.

Growth,

HRD,

Tourism

Joint-FDI &

projects

Infrastr.,

Trade,

Loans from

Thailand

FTA in

2007


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MOTIVATINGFACTORSMOTIVATINGFACTORS

Geographical Proximities/Existence of old trade routesGeographical Proximities/Existence of old trade routes Historical LinksHistorical Links

Cultural Proximities and Ethnic TiesCultural Proximities and Ethnic Ties

Economic ComplementaritiesEconomic Complementarities

Thawing of Political TensionsThawing of Political Tensions Economic Reforms in Formerly Command/ControlledEconomic Reforms in Formerly Command/Controlled

EconomiesEconomies

Rising of China and India/Competition for ForeignRising of China and India/Competition for ForeignInvestmentInvestment

Emergence ofRegional and SubEmergence ofRegional and Sub--regional Groupings andregional Groupings andTrade BlocsTrade Blocs

Fear of ProtectionismFear of Protectionism


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Challenges and IssuesChallenges and Issues

Politica

lPolitica

l

Different political systemsDifferent political systems Lack of political willLack of political will Territorial disputesTerritorial disputes

HistoricalHistorical Historical baggageHistorical baggage

CulturalCultural

Common ethnicityCommon ethnicity Common/similar cultureCommon/similar culture


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Challenges and IssuesChallenges and Issues

Economic

Economic Different economic systemsDifferent economic systems

Different levels of developmentDifferent levels of development Different financial and banking systems and legalDifferent financial and banking systems and legal

systemssystems

Likely opposition from nonLikely opposition from non--competitive sectorscompetitive sectors

EnvironmentalEnvironmental

Degradation of environmentDegradation of environment

CrossCross--border Issuesborder Issues Illegal tradeIllegal trade Human traffickingHuman trafficking Drug traffickingDrug trafficking

Spread ofH

IV/AIDSSpread ofH

IV/AIDS


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Key Factors behind the Success ofKey Factors behind the Success of

Growth TrianglesGrowth Triangles

Economic ComplementarityEconomic Complementarity

Geographical proximityGeographical proximity

Political Commitment and PolicyPolitical Commitment and PolicyCoordinationCoordination

Infrastructure DevelopmentInfrastructure Development


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GTs Complement the FTAsGTs Complement the FTAs

GT as a form of regional cooperation provides competitive model toGT as a form of regional cooperation provides competitive model toattract investment and technology as well as building block towardsattract investment and technology as well as building block towardsFTA.FTA.

GT as a starter, with relatively less rigid and formal cooperationGT as a starter, with relatively less rigid and formal cooperationstructure as compared to FTA, is expected to be more innovative,structure as compared to FTA, is expected to be more innovative,

flexible, and most importantly always ready to attend to the everflexible, and most importantly always ready to attend to the ever--changing needs of investors and alike.changing needs of investors and alike.

GT as a strategy promoted by those regional leaders keen onGT as a strategy promoted by those regional leaders keen onexpanding embedded exportism and by global enterprises involvedexpanding embedded exportism and by global enterprises involvedin international production see it as having a facilitating effect uponin international production see it as having a facilitating effect uponopen regionalism championed in the Bogor declaration.open regionalism championed in the Bogor declaration.

GT has become a building block towards free trade arrangementsGT has become a building block towards free trade arrangementssince the changes that are manifested in the growth triangle strategysince the changes that are manifested in the growth triangle strategyprovide supports for ASEANs FTAs and APECs free trade plans.provide supports for ASEANs FTAs and APECs free trade plans.


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IndonesiaIndonesia--MalaysiaMalaysia--Thailand Growth TriangleThailand Growth Triangle

(IMT(IMT--GT)GT)

What Is IMTWhat Is IMT--GTGT

Early attempt at economic cooperation and integration in ASEAN.Early attempt at economic cooperation and integration in ASEAN.

Formally endorsed by allFormally endorsed by all 33 governments heads of IMTgovernments heads of IMT--GT nations inGT nations in 19931993..

Expected to boost economic, social and cultural ties between their areas.Expected to boost economic, social and cultural ties between their areas.

The private sector is expected to drive the economic agenda & theThe private sector is expected to drive the economic agenda & thedevelopment of the IMTdevelopment of the IMT--GT by supporting and facilitating its activities.GT by supporting and facilitating its activities.

IMTIMT--GT Joint Business Council (JBC) was inaugurated inGT Joint Business Council (JBC) was inaugurated in 19951995 as theas the

official vehicle to mobilize private sector participation.official vehicle to mobilize private sector participation.

ADB took initiatives to conduct a detailed feasibility study and formulatedADB took initiatives to conduct a detailed feasibility study and formulatedthe framework for cooperation.the framework for cooperation.


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IndonesiaIndonesia--MalaysiaMalaysia--ThailandThailand--GrowthGrowthTriangleTriangle


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Goals of IMTGoals of IMT--GTGT::

Overall goal of the IMTOverall goal of the IMT--GT is to accelerate private sectorGT is to accelerate private sector--ledledeconomic growth in the IMTeconomic growth in the IMT--GT region by:GT region by:

increasing trade and investment by exploitation the underlyingincreasing trade and investment by exploitation the underlyingeconomic complementarities and comparative advantages;economic complementarities and comparative advantages;

increasing exports to the rest of the world by enhancingincreasing exports to the rest of the world by enhancingcompetitiveness for exports and investment;competitiveness for exports and investment;

increasing the welfare of the people by creating employment,increasing the welfare of the people by creating employment,educational, social, and cultural opportunities in the IMTeducational, social, and cultural opportunities in the IMT--GTGTregion; andregion; and

Encouraging the private sector to play a leading role, while theEncouraging the private sector to play a leading role, while thepublic sector facilities and supports as much as possible.public sector facilities and supports as much as possible.


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IMTIMT--GT: MembersGT: Members

IndonesiaIndonesia:: 1994: North Sumatera and Aceh1994: North Sumatera and Aceh 2005: Aceh, Sumatera Utara, Sumatra Barat, Bangka Belitung,2005: Aceh, Sumatera Utara, Sumatra Barat, Bangka Belitung,

Riau,Kepulauan Raiu, Lampung, Sumatera Selatan, Kepulauan NatunaRiau,Kepulauan Raiu, Lampung, Sumatera Selatan, Kepulauan Natuna (The entire island of Sumatra is included in the IMT(The entire island of Sumatra is included in the IMT--GT)GT)

Malaysia

Malaysia::

1994: Kedah, Perlis, Perak, Pulau Pinang, Selangor1994: Kedah, Perlis, Perak, Pulau Pinang, Selangor 2005: Kedah, Perlis, Perak, Pulau Pinang, Selangor Kedah, Perlis, Perak,2005: Kedah, Perlis, Perak, Pulau Pinang, Selangor Kedah, Perlis, Perak,

Pulau Pinang, Selangor Melaka, Kelantan, Negeri Sembilan, Terengganu,Pulau Pinang, Selangor Melaka, Kelantan, Negeri Sembilan, Terengganu, (Kuala Lumpur can also be considered as an IMT(Kuala Lumpur can also be considered as an IMT--GT market due to itsGT market due to its

location and proximity to Selangor)location and proximity to Selangor)

ThailandThailand:: 1994: Yala, Satun, Narathiwat, Songhla, Pattani1994: Yala, Satun, Narathiwat, Songhla, Pattani 2005: Yala, Satun, Narathiwat, Songhla, Pattani, Trang, Nakhon Sri2005: Yala, Satun, Narathiwat, Songhla, Pattani, Trang, Nakhon Sri

Thammarat, PattulungThammarat, Pattulung Potential ConsumerBasePotential ConsumerBase: 100 million: 100 million


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IMTIMT--GT: Selected Economic IndicatorsGT: Selected Economic Indicators

CountryCountry PopulationPopulation(000)(000)

Area (000Area (000sq.km)sq.km)

GDP$ bil.GDP$ bil. GDP/GDP/

Cap$Cap$

IndonesiaIndonesia 219,142219,142 11,,904904,,600600 (92)109,481(92)109,481

(04)261,267(04)261,267

573573

11,,193193

MalaysiaMalaysia 26,20726,207 329329,,800800 ((9292)) 5353,,454454((0404)) 121121,,175175

22,,846846

44,,625625

ThailandThailand 64,99464,994 513513,,100100 ((9292)) 8989,,391391

((0404)) 164164,,905905

1,5481,548

2,5372,537


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IMTIMT--GT: Selected Social IndicatorsGT: Selected Social Indicators

CountryCountry Literacy RateLiteracy Rate((9090)) ((0404))

Life ExpectancyLife Expectancy(98) (04)(98) (04)

Fertility RateFertility Rate(Both Sex)(Both Sex)

(99) (03)(99) (03)

IndonesiaIndonesia (M)(M) 8989..66 9898..55(F)(F) 7878..77 9797..66

6262..66 6666..77

6666..55 7070..77

22..5 25 2..11

MalaysiaMalaysia (M) 87.0 97.2(M) 87.0 97.2(F) 74.6 97.3(F) 74.6 97.3

6969..7 707 70..00

7474..8 768 76..44

33..1 21 2..99

ThailandThailand (M)(M) 9595..66 9898..11(F)(F) 9191..2 972 97..88

66.0 68.0*66.0 68.0*

72.0 75.0*72.0 75.0*

22..0 10 1..77


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IMTIMT--GT: IntraGT: Intra--SubSub--Regional Trade (%)Regional Trade (%)

CountryCountry 19951995 20032003 (95(95--03)03)

IndonesiaIndonesia 44,,346346 596596 3838,,380380

MalaysiaMalaysia 55,,815815 22,,473473 3636,,062062

ThailandThailand 22,,070070 11,,869869 3131,,924924


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The Public Sectors of the IMTThe Public Sectors of the IMT--GTGT

Coordinating secretariat in each of the IMTCoordinating secretariat in each of the IMT--GTGTcountries;countries;

Coordinating the activities, plans & progress ofCoordinating the activities, plans & progress of

their respective ministries and governmenttheir respective ministries and governmentagencies involved in one way another with theagencies involved in one way another with theIMTIMT--GT;GT;

Holding the annual Senior Officials MeetingHolding the annual Senior Officials Meeting

(SOM) and Ministerial Meeting (MM) to take(SOM) and Ministerial Meeting (MM) to takestock of the problems & progress faced by thestock of the problems & progress faced by theIMTIMT--GT; and others.GT; and others.


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The Role of the Private Sector (JBC)The Role of the Private Sector (JBC)

The Joint Business Council (JBC) is the officialThe Joint Business Council (JBC) is the official

representative body for the IMTrepresentative body for the IMT--GT business community;GT business community; Created in 1995 with mandate from the IMTCreated in 1995 with mandate from the IMT--GTGT

governments;governments;

Meeting three or four time a year on rotation basis;Meeting three or four time a year on rotation basis; Annual JBC meeting in conjunction with the annual IMTAnnual JBC meeting in conjunction with the annual IMT--

GT meeting with Senior Officers Meeting (SOM) andGT meeting with Senior Officers Meeting (SOM) andMinisterial Meeting (MM);Ministerial Meeting (MM);

Instrumental in guiding government policy in IMTInstrumental in guiding government policy in IMT--GTGT

countries in regard to IMTcountries in regard to IMT--GT, especially in the areas ofGT, especially in the areas oftrade and investment, people mobility, education &trade and investment, people mobility, education &training, tourism, cultural & sports linkages, agriculturetraining, tourism, cultural & sports linkages, agricultureand fisheries;and fisheries;


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The Role of the Private Sector (JBC)The Role of the Private Sector (JBC)

(contd)(contd)

Facilitated an estimated US$Facilitated an estimated US$33..88 billion worth ofbillion worth ofprojects betweenprojects between 19951995--20052005;;

Mobilize private sector involvement in exploringMobilize private sector involvement in exploring

the many opportunities;the many opportunities; Coordinate with the IMTCoordinate with the IMT--GT governments on theGT governments on the

issues of mutual concerns;issues of mutual concerns;

Acting as a channel for business information andActing as a channel for business information and

exchange of business opportunities;exchange of business opportunities; Promote IMTPromote IMT--GT as an attractive investmentGT as an attractive investment

destination for foreign investors; among others.destination for foreign investors; among others.


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JBCs AchievementsJBCs Achievements

Enabling several thousands Indonesians & Thai studentsEnabling several thousands Indonesians & Thai studentsto undergo training in Malaysia;to undergo training in Malaysia;

Boosting the number of operators and frequency ofBoosting the number of operators and frequency ofmarine & flight linkages within the IMTmarine & flight linkages within the IMT--GT;GT;

Enabling the fiscal tax on Indonesian citizens departingEnabling the fiscal tax on Indonesian citizens departingthe country to be waived for those departing from anythe country to be waived for those departing from anyIMTIMT--GT airports;GT airports;

Getting involved in reconstruction and rehabilitationGetting involved in reconstruction and rehabilitationefforts in tsunamiefforts in tsunami--affective areas;affective areas;

Boosting trade, investment & tourism; among others.Boosting trade, investment & tourism; among others.


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Real Economic Growth 2000-2008


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Documents

Greater Mekong Subregional Econ. Cooperation