Introduction and Background

Infrastructure development has an important role to play in economic development and poverty alleviation in the Greater Mekong Subregion (GMS). This study attempts to measure the links between infrastructure investment and poverty reduction using a multi-region general equilibrium model, supplemented with household survey data. Specifically, it examines how improvements in road infrastructure and the potential trade facilitation impacts of the Cross Border Transport Infrastructure (CBTI) agreement may impact household incomes in the GMS.

The GMS comprises Cambodia, Lao People's Democratic Republic (Lao PDR), Myanmar, Thailand, and Viet Nam, as well as Yunnan Province and Guangxi Zhuang Autonomous Region of the People's Republic of China (PRC). At the time of the inauguration of the GMS Economic Cooperation Program (1992), most of the region's infrastructure was of a very poor quality (Ishida 2007). In response to this, the GMS adopted the Transport Master Plan in 1995, which identified priority transport links—mostly road projects—designed to generate the greatest and most immediate improvements in connectivity. This was an important step in economic development, with improvements in transportation infrastructure boosting economic opportunities throughout the region, for example by significantly reducing travel times and costs. As the countries have moved away from a strategy of self sufficiency to one of regional cooperation, major efforts have been made to develop the infrastructure linking the GMS and beyond, particularly through the identification of ambitious economic corridor projects. These infrastructure projects have been supported by a number of international agencies, including the Asian Development Bank (ADB), in the hope that they will lead to significantly improved opportunities for the region.

Improved transportation infrastructure gives rise to complex economic interactions, with the exact casual relationship between economic growth and infrastructure investment unclear.¹ In this study, we attempt to quantify the effects of some of the key linkages between upgraded infrastructure, economic growth, and poverty reduction in the GMS. We use a computable general equilibrium framework that is particularly well-suited to this task, since it explicitly accounts for all sectors within an economy, as well as the interactions between them and with other economies. This framework enables us to quantify how the costs and benefits of improved infrastructure may be transmitted between markets and how they impact different household groups, including the implications for poverty alleviation.

We begin by outlining the nature of the economies and infrastructure issues in the GMS. We then introduce the global trade model and databases that are used to generate insights into some of the likely impacts of infrastructure development on GMS countries. This is followed by a discussion of the scenarios considered and the results of these, with a particular focus on medium-run and poverty impacts. We briefly discuss some potential negative impacts of infrastructure development before making some concluding remarks.

Download this Paper [ PDF 606KB| 39 pages ].

Comment(s)

There are [0] comment(s) for this entry. Post a comment.