arcid CHINA POLICY B R I E F LANCANG-MEKONG COOPERATION: TURNING A TRUST CRISIS INTO SUSTAINABLE DEVELOPMENT

By Piti Srisangnam

Volume 2, No. 1 2019 Asian Research Center for International Development (ARCID) Mae Fah Luang University, Thailand

ISSN 2630-0877

ARCID China Policy Brief Volume 2, No. 1 2019

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

ARCID CHINA POLICY BRIEF Volume 2, NO. 1 2019 Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development © All Rights Reserved Author : Piti Srisangnam ISSN : 2630-0877 First published in 2019 by ASIAN RESEARCH CENTER FOR INTERNATIONAL DEVELOPMENT (ARCID) School of Social Innovation, Mae Fah Luang University 333 Moo1, Thasud, Muang, Chiang Rai 57100, Thailand Tel : +66 5391 7137 Email : arcid.social-innovation.school@mfu.ac.th Website : chinawatch.today, social-innovation.mfu.ac.th/arcid.php Facebook page : www.facebook.com/ARCIDTHAILAND www.facebook.com/chinawatch.arcid Printed by Techno Printing Center 643 Utarakit Road, Wiang, Muang, Chiang Rai 57000, Thailand Tel/ Fax : +66 5371 8841 Email : tpccri@gmail.com

ARCID China Policy Brief Volume 2, No. 1 2019

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

Preface economic reforms and the opening up of the People’s Republic of China (PRC) to the outside W ith world by Deng Xioaping and post-Deng leaders, China is now the largest economy (on a purchasing power parity basis). All indications show that China will be a superpower. The meteoric rise of China in the 21st century signals the successful comeback of China in regaining its respectful place in regional and international affairs. It also means challenges as well as opportunities for other parts of the world, especially for countries in the Asia Pacific region. For many of us, the big question is: how should we deal with such a rising superpower? Other questions may include the following: Is China’s rise going to be sustained? What are the new directions mapped out by Xi Jinping to develop China? What sort of developmental challenges will it face? Is China a threat according to some analysts? How can we promote a win-win relationship with China? How can we manage our problems, if any, with China in order to preserve peace and development? To answer these questions, the Asian Research Center for International Development (ARCID) of the School of Social Innovation at Mae Fah Luang University has launched the China Watch Project with a grant from the Thailand Research Fund (TRF). We would like to express our thanks to the TRF for its funding support and suggestions in improving the project proposal. As part and parcel of the China Watch Project, ARCID has established a Monitor and Analysis (M & A) Unit surveying and analyzing major developments in China. Located in Northern Thailand, ARCID would like to take advantage of its geography and focus its research more on the Mekong region and its relations with East Asia, including China. We hope this strategy could help a young research center to establish a niche in the academic, intellectual and policy community. In this regard, the ARCID China Policy Brief is produced by the M & A Unit to examine policy issues on ASEAN-China relations in general and Thailand-China relations in particular. Inaugurated in August 2018, the ARCID China Policy Brief is published a few times a year. Finally, it has to be understood that the views expressed are those of the author.

Lee Lai To, Ph.D. Senior Professor and Director ARCID

ARCID China Policy Brief Volume 2, No. 1 2019

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

About the author Assistant Professor Dr. Piti Srisangnam Bachelor of Economics from Chulalongkorn University. Master of International Economics and Finance and Ph.D. in Economics from University of Melbourne, Australia. He teaches at Faculty of Economics, Chulalongkorn University. He specializes in international economics and integration and ASEAN economics. At present, he is a Director for Academic Affairs of the ASEAN Studies Center and Director of the Centre for International Economics at Chulalongkorn University.

ARCID China Policy Brief Volume 2, No. 1 2019

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

Lancang-Mekong Cooperation: Turning A Trust Crisis into a Sustainable Development Piti Srisangnam, PhD

The Lancang-Mekong is a trans-boundary river in Southeast Asia. It is the world's twelfth longest river and the seventh longest in Asia with the length of 4,350 km. The river and its drain area cover 795,000 square kilometers. The river flows from the Tibetan Plateau through China, Myanmar, Lao PDR, Thailand, Cambodia, and Vietnam. Lancang-Mekong is a major trade route between the landlocked areas of western and southern part of China with Southeast Asia. However, during the annual dry season, the water level in the Mekong River will decrease until it is in a crisis. This crisis has not only affected agricultural sectors and the way of life of people along the river but also caused problems in international relations. An inefficient water management without international cooperation causes the downstream countries to blame the upstream countries for the drought. This creates a “Trust Crisis” among neighboring countries along the Lancang-Mekong River. This article will demonstrate the different needs in using this international river. Such needs produce conflicts leading to a “Trust Crisis”. After that we will discuss the root causes of the lack of cooperation in water management before offering some guidance on how to build partnerships for sustainable development for all countries in this region. Lancang - Mekong: The International River of Domestic Confrontations The Lancang-Mekong River is the largest and longest river in Southeast Asia. It also the eight longest river in the world, with a basin covering an area of 800,000 square kilometers, encompassing five Southeast Asian countries, namely, Cambodia, Lao PDR, Myanmar, Thailand and Vietnam. The river also flows through Yunnan Province in Southern China. In China, the Mekong River is called Lancang Jiang (Upper Mekong). Langcang Jiang is one of China’s longest rivers and it contributes approximately 13.5% of the Mekong’s flow. The river system provides water and food for some 70 million inhabitants and is a major source of livelihood. It sustains crops, livestock, fisheries and forests; serves as a waterway for transport of goods and people; and it is the source of tourism, recreational and sociocultural activities. This indicates that the Lancang-Mekong River Basin has been integral to people’s livelihood and economic development. However, for relations among the six Mekong nations with full independence and sovereignty have never been easy because of the contest in using the river since the early 1950s, and especially in the last two decades. China has had strong interest in generating electricity from the Lancang-Mekong River through hydro-power dam development and in clearing parts of the basin to improve navigation in the Upper and Lower Mekong Basin for trade. Myanmar, which seems to have been cut off from the world since 1960’s until recently, and shares the Mekong River as a border with Lao PDR, has been quiet but cooperative with China. Similar to China, Lao PDR prefers developing hydro-power electronic dams on the Mekong River in order to create more energy supply and to transform its energy richness into a battery of Southeast Asia. (See Figure 1)

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Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development 1

Figure 1: Annual rainfall, Topography and physiographic zones and the Dams Projects of Mekong Basin

Source: http://mekongriver.info/mekong-basin, http://www.mrcmekong.org/mekong-basin/physiography/physiographic-regions/ and http://www.thanhniennews.com/society/thousands-sign-petition-against-mekong-dam-construction-53594.html

Thailand demands more electricity supply from both China and Lao PDR and diverts water from the main Mekong tributaries to irrigate its northeastern areas for agricultural activities as well as for its manufacturing sector. Cambodia wants fewer structures such as large-scale dams and irrigation systems in the Lancang-Mekong Basin because it has abundant fish and aquatic species. Vietnam chooses to build many dams in central Vietnam but objects to the construction of any mainstream dams because of potential negative impacts on its productive agriculture and aquaculture in the Southern edge of Vietnam located in the Mekong delta. The current situation is getting worst since all countries along the river are competing with each other to build dams that block Lancang-Mekong and its river system. (See Table 1) Table 1: The Dam Projects of the Lancang-Mekong Basin Project

Country

Dachaoshan Gongguoqiao Nuozhadu Jinghong Manwan Xiaowan Jinfeng Jinhe Guoduo Laoyinyan

China China China China China China China China China China

Nanhe 1 Nanhe 2 Luozhahe 1 Xi'er He 1 Xi'er He 2 Xi'er He 3 Xi'er He 4 XunCun

China China China China China China China China

River

Mekong Mekong Mekong Mekong Mekong Mekong Nan La He Jin He Mekong Gua Lan Zi He/Shun Dian He Luo Zha He Luo Zha He Luo Zha He Xi'er He Xi'er He Xi'er He Xi'er He Hei Hui Jiang

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Commissioned

Installed capacity (MW)

Mean Annual Energy (GW) 5,500 4,041 23,912 5,570 6,710 18,990 64.3 367 823

Height (m)

Crest length (m)

2003 2012 2014 2009 1995 2010 1998 2004 2015 1997

1,350 900 5,850 1,750 1,570 4,200 16 60 160 16

115 105 262 108 132 295 45 34 93 4.2

481 356 608 705.5 418 893

2009 ? 2016 1979 1987 1988 1971 1999

40 25 30 105 50 50

170 100 135 440

56.8

148

37 21

122

0.2

223

78

345

67

165

14 74

68.4 235.5

59

Total storage (million m3) 890 316 23,703 1,140 920 14,560 19.48 4.27 83 1,092

Max reservoir area (km2) 26.25 343 320 510 415 194

11.36 14.33

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

Project

Country

Houay Ho Houay Lamphan Nam Beng Nam Khan 2 Nam Khan 3 Nam Leuk

Laos Laos

Houayho/Xekong Xekong

1999 2015

152 88

Mean Annual Energy (GW) 450 480

Laos Laos Laos Laos

2014 2015 2016 2000

36 130 88 60

145 225 480 215

25.5 160 77 51.5

84.8 405 74.5 800

3,611 140 185

0.7 30.5 9 17.2

Nam Lik 1-2 Nam Mang 1 Nam Mang 3 Nam Ngiep 2 Nam Ngiep 3A Nam Ngum 1 Nam Ngum 2 Nam Ngum 5 Nam Theun 2

Laos Laos Laos Laos Laos

Nam Beng Nam Khan Nam Khan Nam Leuk/Nam Ngum Nam Lik Nam Mang Nam Gnogn Nam Ngiep Nam Ngiep

2010 2016 2004 2015 2014

100 64 40 180 44

435 225 150 732 152

103 70 28

328 280 151

11 16.5 49

24.4 0.148 10

1971 2011 2012 2010

148.7 615 120 1,075

1,006 2,300 507 5,936

75 182 99 48

468 421 235 325

4,700 3,590 314 3,500

370 122.2 15 450

Nam Ou 2 Nam Ou 5 Nam Ou 6 TheunHinboun TheunHinboun Expansion Project Xe Kaman 3 Xeset 1 Xeset 2 A Luoi Buon Kuop Buon Tua Sra

Laos Laos Laos Laos

Nam Ngum Nam Ngum Nam Ngum Nam Theun/Xe Bangfai Nam Ou Nam Ou Nam Ou Nam Theun

2016 2016 2016 1998

120 240 180 220

546 1,049 739 1,645

49 74 88 48

352

810

121.7 335 409 1,300

15.7 17.22 17.01 49

Laos

Nam Gnouang

2013

222

1,395

65

480

2,450

49

Laos Laos Laos Vietnam Vietnam Vietnam

2014 1994 2009 2012 2009 2009

250 45 76 170 280 86

1,000 154 309 686 1,455 359

102 18 26 49.5

543 124 144 208

141.5

5.2

Dray Hlinh 2 Plei Krong

Vietnam Vietnam

Xe Kaman Xeset Xeset A Sap Sre Pok Se San/Krong Po Ko Sre Pok Se San/Krong Po Ko Sesan Sesan Sesan Sre Pok Sesan Nam Phrom Mun Lam Dom Noi Nam Pong Lam Ta Khong

2007 2008

16 100

85 479

65

Sesan 3 Vietnam 2006 Sesan 3A Vietnam 2007 Sesan 4 Vietnam 2009 Sre Pok 3 Vietnam 2009 Yali Falls Vietnam 2001 Chulabhorn Thailand 1972 Pak Mun Thailand 1994 Sirindhorn Thailand 1971 Ubol Ratana Thailand 1966 Lam Ta Thailand 1974 Khong Source: Data collected by the author from Wikipedia

260 96 360 220 720 40 136 36 25.2 500

1,224

79

Laos Laos Laos Laos

River

ARCID China Policy Brief Volume 2, No. 1 2019

Commissioned

Installed capacity (MW)

60 52.5 65 93 280 86 57 400

Height (m)

Crest length (m)

79 77

74.5

Total storage (million m3) 3,530 140

Max reservoir area (km2) 37 9

1.8

47 41 745

1,049

53 6.4

54 1,460 70 17 42 35.1 40.3

1,037 700 300 940 885 251

64.5 165

31

1,967 2,559 310

288 410 37

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development 3

Water Management and Trust Crisis Since the core of Lancang-Mekong Cooperation is the River, “Water Management” is therefore very important. Efficient water management will enable all 6 countries to achieve enormous opportunities. However, on the contrary, wrong management of water may lead to a crisis of faith among neighbors. Transboundary data sharing is widely recognised as a necessary element in the successful handling of water-related climate change issues, as it is a means towards integrated water resources management (IWRM). Unfortunately, it is often a challenge to achieve it in practice. Before the establishment of the Lancang-Mekong Cooperation (LMC) mechanism by China, the Mekong River Commission (MRC), an inter-governmental agency established by Cambodia, Lao PDR, Thailand and Vietnam, has adopted IWRM in its water strategy plan in order to properly manage the transboundary waters of the Mekong River. In this context, data sharing procedures were institutionalized and have been officially implemented by the four member countries since 2001. However, until recently, the initial objectives of the Procedures for Data and Information Exchange and Sharing (PDIES) have not been fully achieved, and furthermore, Vietnam has much to gain and little to lose by engaging in data sharing in the MRC context. The primary motivation for data sharing stems from the desire to protect national benefits and to prevent upstream countries from over-exploiting the shared water resources. However, data sharing is hindered by a lack of national regulations in Vietnam concerning data sharing between state agencies and its outdated information management systems. (Heng and Uta, 2016) In the case of Thailand, data sharing is quite limited. The main bottlenecks hindering relevant Thai organizations sharing data across national boundaries appear to be a perception of limited gains, and concerns for national security. The article by Bunthida, Uta Wehn and Zaag (2014) concludes that data sharing for IWRM implementation cannot be radically improved without significant changes in the mindsets of the relevant organizations. In the case of the upstream country, China is pursuing transboundary water cooperation because it is connected and divided by international rivers, lakes and aquifers. China shares more than 40 major transboundary waters located upstream with 14 (mostly) downstream riparian neighbouring countries. China’s foreign policy is directed towards Five Principles of Peaceful Coexistence, Good Neighbourliness and Friendship, South-South Cooperation, North-South Cooperation and Win-win Cooperation. The transboundary water cooperation between China and its neighbours can be divided into two segments as substantive and procedural. The substantive cooperation includes treaties, agreements and Memorandum of Understandings (MoUs). (Ping, 2017) In 2015 China, Myanmar, Lao PDR, Thailand, Cambodia, and Vietnam launched the LMC mechanism. This mechanism covers five priority areas, namely, interconnectivity, production capacity, cross-border economic cooperation, cooperation on water resources and cooperation on agriculture and poverty reduction. In 2016, the Sanya Declaration ‘For a Community of Shared Future of Peace and Prosperity among Lancang-Mekong Countries’ was launched at the first LMC Leaders’ meeting. The Declaration will enhance cooperation among LMC countries in sustainable water resources management and utilisation through the following activities: (Ping, 2017) a. establishment of a center in China for Lancang-Mekong water resources cooperation to serve as a platform for LMC countries to strengthen comprehensive cooperation in technical exchanges b. capacity building c. drought and flood management d. data and information sharing e. conducting joint research and analysis related to Lancang-Mekong river resources.

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Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

It seems that the five main activities are related to water resources management among 6 member states and they can be achieved only when “data and information sharing” is fully implemented first. With this new platform on water management like the one under the LMC, all parties put a very high hope that the cooperation from both upper- and lower- stream member states will create a complete dataset to create and implement a more efficient integrated water resources management (IWRM). Unfortunately, this still does not happen as there is no dataset available. However, the new cooperation like the one under the LMC is facing new challenges in the region. The most important impetus driving the cooperation to success is “Trust Building” between Mainland ASEAN countries and China. Unfortunately, there is a “Trust Crisis”, a worrisome obstacle to the overall collaborative efforts within the region. This tension between China and the Mekong Sub-region countries is likely to stem from some causes, as follows: First, the fear between strong and weak nations, the imbalance of power. This is in part caused by the phenomenon of the miraculous economic growth in China, with GDP expansion exceeding 10% for more than 15 years, resulting in an asymmetry of power which makes the less robust economies becoming cautious in relating to China. Many ASEAN countries are in such a position resulting in their cautionary stance towards various projects of China, such as the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB), as attempts to utilize the region to acquire excessive benefits. This is coupled with the difficulties of smaller businesses of the Mekong Sub-region countries in gaining market access to the Chinese market successfully. In the light of numerous obstacles, there is an atmosphere of skepticism in the region. This is the fear that the prospect of mutual benefits for an equitable share of economic benefits between the parties may not be forthcoming Second, misperceptions about numerous issues, sparking misunderstandings between one another: Two of the most influential ones are the cold war memories that have imprinted the image of evil and danger in looking at each other and the South China Sea conflict in which some Mainland ASEAN member states consider China as an offender while China regards its action as building the foundation infrastructure for safe navigation and trade facilitations. Third, international and domestic politics and policies. Many countries in the region are politically linked to major economic powers outside of the region. These outside parties are ready to intervene into the regional political affairs as well as the South China Sea conflict. Last, Identity problem. Certainly, there are many people of Chinese descent and lineage in the Mainland ASEAN countries, as well as Chinese immigrants who are able to achieve high social, economic, financial, and political status in the region. As time passes by, these people of Chinese descent have been integrated into the countries they settled in. However, on many occasions they are considered by the PRC as native Chinese citizens who can act as agents to safeguard the interests of the PRC. The same idea sometimes also applies to the case of Viet Kieu or the Overseas Vietnamese and the larger Tai ethnolinguistic peoples found in Thailand and adjacent countries in Southeast Asia as well as southern China and Northeast India. From Trust Crisis to Trust Building and Partnership for Sustainable Development Since the “Trust Crisis” has become a serious issue between Thailand, China and other countries in Mainland ASEAN, there is a need to solve the “Trust Crisis” for the LMC to become an effective cooperation mechanism. A “Trust Building” system is thus urgently needed. Steps that can be taken to promote cooperation and building trust leading to long term sustainable development are as follows.

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Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development 5

Diagram 2: Interlinkages between International Trade to Sustainable Development

Drawing upon the information and findings on the situation of countries in Mainland ASEAN, based onthe methodologies of PESTEL Analysis (comprised of Political, Economic, Social, Technological, Environmental and Legal factors), in-depth interviews and brainstorming sessions throughout the survey of the five Mainland ASEAN countries, namely Thailand, Cambodia, Lao PDR, Myanmar, and Vietnam (Sponsored by International Institute for Trade and Development, Thailand), the researcher has observed that there are rooms for positive development. While each country will need to determine its own policies and manage its own internal affairs, the pass-through from trade to sustainable development is possible, despite the internal nature of national policies aiming to tackle poverty and inequality issues, which may be associated with tensions on international relations should direct policy interventions occur from a neighboring country. Despite this internal characteristic of national development policies, the researcher is convinced that international trade and investment policies, coupled with prudent foreign relations policies, can provide a solid foundation for regional and local small and medium enterprises, stimulate infrastructural development, connect foreign direct investment projects and special economic zones. Consequently, when these fundamentals have been strengthened, China, Thailand and the neighbouring Mainland ASEAN partners will be able to integrate themselves into the global value chains (GVCs), which will then serve as important drivers of regional export-led- growth. Properly maintained and supervised, such economic growth, together with foreign aid promoting the alleviation of poverty and inequality issues, can lead to the reduction of poverty and inequitable allocation of income within the China-Mainland ASEAN Sub-region. When this is achieved, these qualitative factors will attract greater volumes of high-quality trade and investment into the region and its countries, in an upward spiraling fashion (See diagram 2). In this light, towards the goals of poverty reduction and promotion of pragmatic sustainable development in the Lanchang-Mekong Sub-region, the policy recommendations for China and Thailand on the regional scale of operations can be summarized as follows: 

China and Thailand need to initiate this process by altering the mindset of the people – viewing our neighbours in the LMC region as sources of new opportunities rather than threats, and potential partners in win-win situations rather than adversaries. As such, connectivity in all dimensions will be important; physical connectivity through improvement of infrastructural and logistics-related systems, institutional connectivity through the harmonization of rules, regulations and standards,

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and people-to-people connectivity through a multitude of efforts such as trust-building processes. These are vital to the joint success of the countries in the GMS region (see Arrow 1 in diagram 2). In order to firmly establish Thailand as a full-fledged trading nation, and an important hub for the Mainland ASEAN Region, one of the urgent matters is to reduce non-tariff measures in trade (NTMs) towards eventual abolishment, and redefine the role of state agencies and public authorities from “regulators” to “facilitators”. An important agenda is to promote a trade and investment-friendly environment, through the promotion of trade facilitations (TFs). (See the Arrows 1 and 2 in diagram 2). Stakeholders and business parties who are expected to be affected by changes originating from each policy implementation and trade negotiation should be consulted with, and their respective opinions are to be heard and considered, in brainstorming and voicing sessions prior to the implementation or the negotiation. The entire supply chain needs to be taken into account before a significant policy change goes into effect. Participants in the supply chains or value chains should be able to participate in the policy formulation process. (See Arrow 1 in diagram 2). In order to ensure sustainable development and actual reduction of inequality and poverty amidst the people of the LMC region, an important issue is to facilitate the movement of factors of production, as well as intermediate and final goods and services. Needless to say, proper supervising measures are to be present as well, so as to prevent security and criminal threats which may arise out of transnational criminal activities, human trafficking, or other harmful actions. Nevertheless, the simplification of border measures and facilitation of factor movement will serve to reduce costs, complexities, and documents required to certify for trade benefits. (See Arrow 1 in diagram 2). The role of Chinese and Thai governmental agencies in supporting SMEs is clearly pronounced. Public agencies will need to integrate and join together the processes of the various, currently overlapping responsibilities of individual agencies or bodies, into an integrated system of business incubators. This structure will be responsible for providing assistance and support to SMEs entrepreneurs, and will need to consider the long-term likelihoods of success for Chinese and Thai SMEs, so that they can practically and fruitfully join their business partnerships with private and public agents in neighboring countries, with actual, sustained results. The conventional businessmatching programs with short-term quantitative results (lacking in middle and longer term progress for the businesses) are to be upgraded towards a more practical system oriented towards qualitative and long-term achievements in linking China, Thailand with its neighbors and their economic agents, paving the way for a more solid regional value chain. (See Arrows 1 and 2 in diagram 2). The dissemination of knowledge with respect to trade, investment, trade benefits and opportunities and threats in neighbouring economies must be strategically implemented, alongside an efficient knowledge management system. This is needed in order to reduce the redundancy and confusion within the information pool, in order to provide precise, updated and reliable information to entrepreneurs wishing to invest or participate in neighbouring economies, some of which are undergoing turbulent changes and frequent readjustments of rules and laws. (See Arrows 1 and 2 in diagram 2). Assistance strategies of China and Thailand towards connectivity and poverty reduction in neighbouring countries will need to be formed systematically and strategically together with the involving countries, in order to avoid the dilution of efforts or disorientation, as well as to promote the awareness of the strategies or programs among the people in the countries concerned. This is done to facilitate pragmatic progress in reducing poverty and inequality (especially in instances where a Mainland ASEAN country has not solidly determined its poverty and inequality reduction agendas in its national development plan). Aid and assistance towards a fellow Mainland ASEAN country will need to be transparent and incorporate good governance, and should be coupled with the use of practical indices that can reflect actual reduction in poverty and inequality levels. Also, there is the need to clearly define the recipients for the assistance program, so as to ensure that the benefits are truly delivered to the vulnerable and/or marginalized groups at risk. These groups vary from case to case. For example, in the cases of Myanmar and Lao PDR, they may comprise many of the minorities, whereas in Cambodia, the focus will be on the poor and near poor groups of people. (See Arrow 4 and the + Arrow in diagram 2).

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Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development 7

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The monetary policy actions of China and Thailand should also consider the potential impacts on the neighbouring countries. This is especially true with the policies of the Chinese RMB as a new international settlement currency due to the connectivity through border trade and investment flows from China and Thailand, affecting the exchange rate and the real and monetary sectors in other Mainland ASEAN countries. Of course, while it is not in the current interest of ASEAN to pursue the ultimate goal of a monetary union similar to the Eurozone, we still cannot overlook the importance of an efficient and reliable regional cross-border payment system and the linkage between the regional economies. On the other hand, policies that promote the strength and efficiency of Chinese and Thai banks and financial institutions can generate many benefits towards the countries involved, as such policies can pave the way for pioneering financial service providers and entrepreneurs wishing to participate in the economiesof neighbouring countries. This will strengthen the regional/global value chain and can contribute to sustainable economic and income development through the provision of efficient financial services, in line with the promotion of financial inclusion in the local economy. (See Arrows 1 – 4 in diagram 2). The role of the private sector in development efforts, possibly in the form of public-private partnerships (PPPs) is another mechanism that should be encouraged. At any rate, it should always be taken into consideration that a fair and equitable distribution of economic and other benefits between the countries and people involved, and between the public and private parties, is the most vital factor in this mechanism. (See the Arrows 1-4 in diagram 2). China, Thailand and Mainland ASEAN countries will need a strong trade strategy, and will need to define a more prominent role for itself in matters related to trade agreements and liberalization, covering many issues beyond-trade/investment. LMC member states will need to be ready to understand and handle high standard and comprehensive trading agreements. Examples will include but are not limited to the Regional Comprehensive Economic Partnership (RCEP), ASEAN+6, the Trans-Pacific Partnership Agreement (TPP), the Free Trade Agreement of Asia-Pacific (FTAAP), and the ASEAN 2025 Framework. Proper and adequate assessments of impacts, benefits and costs are necessary and will require robust participation from all sectors (the government, the private sector, the people, and the academic sector), by drawing from credible academic knowledge. The first and foremost objective of such participation in international trade should be the welfare and benefits of the people, the paramount goal of any trade or investment agreement. Despite a positive brand reception and popularity of Thai commodities in neighboring countries due to their favorable quality at affordable prices, it should be noted that resource consumption, investment, impacts on local businesses, as well as nationalist sentiments in such countries, may generate negative economic and/or political issues, affecting growth opportunities and relations. Therefore, it is advisable that enterprises adhere to the framework of Corporate Social Responsibility (CSR) with sincerity, coupled with the use of public relations campaign to inform the consumers in other countries on the true intent of promoting mutual benefit from trade rather than exploitation. Understanding should be reached between enterprises and consumers that trade and investment will be used to provide growth opportunities, lower economic hardships and promote mutual benefits for the people in both the host and investing countries together in a sustainable manner. (See Arrows 1 – 5 in diagram 2).

In conclusion, China and Mainland ASEAN are confronted with common threats especially on the conflict of interests in promoting their economic growth through shared water exploitation. With this common threat, the next level in improving the LMC cooperation is not only to solve the present problems for the peace of the region, but also to pursue the long term goal by the six member countries in establishing a community that every country can equally share the mutual benefits, and develop together in order to create a caring and peaceful community to promote economic growth and sustainability. People-to-People connectivity will be the key to address the challenge.

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References Anand, R. et al. (2013). “Inclusive Growth: Measurement and Determinants”. IMF Working Paper 135, 13. Ando, M. and Kimura, F. (2009). “Fragmentation in East Asia: Further Evidence”. ERIA Discussion Paper Series 20. Arce, R. and Gullón, N. (2000). “The application of Strategic Environmental Assessment to sustainability assessment of infrastructure development”. Environmental Impact Assessment Review 20, 3 : 393–402. ASEAN Link in China’s Belt and Road Initiative http://hkmb.hktdc.com/en/1X0A3UUO/hktdcresearch/The-ASEAN-Link-in-China%E2%80%99s-Belt-and-Road-Initiative Asian Development Bank. (2015). Asian Development Bank Member Fact Sheet: Myanmar [online]. Retrieved from http://www.adb.org/sites/default/files/publication/27782/mya-2015.pdf. [July 22, 2016]. Asian Development Bank. (2016). Overview of the Greater Mekong Sub-region [online]. Retrieved from http://www.adb.org/countries/gms/overview. [June 15, 2016]. Asian Development Bank and Lao PDR. (2016). Asian Development Bank and Lao PDR: Fact Sheet [online]. Retrieved from http://www.adb.org/countries/lao-pdr/main.[27 July 2016]. Asian Development Bank Institute. (2013). Special Study on Sustainable Fisheries Management and International Trade in the Southeast Asia and Pacific Region [online]. Retrieved from http://www.adb.org/sites/default/files/publication/156293/adbi-wp438.pdf. [July 18, 2016]. BBC News. Myanmar- Country Profile. Retrieved from http://www.bbc.com/news/world-asia-pacific12990563. [February 2, 2016]. Bhattachaya, D., Khan,T.I., Salma,U. and Uddin, G.J. (2013). Lagging Behind : Lessons from the Least Developed Countries for a Development Agenda Post-2015 [online]. Retrieved from http://library.fes.de/pdf-files/iez/10354.pdf. [June 20, 2016]. Bunny Yorth: International Mekong River Basin: Events, Conflicts or Cooperation, and Policy Implications, Oregon State University, 2014. Bunthida Plengsaeng, Uta Wehn & Pieter van der Zaag (2014) Data-sharing bottlenecks in transboundary integrated water resources management: a case study of the Mekong River Commission’s procedures for data sharing in the Thai context, Water International, 39:7, 933 951, DOI: 10.1080/02508060.2015.981783 Centre for the Promotion of Imports from developing countries (CBI). (2013). CBI Import Intelligence: Seafood in Myanmar [online]. Retrieved from https://www.cbi.eu/sites/default/files/study/import-information-seafoodmyanmar-europefish-seafood-2013.pdf. [July 17, 2016]. Chanborey C. (2015). Cambodia’s Strategic China Alignment: A number of factors are driving Cambodia’s strategic convergence with China [online]. Retrieved from http://thediplomat.com/2015/07/cambodias-strategic-china-alignment. [27 July 2016].

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Cheewatrakoolpong, K., Potipiti, T., Satchachai, Banditwattanawong and Nopparattayaporn. (2015). The New Normal of Global Trade: The Impact of Thailand’s Export Structure [online]. Retrieved from https://www.bot.or.th/Thai/MonetaryPolicy/ArticleAndResearch/SymposiumDocument/symp osium2015_Slides_1.0_Presentation_Kornkarun_Trade_17Sep15.pdf. [July 12, 2016]. China woos Mekong states with loan pledges, http://www.straitstimes.com/asia/se-asia/china-woosmekong-states-with-loan-pledges Darnall N., Henriques I. and Sadorsky P. (2008). “Do environmental management systems improve business performance in an international setting?”. Journal of International Management 14, 4 : 364-376. Dittmer, L. (2010). Burma or Myanmar?: The Struggle for National Identity. Singapore : World Scientific. FAO .(2011). Fishery and Aquaculture Country Profiles: The Kingdom of Cambodia. Fisheries and Aquaculture Department. Food and Agriculture Organisaion of the United Nations [online]. Retrieved from http://www.fao.org/fishery/facp/KHM/en#CountrySector-StatusTrends. [2 August 2016]. George, J. (2011). Growth and Development. . . Inclusive Growth: What went wrong with Development? [online]. Retrieved from http://mpra.ub.unimuenchen.de/33182/1/MPRA_paper_33182.pdf [May 3, 2016]. Glasson J., Therivel R. and Chadwick A. (2011). Introduction to Environmental Impact Assessment (4th Edition). Abingdon : Routledge. Heng and Uta. (2016) Data sharing in international transboundary contexts: The Vietnamese perspective on data sharing in the Lower Mekong Basin. Journal of Hydrology. Volume 536, May 2016, Pages 351-364. Available online 27 February 2016.(https://doi.org/10.1016/j.jhydrol.2016.02.035) Ishida, M. (2008). “GMS Economic Cooperation and Its Impact on CLMV Development”. in Sotharith, C. (ed.). Development Strategy for CLMV in the Age of Economic Integration. ERIA Research Project Report 2007-4. Chiba: IDE-JETRO : 115-140. Lower Mekong Initiative FAQ's http://www.state.gov/p/eap/mekong/faq/index.htm Ministry of Natural Resources and Environment. (2012). Lao Environment Outlook 2012 [online]. Retrieved from http://www.unep.org/pdf/Lao_EO_2012.PDF. [29 July 2016]. Ministry of Planning. (2013). Guidelines for Formulating National Strategic Development Plan [online]. Retrieved from http://www.cdccrdb.gov.kh/cdc/documents/NSDP_2014-2018.pdf. [27 July 2016 2016]. Myanmar’s Planning Commission. (2012). The Framework for Economic and Social Reform [online]. Retrieved from http://www.eaber.org/sites/default/files/FESR%20Official%20Version%20%20Green%20Cover.pdf. [April 2, 2016]. Overview of the Greater Mekong Subregion, http://www.adb.org/countries/gms/overview Ping, Chen Hui. (2017) Status of transboundary cooperation between China and its neighbours. Presented to Regional Workshop on Transboundary Water Cooperation in the context of the

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SDGs in South Asia and beyond, Global Water Partnership (GWP). 23-24 May 2017, Pokhara, Nepal. (https://www.gwp.org/contentassets/9047146502d64c8889ec57b838ba7e9e/transboundarycooperation-report-final-draft.pdf) Tsui, W. (2015). The ASEAN Link in China’s Belt and Road Initiative [online]. Retrieved from http://hkmb.hktdc.com/en/1X0A3UUO/hktdc-research/The-ASEAN-LinkinChina%E2%80%99s-Belt-and-Road-Initiative [June 3, 2016]. The Tokyo Declaration of the First Meeting between the Heads of Government of Japan and the Mekong Region Countries, Ministry of Foreign Affairs, Tokyo, November 7, 2009. The World Bank. (2016). Myanmar – World Bank Group Partnership: Country Program Snapshot [online]. Retrieved from http://documents.worldbank.org/curated/en/641031468184167373/MyanmarWorld-BankGroup-partnership-country-programsnapshot;jsessionid=HX72KpCFGZQKC97K6TGz526b. [June 7, 2016]. Xinhua. (2014). Li Keqiang’s speech at ASEAN 10+1 Leaders’ meeting – Full Text [online]. Retrieved from http://news.xinhuanet.com/world/2014-11/14/c_1113240171.htm. [June 1, 2016]. Xinhua. (2015). China-Indochina International Economic Corridor along the country [online]. Retrieved from http://news.xinhuanet.com/fortune/2015-09/18/c_1116610908.htm. [June 1, 2016]. Xu, B. and Albert, E. (2015). Understanding Myanmar. Council on Foreign Relations. November 2015. Yorth, B. (2014). International Mekong River Basin: Events, Conflicts or Cooperation, and Policy Implications. Master’s thesis, Oregon State University. 中国－中南半岛国际经济走廊将普惠沿线国家, http://news.xinhuanet.com/fortune/201509/18/c_1116610908.htm 李克强． 在第十七次中国 － 东盟( 10 + 1) 领导人会议上的讲, http: //news.xinhuanet. com/world/2014- 11/14/c_1113240171.htm

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ARCID CHINA POLICY BRIEF 1. Kavi Chongkittavorn, “New Challenges of Thai-China Relations”, Volume 1, No.1, July – August 2018 2. Bilveer Sigh, “The Uighur Issue in Thai-China Relations”, Volume 1, No.2, September – October 2018 3. Somchai Thamsutiwat, “China’s Railway Transportation Policy”, Volume 1, No. 3, November – December 2018 4. Piti Srisangnam, “Lancang–Mekong Cooperation: Turning A Trust Crisis into Sustainable Development”, Volume 2, No.1, 2019

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ARCID China Policy Brief Volume 2, No. 1 2019

Lancang-Mekong Cooperation: Turning A Trust Crisis into Sustainable Development

ISSN 2630-0877