INTRODUCTION

It is generally said that economic regionalism has a positive impact on economic development as it strengthens economic linkages through trade and investment and encourages the development of production networks. Sen (2007) in his analysis of ASEAN regionalism observes that ASEAN has the potential to promote economic development and facilitate the newer and economically less developed ASEAN members in building up production networks that would facilitate the economic integration process.

In this context, this chapter examines ASEAN economic integration and its implications for the CLMV countries, namely Cambodia, Laos, Myanmar and Vietnam. The chapter begins by giving a background on the ASEAN Economic Community and discusses its origin, rationale and challenges. It then looks at the development divide within ASEAN. It is observed that while the different levels of economic development can be complimentary in nature and therefore facilitate production network development, infrastructure and social gaps can be hurdles for reducing costs. The chapter also examines in more detail the extent of integration of Cambodia, Laos and Vietnam within ASEAN and the rest of the world. Finally, prior to providing some concluding remarks, the chapter analyses the role of free trade agreements (FTAs) in strengthening production networks in the region, especially in the light of newer members of ASEAN.

THE ASEAN ECONOMIC COMMUNITY

ASEAN, established in 1967, is one of the world' most successful regional organizations. It comprises ten countries, namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. ASEAN countries combined constitute a population of about 567 million, spanning a total area of 4.5 million square kilometers. In 2006, ASEAN generated a combined gross domestic product of US$1.07 trillion and total trade of US$1.44 trillion, accounting for more than a quarter of Asia' total exports and imports.

Since its inception, ASEAN has managed to successfully foster closer political and security cooperation, creating a peaceful and stable region. As a result, ASEAN, especially its five original members (ASEAN-5), i.e. Indonesia, Malaysia, the Philippines, Singapore and Thailand, enjoyed impressive economic growth rates, reduced poverty and improved living standards over the past three decades. However, in recent years, the region has begun to face stiff competition from China, particularly in attracting foreign direct investments (FDIs).