Part one of the report conducts a stocktaking of the extent of integration of the GMS into the global economy. Three main themes guide the discussion: (i) the current level of integration of GMS economies in the global economy; (ii) the current export structure and specialization of GMS economies; and (iii) the extent of similarity of the export structures and specialization of the GMS members.

The report provides an understanding and analysis of the potential for GMS members to diversify their export structures. It breaks down the extent to which members’ specialization patterns are dependent on the specialization patterns of their neighbors. This part also asks whether the distinction between regional and global orientation has implications for development prospects, for instance, by affecting the extent of growth spillovers that come from interactions with other countries. Furthermore, it addresses whether GMS members are meeting expectations with regard to trading in the global economy given their current levels of development, size, and distance from the rest of the world. Looking to the future, it addresses fundamental questions to guide the GMS members in the coming decades. The analysis revolves around the idea of upgrading the economy, examining the proposal to transform production and export baskets by shifting the composition of these baskets to increase the share of more complex products — products that embody more knowledge and command higher wages to ensure a steady increase in wages. The study proposes a sound methodology to evaluate products and sectors of higher complexity that each GMS member could feasibly add to its export basket.

Other fundamental questions are examined in the first part, such as the role of global value chains in the upgrading path of each country to realize its future diversification, and the possible impacts and effects of the fourth industrial revolution (4IR), which is of paramount importance for the GMS. The term “4IR” is used to capture ongoing technological progress associated with the fusion of the digital, biological, and physical worlds alongside the increased use of new technologies such as artificial intelligence, cloud computing, robotics, three dimensional (3D) printing, and the internet of things, among others. The report discusses two issues of immediate concern: (i) the extent to which GMS members are engaged in the production and use of these technologies, thus providing initial insights into the region’s readiness for the 4IR; and (ii) the extent to which these new technologies provide a risk to development opportunities, in particular those related to employment generation.

Part two highlights the importance of cities as engines of growth. It documents the significant increase in urbanization that GMS countries have experienced over the last several decades. Findings indicate that firms in bigger GMS cities tend to be more productive, pay workers higher wages, and are more likely to engage in innovative activities. However, this part also underscores that robust economic growth requires vibrancy in all types of cities: small, medium, and large.

While cities have played an important role in the growth of today’s developed countries as well as newly industrialized economies, recent experience from the developing world suggests that urbanization does not automatically imply greater economic dynamism. The report also discusses factors that take away productivity advantages of cities, such as traffic congestion, weak urban planning, and a lack of affordable housing.

Furthermore, part two emphasizes that far from being individual islands, cities are interconnected with one another through the flow of goods, services, and people, to constitute a system. The interconnections often cross borders, as in the case of GMS countries. Making the most of the benefits that urbanization can bring requires that cities be managed well, not only from the perspective of individual cities but also from the perspective of the system of cities spanning both individual economies, and the GMS as a whole. Policymakers are urged to pay attention to the factors that underpin how efficiently the system of cities works, namely, the state of intercity transport infrastructure and institutions that can coordinate decisions and plans across cities.

Part three focuses on the need to upgrade road infrastructure in the GMS. The chapters in this part provide an innovative analysis on the quality of the road network and identify routes that need significant improvement. They show how data on actual travel distance and time between several thousand districts in the GMS can be used to analyze the quality of roads. These data can be generated relatively quickly by using online routing systems, and this way avoiding expensive field surveys. Part three also argues that improvements in trade facilitation will enhance connectivity. The GMS needs high-quality infrastructure linking its cities in order to increase their competitiveness and to form systems of cities.

The book concludes with a chapter that brings together a series of recommendations based on the analysis in the previous chapters. Guided by the ultimate goal and rationale that a regional cooperation program, such as the GMS Program, will contribute to its members’ development, the book proposes that regional cooperation can be instrumental in facilitating the growth process of countries and regions.

The analysis in the first part, “Integration into the Global Economy and Upgrading,” sets forth the following recommendations:

(i) Develop trade policies and infrastructure investments to enhance trade integration.
(ii) Encourage integration into GVCs and upgrading production within GVCs.
(iii) Develop an environment conducive to maximizing the benefits from the 4IR.
(iv) Develop a strategy for upgrading the production structure.
(v) Consider the employment implications of the upgrading paths.
(vi) Encourage the diversification of GMS economies.

The analysis in the second part, “the Role of Cities as Engines of Growth,” has the following recommendations:

(i) Evaluate whether cities are able to reap agglomeration economies commensurate with their size, or whether factors such as traffic congestion, weak urban planning, and unaffordable housing are undermining the benefits of agglomeration.
(ii) Manage cities adequately by paying attention to basic issues such as transport and other urban infrastructure, urban planning and land-use regulations, and affordable housing. This also requires developing the institutions that contribute to enhancing human capital and creating a conducive business environment, as well as implementing policies to encourage new economic activities and young firms to operate.
(iii) Develop an efficient intercity transport infrastructure and set up institutions to coordinate decisions and plans across cities and their administrative units. This will improve the flows of goods, services, and people, between cities and between these and the rural hinterland.

The analysis in the third part, “the Need to Improve the Quality of Road Infrastructure and Connectivity to Enhance Trade Integration and Connect Competitive Cities,” leads to a series of general recommendations for the GMS as a whole and for each member country, including:

(i) Make use of volunteer-based and bottom–up online routing systems to evaluate and monitor up-to-date road connectivity more efficiently.
(ii) Improve connectivity to Bangkok, Ho Chi Minh City, and Ha Noi, as the most efficient option to increase market potential for most districts in the GMS.
(iii) Develop a metropolitan area similar to Bangkok, Ho Chi Minh City, or Ha Noi, somewhere in the western part of the GMS, and another one in central Viet Nam, which would help the upper part of the GMS and the East–West Economic Corridor.
(iv) Reduce border crossing time, which accounts for much of the total transport time between origin and final destination. This is the cheapest and most efficient way for border-area districts to benefit from larger and closer markets in neighboring members.
(v) Connect seaports with cross-border railway networks, two of the cheapest modes of long-haul transport. These would enable more firms located in the GMS to participate or penetrate further into GVCs.
(vi) Improve different aspects of trade facilitation, especially in Cambodia, the Lao PDR, and Myanmar.