The Challenge of Economic Integration for Transitional Economies of Southeast Asia: Coping with Revenue Losses

This paper seeks to estimate the revenue losses of CLMV countries (Cambodia, Lao PDR, Myanmar, and Vietnam) due to the implementation of CEPT (Common Effective Preferential Tariff) scheme resulting from their participation in the ASEAN Free Trade Area (AFTA) and to suggest appropriate policies for compensating the losses. It is evident that all CLMV countries, with the notable exception of Myanmar, stand to lose significant amounts of customs revenue from ASEAN imports due to the scheme. However, the overall government revenue (tax as well as non-tax) is likely to rise substantially in all CLMV countries despite CEPT rate reductions. The countries should, therefore, stay committed to the full implementation of CEPT scheme despite temporary decline in their revenues, argued in the paper.