ASEAN is divided. The most striking is the development divide that separates the newer
members (the CLMV countries) from the original ones (ASEAN6). More rapid growth in the
CLV since the 1990s, driven by trade, investment and other market reforms, have reduced
these income differences. While the development divide has narrowed, huge gaps remain.
Further narrowing of these gaps will require an increase in the speed and the breadth of
policy reforms. A gaping hole in the policy landscape in ASEAN is the failure to address
labor mobility adequately. On-going demographic transitions will result in greater labor
outflow. The current policy void on labor migration not only limits the benefits from trade and
investment liberalization, but increases the cost of structural adjustment. Although rapid
growth has resulted in convergence, it has also increased polarization within countries. This
can threaten social cohesion, as well as the sustainability of future growth. In order to make
growth more inclusive, there is a need to invest more in education and health, and to
institute land reform. Apart from directly reducing social and asset inequities, it will produce a
workforce more able to actively participate in the growth process and adapt to structural
change.