Governments in Asia must undertake national as well as regional actions to reap the full benefits of integration initiatives like the Asean Economic Community (AEC) and be in a strong position to face global economic volatility, according to the Asian Dev
"Strengthening regional integration will help developing Asia become more productive and efficient at a time when the global economy is still in flux," Iwan Azis, head of the ADB’s Office of Regional Economic Integration, said yesterday.
"To do that and to avoid falling prey to domestic protectionist pressures, governments must act now to ratify, implement and enforce regional agreements."
The "Asian Economic Integration Monitor", a semi-annual report from the ADB, notes that Asia has seen mixed progress in regional cooperation and integration recently against the backdrop of a shifting economic and financial landscape. Cross-border trade and equity flows have slowed modestly despite improvements in cross-border foreign direct investment, bond purchases, bank credit and tourism flows.
Progress towards the AEC has been steady but slow. The region needs to work harder on tackling barriers to trade in economically sensitive industries such as agriculture, steel and motor vehicles as well as reducing the non-tariff barriers that are increasingly replacing tariffs as constraints to international trade, the bank says.
Liberalising trade in services and enacting competition policy and protection of intellectual-property rights – all difficult areas of reform – require national rather than regional actions. As such, 2015 will be a milestone rather than an end-point in fully achieving the AEC goals laid out by Asean.
Work needs to continue beyond 2015, particularly to increase labour mobility so that unskilled as well as skilled workers can move across borders more easily.
Greater labour mobility will allow the region to reap the full benefits of all its other reforms.
There is a need to address other impediments to trade including fees, excessive paperwork at customs and trade finance. Tackling these issues is where the main trade benefits lie, the ADB says. Every 1-per-cent saving in trade-related transaction costs is estimated to yield a worldwide benefit of US$43 billion (Bt1.3 trillion).
National actions combined with a multilateral agreement on trade facilitation – expected to be signed at the World Trade Organisation’s ninth Ministerial Conference in Indonesia from December 3-6 – are key to realising these gains.
Regional cooperation can address economic uncertainties and other cross-border challenges such as climate change, health issues and territorial disputes.
This can be achieved notably through greater policy dialogue, stronger regional institutions, better transport links, deeper regional capital markets and financial safety nets.