Turning Trade Opportunities and Challenges into Trade: Implications for ASEAN Countries

Transcription

1 Turning Trade Opportunities and Challenges into Trade: Implications for ASEAN Countries Dr. Ponciano Intal, Jr The OECD-WB Global Forum on Globalization, Comparative Advantage and Trade Policy Chengdu, China (14-15 October 2010)

2 Outline I. ASEAN s Trade and Economic Performance and Evolving Trade Linkages and Shifts in Comparative Advantage in East Asia II. III. Turning Trade Opportunities and Trade Challenges into Trade: Some Key Policy Imperatives for ASEAN Countries Concluding Remarks

3 I. ASEAN s Trade and Economic Performance and Evolving Trade Linkages and Shifts in Comparative Advantage in East Asia

4 ASEAN REGION IN INTERNATIONAL PERSPECTIVE Share of GDP (%) Share of FDI Inflow (%) Share of Total Import (%) Share of Total Export (%)

5 The ASEAN Countries in International Perspective (Table 2) 1990s ASEAN & APTA had the two highest average growth rates in 1990s ASEAN top FDI recipient in early 1990s 2000s Slower growth performance due to the: FDI flows < 10% of FDI going to the developing world Share of international trade declined 2010: Q1 Q3 Indications of better investment flows, export, and growth performances in ASEAN countries Further challenges to sustain more robust investment, export, and growth performances

6 The Evolving Trade Linkages in East Asia (1) China s share of total exports of ASEAN countries & China s share to total ASEAN imports has increased tremendously ( ) Overall, ASEAN experienced trade deficit : ASEAN- India trade accelerated. Growth of ASEAN export to India exceeds import, therefore in overall ASEAN experienced trade surplus with India Japan s share as ASEAN export market declined during 1990s but moderated during 2000s. Decline of share of Japan as source of ASEAN s import was modest in 1990s but accelerated in 2000s. ASEAN s trade with ROK is bigger than trade with India. Korea s share in ASEAN s overall international trade is moderately rising secularly over time.

7 Losing export market share in agricultural and manufactures World s manufacturing base in the commodity groups Widest and most balanced portfolio of commodity groups Gain export competitiveness in agriculturebased, low and semi-skilled labor intensity manufactures Generalized reduction in global shares of key exports Heavy concentration on garment and footwear Lost competitiveness in textiles, garments and footwares More competitive in highly skilled labor intensive industries Strong competitiveness in natural resourcebased industries, textile, garments, footwears and furniture

8 Changing Comparative Advantage in East Asia: Challenges & Adjustments China emerged as global export powerhouse. Increased global export share in most commodity groups. Both Malaysia and Philippines lost global market share, esp. HS 85. Philippines: apparent generalized loss of international competitiveness. Decline in real wages as adjustment tool, starting to recover Singapore s global share holds steady despite high wages and increased share in HS 85, other tech intensive products; largest number of products gained RCA (gross and net) during 2000s; second largest number of products with RCA after Thailand. Thailand: largest number of sectors with revealed comparative advantage but largest number of net loss in RCA during 2000s. Indonesia: strong in natural resources. Third largest number of products with RCA but largest number of net loss in RCA. Vietnam: gained global share; second highest net gain in number of products with RCA. Cambodia: gaining global shares in HS 61 (garments) and HS 64 (footwear) Successful exporters/adjusters have better investment record

9 Matrix of Revealed Comparative Advantage (RCA) Index and Country Share (CS) in ASEAN Member States: (4 Digit HS Code*) Cambodia Indonesia Malaysia Philippines Singapore Thailand Vietnam RCA > Addition (A) Deletion (D) RCA (+) CS (+) RCA (+) CS (-) RCA (-) CS (+) RCA (-) CS (-) Source: Author's Calculation. Note: *) Selected HS Code from: HS ; HS ; HS ; HS ; HS ; HS ; HS HS ; HS ; and HS Total number of commodity group is 278. These products were chosen based on the category of Top 10 (ten) export commodities in ASEAN. RCA = Revealed Comparative Advantage; CS = Country Share Addition (A) = Country gained RCA Index during the period; Deletion (D) = Country lost RCA Index during the period.

10 CAN ASEAN SEIZE THE OPPORTUNITIES? Emergence of China and India Opportunities

11 II. Turning Trade Opportunities and Trade Challenges into Trade: Some Key Policy Imperatives for ASEAN Countries

12 Opportunity for ASEAN Blueprint / ASEAN Connectivity East Asia is in the throes of a major economic transformation. Major redirection of regional production networks toward China as the hub in the region China s real wages can be expected to spike up while the growth of China s middle class would mean more solid growth in domestic consumption and imports of tradable services (mainly tourism) A more open, integrated and connected ASEAN countries is better to respond both to the challenges and the opportunities of the emergent China and emerging India Realization of AEC Blueprint and ASEAN Connectivity Master Plan

13 ASEAN ECONOMIC COMMUNITY BLUEPRINT Trade, Services & Investment Liberalization and Facilitation Standards & Conformance, MRAs, Competition Policy Transport, Infrastructure & Logistics Free flow of Goods, Services, Investment & Skilled Labor Freer Flow of Capital Single Market & Production Base Equitable Economic Development Reduced Poverty & Socio-Economic Disparities

14 Physical Connectivity Challenges Existing infrastructure need to be upgrade New infrastructure need to be constructed Regulatory framework need to be harmonized Technological innovation need to be nurtured Strategies Establish integrated and seamless regional connectivity through multimodal transport system, enhanced ICT infrastructure and energy security

15 People to People Connectivity Challenges Narrow the development gaps; Lack of awareness, collaboration, exchange and outreach programme; Limitations on people mobility Strategies ASEAN Community Building programme; Relaxation of visa restrictions for intra-asean travel; Development of MRAs for skilled labour

16 Challenges Strategies Institutional Connectivity - Impediments to movement of vehicles, goods and people across borders - Inconsistent applications of Rules of Origin for preferential tariffs - High transaction costs due to non-tariff measures - Restrictions and impediments to inflow of investments - Easing flow of goods and services through the elimination of barriers to trade, harmonization of both Rules of Origin, and Standards and Conformity assessments procedures - Reducing the cost of moving goods and services through improved transport and trade facilitation including the operationalization of National and ASEAN Single Window and transport facilitation framework agreements

17 INVESTMENT LIBERALISATION Market Access Market Access Cambodia, Singapore National Treatment Screening & Approval Requirement National Treatment Thailand, Singapore Foreign Participation in Board of Directors Movement of Investors Performance Requirement Overall Singapore, Philippines, Cambodia Source: Urata & Ando (2010)

18 INVESTMENT FACILITATION Ease of Doing Business Singapore Investor Servicing & Facilitation Investment Promotion & Facilitation Strategy Malaysia Investment Promotion Agency Image Building & Promotion Investor Linkages & Policy Consistency Philippines, Thailand

19 EASE OF DOING BUSINESS ASEAN Vs APEC Timor Leste, Cambodia, India, Philippines, Laos, Russia, Indonesia Vietnam, Papua New Guinea, Peru, China, Brunei, Mexico, Chinese Taipei, Chile, South Korea Thailand, Mongolia, Malaysia, Japan, Australia Canada, United States, Hong Kong, New Zealand, Singapore Note: Scale 0-1 where 1 is the highest score Source: World Bank (2010), Author s Calculation

20 Investor Servicing and Facilitation Speed of Processing Alright to Quick Alright Slow to Alright Mainly Slow : Singapore and Malaysia : Philippines, Thailand and Vietnam : Indonesia : Cambodia, Lao PDR and Myanmar Key Common Investor Concerns / Problems Too much red tape / long and complex procedures / long time Lack of transparency / corruption / unofficial payments Local permit process from local governments / unnecessary regulations of local governments Lack of coordination among government agencies (Note: Virtually no investor processing concern in Singapore)

21 Transparency Coordination Liberalization IPA KEY RECOMMENDATIONS INVESTMENT LIBERALISATION & FACILITATION Streamline process and expedite approval process National & local government agencies, investors Allow greater foreign equity participation Strengthen, reorganize and capacitate

22 Trade, Transport and Logistics: Key Challenges Customs and import clearance fast in Singapore but slower and varies widely among other ASEAN countries with poor ports infrastructure and maritime services in CLMV plus Indonesia and Philippines Poor and weak infrastructure, esp. in CLMV and large swaths of Indonesia and Philippines Congestion in ports or lack of adequately equipped alternative ports, esp. in CMV, Indonesia and Philippines Substantial incidence of informal solicitation and payment along trucking routes in many ASEAN countries Low quality of domestic logistics providers Lack of coordination among government agencies

23 KEY RECOMMENDATIONS: TRADE FACILITATION National Regional Pragmatic Approach Customs Reform and Modernization Technical, legal, institutional and infrastructure preparations for National Single Window Infrastructure Upgrade Strengthen the Capacity of Implementation Agencies Harmonization and coordination of technical and infrastructurerelated issues for ASEAN Single Window Outreach to Key Stakeholders Implement ASEAN/National Single Window at the earliest opportunities

24 KEY RECOMMENDATIONS: TRANSPORT & LOGISTICS National Regional Review Cabotage Policy (e.g., Malaysia Perspective) Ratify ASEAN Transport Facilitation Agreements Improve Road, Highway, Port Infrastructure Enhance Logistics Personnel Competencies Ratify ASEAN Agreements Toward Single Aviation Market Strengthen Government Agencies Coordination Liberalize Logistics & Transport Sectors Accelerate the Development of ASEAN Single Shipping Market

25 III. Concluding Remarks

26 Concluding Remarks (1) ASEAN countries are at the center of the world s primary growth corridor at present: i.e China/Korea ASEAN India corridor which offers tremendous trade opportunities for the ASEAN countries The trade challenges lie in that dynamic China and (to far less extent) India pose competitiveness challenges for ASEAN countries in third country markets as well as in their own domestic markets The challenge for ASEAN countries is how to provide the policy and institutional environment that would enhance complementation and competition as well as adaptability and productivity of each ASEAN country vis-à-vis China and India as well as with the rest of the world

27 Concluding Remarks (2) Investment liberalization and facilitation, as well as transport, logistics and trade facilitation are areas that particularly important for ASEAN countries to improve their investment attractiveness and become more internationally competitive. Improving investment and trade facilitation entails closer inter-agency coordination with clearer delineation of responsibility, simplified and fewer processes, and more extensive use of information technology and other equipment to expedite approval and permit processes. Improving transport and logistics involve investments in ports, airports, roads, etc., infrastructure and equipment as well as regulatory climate that encourages the private sector or government sector firms to be more productive and competitive

28 Concluding Remarks (3) Given its promising future, it is apparent for investments of ASEAN countries to improve infrastructures and logistics systems, strengthen institutions, liberalize further ASEAN economies, and refine regulatory regimes to turn the trade (and investment) opportunities and challenges to trade (and investment and eventually redound to better economic outcomes individually and as a region.

29 The End. Economic Research Institute for ASEAN and East Asia