Mr. Arjun Goswami Regional Economic Integration and Inclusive

ASEAN Economic Integration
and Inclusive Growth
12 November 2014
By Arjun Goswami
Director, Office of Regional Economic Integration
Chair, RCI CoP
Vice Presidency for Knowledge Management & Sustainable Development
Asian Development Bank
Presentation at “Ensuring Growth that Matters:
ASEAN Integration and Inclusive Growth”
40th APS Anniversary Lecture Forum
Outline of the Presentation
 Centrality of regional cooperation and integration (RCI) for
 ASEAN’s role in regional economic integration
 Regional economic integration and labor productivity
 Regional cooperation and labor productivity
 Responding to productivity challenges: Importance of
second-generation RCI
Centrality of RCI for ADB
• ADB Charter - Support for RCI
• RCI Strategy adopted in 2006
• Strategy 2020: At least 30% of ADB’s
operations to support RCI by 2020
• Mid-Term Review of Strategy 2020
– RCI a niche area of strength for ADB
– Next generation of RCI - responding to challenges
of raising productivity, reducing inequalities,
mitigating vulnerabilities
ASEAN’s Role in
Regional Economic Integration (1)
• ASEAN’s regional leadership in integration
• Degree of ASEAN integration with Asia: 48.9%
in FDI (2012), 68.3% in Trade (Jan-May 2014)
• ASEAN Economic Community by 2015
• Four pillars of AEC: (1) single market and
production base, (2) competitive economic
region, (3) equitable economic development,
and (4) integration into the global economy
ASEAN’s Role in
Regional Economic Integration (2)
• AEC Blueprint: Core elements and priority actions
• AEC Scorecard: ASEAN achieved 76.5% of AEC targets due by
March 2013, but work needs to be done
Source: Milo, Melanie. 2013.
Linkage between Greater Mekong
Subregion Economic Cooperation
and ASEAN Economic Community.
Presentation at the Mekong
Forum 2013: Towards More
Inclusive and Equitable Growth in
the Greater Mekong Subregion.
11-12 July 2013, Khon Kaen.
ASEAN’s Role in
Regional Economic Integration (3)
Progress and Challenges in Pillar 1
• Goods trade liberalization: >70% of intra-ASEAN trade now
• Goods trade facilitation: some progress on NSWs and selfcertification, but challenge of harder reforms
• Trade logistics: wide variance in performance
• Services trade liberalization: progress on AFAS, financial
• Skilled labor mobility: MRAs for 8 professions, but challenges
in implementation
• Capital flows: Several initiatives, e.g. ASEAN Exchanges, ABMI,
Regional Economic Integration
and Labor Productivity (1)
• Labor productivity
– Pre-AFC: Major driver of growth in ASEAN and Asia as
a whole
– Post-AFC: Wide economic diversity
• Slower labor productivity growth in some
countries due to:
Cyclical factors
Labor market rigidities
Productivity differentials across sectors
More challenging external environment
Regional Economic Integration
and Labor Productivity (2)
• In theory, regional economic integration can
address emerging productivity challenges by
– Greater competition and efficiency
– FDI, technology acquisition, and knowledge
– Labor and capital reallocation
– Labor mobility
Regional Economic Integration
and Labor Productivity (3)
• For the Philippines, fully implementing AEC
trade measures can:
– Expand the country’s GDP by 7.5% by 2025
– Create 3.1 million additional jobs over baseline
(6% increase in total employment)
– Reverse deindustrialization and premature shift to
services: greater share of agriculture and industry
in employment
Regional Cooperation
and Labor Productivity
• To boost productivity, economic integration
through AEC is necessary, but not sufficient
• National and regional actions are important:
– Skills development for structural reallocation
– Infrastructure investment to address supply-side
– Addressing possible inequality from regional
economic integration (BIMP-EAGA; regional
financing mechanisms, including disaster risk
Responding to productivity challenges:
Importance of second-generation RCI
• MTR action plan
• Requires new set of RCI instruments building
on existing ones
• Cross-border connectivity still important, but
– Special economic zones
– Multi-modal transport and trade logistics
– New financing mechanisms

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