Mr. Arjun Goswami Regional Economic Integration and Inclusive

ASEAN Economic Integration
and Inclusive Growth
12 November 2014
By Arjun Goswami
([email protected])
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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