Download East Asia Integration and ASEAN Economic Integration: Implication

East Asia Integration and ASEAN
Economic Integration:
Implication for Cambodian Economy
Presenter: Ngov Penghuy
Date: Feb. 13, 2015
Venue: RULE
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East Asia Integration
East Asia:
The definition of East Asia differs depending on the context.
ASEAN plus 6 (China, Korea, Japan, India, Australia, New Zealand)
are often used in the context of economic integration today.
Economic integration:
Unification of economic policies between different states
through the partial or full abolition of tariff and non-tariff
restrictions on trade taking place among them prior to their
integration.
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The tool of economic integration is
Free Trade Agreements (FTAs)
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Some key Concepts of FTA
• Free Trade Agreements (FTAs) is a legally binding agreement
between two or more countries to reduce or eliminate
barriers to trade, and facilitate the cross border movement of
goods, services and people between the territories of the
Parties.
• Three basic pillars of liberalization are included in almost all
FTAs: trade in goods, trade in services, and investment. Other
areas may include protection of property rights, competition
policy, government procurement and dispute settlement.
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Economic rationales of FTA:
• It increases trade, production and specialization;
• It improves efficiency (e.g. due to specialization, economy
of scale, increasing competition);
• It attract more investments and foster technology and
knowledge transfer;
• It enhance productivity;
• It stimulate economic growth
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FTAs in Asia: State of Play
•
Asia is a relatively late comer in FTAs; but over the last decade, the number of FTAs
has increase dramatically creating the so-called ‘Asian noodle bowl’;
•
Today global FTA involve Asia more than any other region. As of January 2013,
there are 257 FTAs; of which 190 (or about 73 percent) are bilateral
Figure 1: FTAs by scope—Asia (cumulative)
Figure 2: FTAs by status—Asia, 2013
300
250
Proposed,
19.5%
200
Signed and
in effect,
43.3%
150
100
Under
negotiation
, 28.7%
0
1975
1980
1982
1983
1989
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
50
Plurilateral
Bilateral
Signed but
not yet in
effect, 8.4%
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Salient Features of FTAs in Asia (1)
• The rise in FTAs has been driven by richer, large economies.
ASEAN+6 countries—the 10 ASEAN members plus Australia,
the People’s Republic of China (PRC), India, Japan, the
Republic of Korea, and New Zealand— has engagement ratio
of 70 percent of the total FTAs in Asia;
• Countries are opting for simple bilateral FTA configurations
rather than the more complex plurilateral ones as they may
be easier to negotiate;
• There is high degree of extra-regional FTAs with majority of
them involving countries outside region;
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Salient Features of FTAs in Asia (2)
• Many agreements frequently go beyond the WTO
regulatory framework to include provisions on a host of
issues (trade facilitation, investment, government
procurement, competition, intellectual property,
environment and labor among others);
• Majority of FTAs have adopted a combination of the
three ROOs rather than applying a single rule.
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Some Key Factors contributing the rise of FTAs
(1)
• Greater economic linkage and interdependence influenced by
market-driven forces of cross-border trade, FDI, and finance;
• A defensive response to the proliferation of trading blocs and
FTAs in other major regions i.e. EU, NAFTA;
• Uncertainty over progress in global trade talks under the WTO
framework. All countries in region have shifted its trade policy
to a three-track approach based on global (WTO-based) cum
trans-regional (APEC-based), regional (ASEAN+3 or ASEAN+6),
and bilateral liberalization;
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Some Key Factors contributing the rise
of FTAs (2)
• The need to improve productivity in the face of the
heightened competitive pressure from the economic
emergence of the People’s Republic of China (PRC) and
India, in particular with respect to economies of scale
through market integration;
• The promotion of “ beyond the border ” structural
reforms as part a competitive strategy (e.g. investment
liberalization, promotion of domestic competition,
harmonization of standards, and upgrading of technology
development)
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Some Key Plurilateral FTAs
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Some Key Plurilateral FTAs
i.
ASEAN Economic Community (AEC)
– Adopted by the ASEAN leaders at the 2003 with agreed
timeframe 2015
– AEC unifies and extends various key existing frameworks
such as ASEAN Free Trade Area (AFTA), the ASEAN
Framework Agreement on Services (AFAS), and the
ASEAN Investment Area (AIA)
– The AEC is characterised by four pillars: (1) single market
and production base; (2) highly competitive economic
region; (3) a region of equitable economic development;
and (4) a region that is fully integrated with the global
economy;
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Some Key Plurilateral FTAs (2)
i.
ASEAN Plus One Frameworks
–
ASEAN has concluded and completed the ratification of five FTAs
with Australia and New Zealand, China, India, Japan, and Republic of
Korea, making ASEAN a de facto FTA hub
–
All the ASEAN+1 FTAs extend beyond trade liberalization in goods to
include liberalization of trade in services and investment, trade and
investment facilitation, government procurement, intellectual
property rights, competition policy, and wide-ranging economic and
technical cooperation.
–
The bad side of it, though, is that the existence of several ASEAN+1
FTAs create a ‘noodle-bowl’ situation which potentially hampers the
firms’ usage of preferential systems
–
The level of tariff liberalization is not sufficiently high; Rules of
Origin (ROOs) are not liberal and uniform enough; and services
liberalization have only small “WTO Plus” components in most FTAs
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Some Key Plurilateral FTAs (3)
iii.
Regional Comprehensive Economic Partnership (RCEP)
–
–
–
RCEP was launched by ASEAN+6 leaders during the 21st ASEAN
Summit at Phnom Penh in November 2012
The creation of RCEP was also driven by intention to ease the
‘noodle-bowl’ situation; ); potential increase in participating in
production chains via ‘accumulation’; and a political economy
argument that ASEAN needs to up its stakes in mega FTA in
order to compete with other agreements such as the TransPacific Partnership (TPP) and the China-Japan-Korea FTA so
that it can maintain its “centrality”
Negotiation starts in 2013 and aims at concluding in 2015
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Some Key Plurilateral FTAs (4)
iv.
Tran-Pacific Partnership (TPP)
–
–
–
–
TPP is originally known as the Trans-Pacific Strategic Economic
Partnership signed in 2005 by Brunei, Chile, New Zealand, and
Singapore and now extended to twelve countries including Australia,
Canada, Malaysia, Mexico, Peru, the United States, Vietnam and Japan.
The modality of TPP is “WTO-plus” covering wide range of areas
including trade liberalization in goods, services, investment, intellectual
property rights (IPRs), environmental protection, labour, financial
services, technical barriers to trade and other regulatory issues
TPP is seen as a US-led process to advance its economic and strategic
interest in Asia including counter-balance China’s influence in the region
Given that China is an active member in East Asia-wide FTAs especially
RCEP, TPP is seen as a direct competition.
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TPP
Country/Region
Status
Date
Brunei
Original Signatory
2005 June
Chile
Original Signatory
2005 June
New Zealand
Original Signatory
2005 June
Singapore
Original Signatory
2005 June
USA
Original Signatory
2008 February
Australia
Original Signatory
2008 November
Peru
Original Signatory
2008 November
Vietnam
Original Signatory
2008 November
Malaysia
Original Signatory
2010 October
Mexico
Negotiating
2012 October
Canada
Original Signatory
2012 October
Japan
Original Signatory
2013 March
South Korea
Announced Interest
2013 November
China
Announced Interest
2013 September
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Opportunities arising from FTAs
•
Promote physical connectivity, bring greater access to regional markets, resources
and investments, and involve in regional production network;
•
Enhance exports, diversification and competitiveness;
•
Accelerate domestic reforms, improve business and investment climate, all
contributing to accelerating productivity, employment generation and economic
growth;
•
Simulation results in Itakura (2013) :
–
–
–
–
–
FTA all region-wide FTAs have positive impact on Cambodia’s economy;
AEC is expected to increase real GDP by 4.4 percentage points from baseline scenario;
Bigger region-wide FTAs like ASEAN+3 and ASEAN+6 have larger impacts leading to increase in real
GDP by 6.42 percent and 6.44 percent, respectively;
Among ASEAN+1 FTAs, ASEAN-China FTA has the largest impact on Cambodia’s economy increasing
real GDP by 8.3 percentage point;
The results also suggests that economic gains arise from increase in volume of international trade
due to lower barrier in trade in goods and services, and increase in investment from both domestic
and foreign investors
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How much Cambodia harness the
opportunities arising from FTAs
• Cambodia has not fully reaped the benefits of regional
integration
– Intra-regional trade volume is meagre compared to other
countries in the region;
– Out of 60 surveyed firms, 20 percent of them apply for
certificate of origin under ATIGA scheme, 16.7 percent
under ASEAN China FTA, and 3.3 percent under ASEAN
Korea FTA;
– The vast majority of business perceives that lack of
information as the main reason for not using FTAs.
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Challenges facing Cambodia
– ASEAN could lose its ‘relevance and centrality’  it could
make Cambodia less relevant in a fast-growing and
dynamic regional economic integration;
– The complex set of FTAs is likely to cause greater
coordination problems for public institutions which can
lead to less effective management of regional cooperation;
– For business, there is a lack of awareness of the benefits
and opportunities of region-wide FTAs and of regional
integration. Also, the complex set of rules and procedures
create burden and confusion for businesses.
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SEZ in Cambodia
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Some key policy priorities to maximize the
benefits from FTAs (1)
• Synchronize regional cooperation frameworks
–
–
–
Investment in long-term institutional capacity
development
Ensure effective coordination and communication among
public institutions and between public and private
institutions
Raise awareness among private sector about FTAs and
latter motivate them to actively engage in regional
cooperation processes.
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Some key policy priorities to maximize
the benefits from FTAs (2)
• Effectively address trade policy constraints through
–
–
–
–
Improve logistics efficiency
Simplify customs procedures
Improve export market information services
Improve standards compliance
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Some key policy priorities to maximize
the benefits from FTAs (3)
• Make fundamental policies right
–
–
–
–
Maintain sound macroeconomic management
Improve investment climate
Invest in human capital
Invest in hard and soft infrastructure
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Conclusion
• Global experiences indicate that no country can sustain high growth
without integrating into the world economy;
• Albeit regional cooperation is a necessary condition for Cambodia’s
growth trajectory, it is not sufficient. Integration into the regional and
world economy can strengthen a smart growth strategy, but they cannot
ensure its success;
• Other elements that loosen binding constraints to growth need to be in
place, including sound macroeconomic management, an enabling business
and investment climate, competent institutions, and thoughtful
investment in human capital and infrastructure, and effective trade policy.
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ASEAN Economic
Integration
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Historical Evolution of ASEAN
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ASEAN 2010 Baseline Data
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ASEAN GDP Growth
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ASEAN Aspiration
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ASEAN Economies: Indicators of Vulnerabilities
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Questions
1. How ASEAN integration affect Cambodian
economy?
2. How East Asia economic integration affect
Cambodia economy?
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