Download Regional Economic Integration: a Perspective Offering for Myanmar

Regional Economic Integration:
a Perspective Offering for Myanmar
Sjamsu Rahardja
Senior Economist
World Bank Group
ESCAP Conference on Regional Cooperation and Integration
Yangon, May 9th 2016
Asia is a dynamic region..
• Region where growth and poverty reduction is sustained
• Region where economic integration is driven by regionalism
• Factory Asia continues to reshape and offer opportunities
At a glance: Sustained growth drove progress in poverty reduction
Progress in reducing extreme poverty - Poverty
headcount ratio at $1.25 a day (PPP) (% of population)
Growth of Asian economies - Average GDP per capita
growth, 1990-2013
8.1
8.0
6.8
6.0
2008-2013
7.0
7.4
5.0
5.0
PERCENT
5.0
4.0
3.3
3.0
2.0
3.1
2.6
2.3
2.8
2.1
1.8 1.8
1.4 1.2
1.0
1.4
-0.1
-0.8
0.0
-1.0
1990-1999
2000-2007
2008-2013
100
90
80
70
60
50
40
30
20
10
0
0
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia
Sub-Saharan Africa
Source: World Bank WDI database; Calculations based on the World Bank WDI database
20
40
60
80
100
1990-1999
45 degrees
East Asia & Pacific
South Asia
Other countries
At a glance: East Asia is relatively well-integrated
Share of imports and exports in parts and components
on total trade2, 1990-2013
Trade openness 1: average Trade-to-GDP ratio, 19902013
85.4
90
85.0
77.8
400000
76.4
73.0
70.3
70
65.3
60
54.9
Percent
50.8
50
300000
48.0
43.3
37.5
40
50.7
45.4
40.2
56.3
53.4
43.9
30
US$ millions
80
FDI flows3
200000
100000
0
20
1990
1995
2000
2005
2010
10
0
1990-1999
2000-2007
2008-2013
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia
Sub-Saharan Africa
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia
Sub-Saharan Africa
Source: Calculations based on the World Bank WDI, COMTRADE and UNCTAD FDI databases
1. Trade openness is defined as the ratio of imports plus exports to GDP 2. Parts and components trade is defined according t o the BEC classification. 3. The lines
represent the total value of inward FDIs in US$ at current prices and current exchange rates in millions
At a glance: a key feature is GVC participation (import for export)
GVC Integration1
100
90
80
Percent
70
60
50
40
30
20
10
0
Foreign value added share of gross exports
Domestic value added in exports of intermediate products as a share of total gross exports
Source: Calculations based on Calculations based on the OECD TiVA dataset and the WTO Regional Trade Agreements Information System (RTA-IS)
1. Data refers to 2011. The values for other developed, other developing and Latin America are simple averages of the shares of the countries
in the group. Other developed includes: Australia, Canada, Iceland, Israel, New Zealand, Norway and Switzerland; Other developing includes:
Russia, Saudi Arabia, South Africa, Tunisia and Turkey. Latin America includes: Argentina, Brazil, Chile, Colombia, Costa Rica and Mexico.
2. The size of the nodes is proportional to the number of PTA partners
Trade and FDI are strongly linked in the era of “Trade in Tasks”:
technology and innovation
are the key channels leading to sustained growth
Efficient trade logistics are
key, but the challenge for
developing countries is not
just to integrate with the
global economy, but to do
so in a way that allows them
to learn, absorb new
technological capabilities,
and upgrade their
productive structures.
Myanmar has geographical comparative advantage
• Shares border with countries that make up 40% of global population,
% of global GDP
• Rising consumer classes and restructuring of industrial employment
• Global value chain offers Myanmar to accelerate industrialization (no
need to build the whole chain).
7
6
5
4
Adjusted openness
8
9
And there is plenty of room for Myanmar to trade more
4.0
6.0
8.0
ln GDP per capita, PPP dollars
Other countries
Myanmar
10.0
ASEAN
Fitted values
12.0
Trading partners can be further diversified
Share of imports
1991-93
ASEAN
Share of exports
2011-13
1991-93
2011-13
Share of trade
1991-93
2011-13
46.4
35.7
36.3
12.9
42.3
28.8
Singapore
27.5
7.6
12.5
1.6
21.2
5.9
Thailand
9.6
20.0
20.1
4.4
14.5
15.4
Malaysia
7.4
3.8
2.4
3.6
5.1
3.7
Indonesia
2.2
3.1
1.2
1.2
1.7
2.5
China
26.0
40.5
22.9
32.4
24.3
39.0
Japan
9.8
6.7
6.7
11.8
8.4
8.1
Rep. of Korea
3.6
6.4
1.1
6.5
2.4
6.4
Australia & NZ
0.2
0.8
0.7
0.3
0.4
0.6
India
1.2
4.0
12.6
23.5
6.4
9.7
EU15
8.7
1.9
5.7
4.5
7.3
2.7
United States
1.3
0.5
5.0
0.2
3.0
0.4
Highly concentrated export needs attention
While gas is important source of revenue and FDI, high dependence on gas exposes
Myanmar to risks of macroeconomic instability (fiscal shock, chronic currency overvaluation)
40
30
20
10
Concentration
index: 21%
0
10
Concentration
index: 13.8%
% in total exports
20
1992 to 1993
2011 to 2013
0
% in total exports
30
Share of country and product pair in
total export (%)
1
1811
No. of country and product pairs
1
6818
No. of country and product pairs
Challenges in business environment and constraints in freight logistics
are still hampering Myanmar’s export diversification
High trade costs reduces incentives for private sector to exploit
new trade opportunities
3
Cambodia
Myanmar
1.5
2
2.5
LPI score
3.5
4
World Bank 2014 LPI score
4
6
8
Log income per capita
* Controlling for size of the country
10
12
Regional economic integration can help Myanmar further its reform
agenda
• Regional economic integration via regional trade agreement (RTA) is not so much
about reducing tariff. Attention has shitted to:
o Trade facilitation and non-tariff measures are big elephants in the room
o Opening up services is not only opening up to FDI but also reforming regulations
• Recent RTAs goes beyond market access and covers “behind the border” issues that
requires domestic reforms by developing countries:
o Competition policy and role of state-owned enterprises
o Investment policies and investor’s protection
o Intellectual property rights
o Government procurement
ASEAN and AEC play an important role in
Regional Integration Schemes
Under the AEC agenda, intra-ASEAN Preferential Tariffs
have been successfully reduced
Intra-ASEAN Preferential Tariffs, 1993-2012
Average CEPT Rates, 1993-2012
14
12
10
Percent
ASEAN-5
8
6
ASEAN-10
4
CLMV
2
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: ASEC database
…but growth in intra-ASEAN trade flows
seems to be slowed down by NTM proliferation
Tariffs, Non-tariff measures (NTMs), and Migration
Measures Implemented by ASEAN
60
pending liberalizing
pending discriminatory
50
green & out of force
40
amber & out of force
red & out of force
30
green & in force
amber & in force
20
red & in force
10
0
Brunei
Cambodia
Darussalam
Indonesia
Lao
Malaysia
Myanmar
Philippines
Source: Global Trade Alert database. Data accessed June 2012.
Singapore
Thailand
Viet Nam
Regional economic integration can help Myanmar further its reform
agenda (continued)
• It makes sense for Myanmar to prioritize engagement with ASEAN-led RTAs
to ensure that its development interests are represented and infrastructure
and institutional capacities are gradually developed
• Recent ASEAN RTAs (like RCEP) has “cooperation” component that can
support developing countries to design and implement domestic policy
reforms
• For example, harmonizing procedures and regulations cannot be done
overnight
• “Mega” RTA like TPP can divert trade and investment from Myanmar to other
countries and erode preferences given to Myanmar in developed country
markets
What Myanmar may also want to expect
• Integration is not only between capital cities but also between areas near land
borders
o How can we take advantage of that for promoting inclusive development and
peace?
• Regional economic integration provides economies of scale that would otherwise too
small for Myanmar businesses to enter/expand
o For certain profit margin and risk, larger market can help more firms to enter
businesses
o But increased competition can cause industrial restructuring, where good firms
will survive and bad/inefficient businesses will disappear (bankrupt or purchased)
o How can we help link SMEs with global value chain?
Thoughtful sequencing of reform can be important
• With the right policy framework, Myanmar can formulate complementary policies to
minimize impact of that process
o Improve workers skills to meet demand, maintain efficiency of labor market and
strengthen social protection
o Improve the functioning of financial market to meet demand from firms and
households
o Identify parts of global value chain which Myanmar already has revealed or
“latent” comparative advantage and design public-private support to further
develop those activities (e.g. agri-business, manufacturing, tourism)
Thank You
Kyei Zu Tin Ba De