Most economies from the Asian and the Pacific regions maintained six per cent growth in 2018 (other than the high-growth nations). Intraregional cooperation between the Asian nations is moving toward a positive trend despite the threat of a US-China Trade War. Asia's international trade growth was higher than the global international trade trend during the same period. Asia's international trade grew by 7.1 per cent while global trade volume grew by 4.7 per cent in 2018. Interregional trade between the Asian countries also increased to 57.8 per cent in 2017 from 55.9 per cent in 2010-2015. Asia's participation in the global value chain has grown more than previous years. Asia's Inward Foreign Direct Investment (FDI) volume has slightly declined to $ 517.5 billion in 2017 from $519.9 billion in 2016. But Asia's share in global inwards FDI rose to 32.2 per cent in 2017 from 27.8 per cent in 2016. A positive news is that, intraregional FDI in Asia has risen from $ 254.7 billion in 2016 to $260 billion in 2017, which is 50.2 per cent of Asian FDI. Greenfield investments generated some 667,000 jobs in 2017; mainly in India, the PRC, Vietnam, the Philippines, and Singaporean real estate, software and information technology (IT) services, and electronic components, among others. Almost half of jobs created through Greenfield investments in Asia originated within the region led by investments from Japan (28.0 per cent), China (15.0 per cent), and South Korea (14.2 per cent).
On the other hand, Asian outward FDI reached 34.1 per cent of global outwards FDI volume in 2017. Asian countries like Japan, China, and Hong Kong were among the world's top 10 global investors. Japan was second globally, investing $160.4 billion (30.6 per cent) invested in Asia. Emerging Asian investors boosted outward FDI in 2017, for example, India doubling its outward investments in sectors such as electronic components and rubber, and Thailand increasing by more than 50 per cent in building and construction material and chemicals, among others. Asian equity markets are increasingly attracting more investment from the US and European investors now than before. Asian tourist spots are also attracting more visitors from intraregional countries as well as rest of the world.
The above developments became a reality because Asian countries are now more integrated than ever before. The Central Asia Regional Economic Cooperation (CAREC) programme is a partnership of 11 countries namely, Afghanistan, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, the People's Republic of China, Tajikistan, Turkmenistan, and Uzbekistan. It is supported by six multilateral institutions and promotes regional economic integration through cooperation, leading to accelerated economic growth and poverty reduction. CAREC, guided by its overarching vision of "Good Neighbors, Good Partners, and Good Prospects," has proved to be an effective and honest broker as it continues to weave its network of transport and economic corridors across Eurasia. CAREC Vision 2030 was inspired by aspirations to connect people, policies, and projects for shared and sustainable development. The strategy aims to create an open and inclusive regional cooperation platform and prioritises five operational clusters for cooperation: (i) economic and financial stability; (ii) trade, tourism, and economic corridors; (iii) infrastructure and connectivity; (iv) agriculture and water; and (v) human development. Other priorities of CAREC initiatives are (a) developing cross-border agricultural value chains by establishing wholesale markets, collection centres, creating logistical infrastructure and providing export certification; (b) preparing reforms to ease border-crossing procedures; and (c) developing regional tourism and marketing.
The second important initiative of the East Asian nations is Southeast Asia: Greater Mekong Sub-region (GMS) Programme. Cambodia, Yunnan Province and the Guangxi Zhuang Autonomous Region in the PRC, the Lao People's Democratic Republic (Lao PDR), Myanmar, Thailand, and Vietnam make up the Greater Mekong Sub-region (GMS) programme. The GMS is an economic partnership guided by a strategy of enhancing connectivity, improving competitiveness, and fostering a sense of community. After 25 years of cooperation, the GMS has managed to create an interconnected and competitive sub-region with generally robust economic growth. Through the end of 2017, GMS governments with multilateral and bilateral development partners approved 87 investment projects amounting to $20.8 billion. ADB contributed $8.2 billion, while GMS governments contributed $5.5 billion and other development partners contributed $7.1 billion. Since its inception, GMS has built, upgraded, or improved over 10,000 km of roads and 500 km of railway lines; built or added 3,000 km of power transmission and distribution lines; and installed 1,570 gigawatt-hours of power generation facilities. The GMS programme takes on high priority sub-regional projects under both hard and soft infrastructures. One strategic priority is economic corridor development, an approach adopted in 1998. Economic corridors are designed to not only help participants improve physical connectivity, facilitate the movement of people, goods, and vehicles across borders, but also to develop border and corridor towns, and promote investment and enterprise development to ensure wider economic benefits to communities around the cross-border transport infrastructure. The economic corridors link GMS capitals and major urban centres with one another and with maritime gateways.
The newer and poor performing initiative in South Asia namely South Asia Sub-regional Economic Cooperation (SASEC) programme is an alternative platform to SAARC. Bangladesh, Bhutan, India, and Nepal established SASEC to strengthen sub-regional economic cooperation and address development challenges such as low intraregional trade and persistent poverty. Maldives and Sri Lanka joined in 2014 followed by Myanmar in 2017, expanding opportunities to improve cross-border connectivity, facilitate intraregional trade, and strengthen regional economic cooperation. ADB is the lead financier, secretariat, and development partner, financing investments and technical assistance. SASEC added financing commitments for seven projects valued at $2.5 billion, including $1.3 billion in ADB financing. This has led to investments in transport, trade facilitation, energy, and economic corridor development since 2001 to $10.72 billion. SASEC has endorsed a vision of "SASEC Powering Asia in the 21st Century" and also fine-tuned its operational plan from 2016 till 2025.
There are a number of regional free trade agreements like, SAFTA, BIMSTEC, ASEAN FTA, APEC, EAEC etc. and a long list of bilateral free trade agreements between the Asian nations. In total there are 764 regional, bilateral or multilateral free trade agreements. Most of these agreements are in effect or supposed to go into effect shortly. All these regional and cross regional initiatives have created platforms where the leader's of member nations can sit and negotiate despite clashes in South Asia. Countries like Singapore, India, Indonesia, Japan, Thailand, New Zealand and Pakistan are negotiating more FTAs with existing and potential trade partners. As multilateral negotiations under the umbrella of World Trade Organisation (WTO) are taking time to conclude, implemented bilateral and regional free trade agreements are offering quicker and deeper integration among the member countries. As a result bilateral and regional free trade agreements are becoming popular day by day.
Isolated countries like Bangladesh will be further isolated in terms of global economic integration if they fail to negotiate win-win economic ties with existing trade partners in near future. This economic isolation can also isolate them from the global supply chain/value chain. Furthermore the nation's cost of doing international business can become costlier, making them less competitive in the global business arena. Therefore countries like Bangladesh, which are likely to graduate from the LDC status, should be more conscious regarding their economic partnership within the region as well as outside the region. They should be more active at being part of regional physical infrastructure development projects and be linked with the sub-regional infrastructure initiatives in order to become a part of the sub-regional value chain.
The Bangladesh government should also be more enthusiastic about tying up with major trading partners in order to counter the erosion effect following graduation of the country from the LDC status from 2024 onwards.
Md Joynal Abdin is Executive Director, DCCI Business Institute (DBI). Views expressed here are not from the organisation that the author represents.
mdjoynal@gmail.com