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Enhancing Trade and Financial Integration in Asia through Public-Private Alliances

This presentation discusses the critical role of public-private alliances (PPAs) in fostering trade and financial integration in Asia. Highlighting achievements and future challenges, it outlines significant growth in intraregional trade, yet notes financial integration remains lagging. The seminar reviews the noodle bowl effect of preferential trade agreements (PTAs) and emphasizes the need for stronger government-business partnerships. Recommendations include promoting private sector participation in trade policy, enhancing financial resources, and establishing mechanisms for effective collaboration to boost regional development.

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Enhancing Trade and Financial Integration in Asia through Public-Private Alliances

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Presentation Transcript

  1. Seminar on Inter-regional Cooperation ESCAP Presentation 8 June 2007 Santiago

  2. Trade & Financial Integration in Asia: Role of Public-Private Alliances Kim Hak-Su UN Under-Secretary-General & Executive Secretary, UNESCAP

  3. Overview • Background • Trade integration: achievements & future challenges • Financial integration & PPA linkages • Way forward

  4. Background: Asymmetric integration • Success in economic integration: asymmetric in Asia • Intraregional trade: grown substantially • Financial integration: lagging behind

  5. Trade Increases • ESCAP members account for about 30% of world trade • Half of their exports: intra-regional • Imports: more from the region than rest of the world (RoW); however RoW imports continue to grow • Large trade surplus

  6. ESCAP exports to & imports from the region & ROW

  7. PTA Proliferation • 89 PTAs: Currently implemented • More: under negotiation & consideration • Most agreements are bilateral, only 11 functioning RTAs • Business sector’s rising participation: critical for consolidating & rationalizing Asian regionalism

  8. Noodle Bowl

  9. Strong Regional Growth & FDI • Around 17% outflows from the region • Around 20% of world total FDI inflows to the region • Top destinations: China, Viet Nam & India

  10. FDI Inflows (billions US$)

  11. Rising Regional TNC Investments • TNCs lead FDI: • TNCs employed some • 6 million workers, with sales of $2 trillion (2005) • Asia: HQs of 77 of world’s top 100 TNCs • Need continuous sound public sector policies to facilitate FDI

  12. PPAs in Trade Facilitation • National Trade/Transport Facilitation Committees • Single-window facilities • Trade financing mechanisms

  13. Trade Integration: Challenges & PPA Role Lingering Doha round A solution: Stronger government-business partnership

  14. Trade Integration: Challenges & PPA Role Loss of PTA effectiveness (noodle bowl effect) A solution: Inclusive trade policy making on PTAs

  15. Trade Integration: Challenges & PPA Role Lesser share of trade-related assistance to the region A solution: More private sector participation in trade capacity building & advocacy

  16. Financial Integration • Large trade surplus, high forex build-up (over $ 3 trillion) • Resources not utilized for development • Financial integration weakest in Asia • May adversely affect region’s growth momentum • PPAs could help reverse the trend

  17. Forex Reserves, 2006

  18. Financial Integration: Little Progress ESCAP region initiatives: - Chiang Mai Initiative - Asian Bond Fund initiatives - Financial market surveillance - Financial liberalization efforts

  19. Financial Integration: Little Progress Constraints: Tight - Capital controls: - Foreign bank entry: Restricted Limited flexibility - Exchange rate regimes: - Trade in financial services: Limited

  20. PPAs to Strengthen Financial Integration • Enough financial resources, but need facilitation mechanism (resource mobilization): - Set up Asian investment bank - Set up regional special purpose vehicle - Expand Asian Development Bank - Expand Asian Bond Fund - Reinvigorate sub-regional banks & funds

  21. Public sector: • Provide regulatory, institutional & regional cooperation mechanisms • Help private sector grow Way forward: Build on Strengths • Private sector: Efficiency & innovation • PPAs: Combine strengths for trade integration & financial integration

  22. Thank you www.unescap.org

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