sme inclusive free trade policy - support of regional
TRANSCRIPT
SMEInclusiveFreeTradePolicyShandreMThangavelu
JeffreyCheahInstituteforSoutheastAsiaSunwayUniversity
UniversityofAdelaide
StructureofPresentation
• Overview• ChallengesandOpportunitiesforASEANSMEs• SMEs,InclusiveandTrade• SMEsandGlobalValueChain• PolicyDiscussions
3
Designated TTRs on AHN Non Designated TTRs on AHN
Designated TTRs on AHN Non Designated TTRs on AHN
ASEAN: Production Power House of AsiaConnectivity and opportunities for SMEs
Introduction:ASEANSuccessfulStorybutalsoRebalancing– GrowthPotentialisslowingdown(doesnotincludeUS-ChinaTradeWar– 0.5to1%ofGlobalGrowthtofall)
4
PotentialGrowthofGDPperCapitalforSelectedASIANCountriesto2015-2050 2008-2014 2015-2020Cambodia 5.8 4.3China 8.3 7.7HongKong 2.3 1.2India 5.6 5.5Indonesia 4.5 4.4Korea 2.9 2.3Philippines 5.5 5.0Singapore 2.5 1.9Taiwan 3.0 1.9Thailand 2.9 2.4Vietnam 4.9 4.0 Source:ADBEconomicOutlook2016
Opportunities• ASEANisalargemarketwithgrowingmiddle-income:Populationof625million(EU507million)• GDP(currentprices)aroundUS$2.4trillion(averagepast5 years)• FDIisaroundUS$122.4billion(averagepast5years)• MerchandiseTradeisaroundUS$2.5trillion(averagepast5years)• Growthrateisaround5.1%(averagepast5years)(CLMVisaround7.0%)• Largeuntappedresourcesintheregion:GreaterMekongRegion• EmergingASEANcountries:Vietnam,Philippines,Indonesia• EmergingASEANLDCs:CambodiaandLaoPDR– releasinglargeresourcesfortrade
• LargeMovementoflaborintheregion:Unskilledlabor
Opportunities
• RegionallyintegratedthroughGVCactivities:GVCactivitiesarestrong• Largetradingblock– AEC,RCEP,CPTPP,APEC,FTAPP• Pro-Business• ASEANConnectivitywithhardandsoftinfrastructure• Stableinstitutionsandhumancapitaldevelopment(??)
• SeveralChallengesareemerginginAsia:Questionsoneconomicandtradeliberalization• Risinginequality• RisingWagegapbetweentheskilledandunskilled• Middleskillsaredisappearing– Polarizationofskills• Neweconomicsterms:“workingpoor”,“middle-incometrap”,outsourcing,GlobalProductionValue-Chain,“demographicdividend”• Inclusivegrowth:PPP,socialenterpriseandentrepreneurs• MovingfromSkillsdevelopmenttoTask– importanceoftraining• Agingpopulationanddemographicdividend
7
NewPolicyChallengesforMicro-foundationsinAsia
SMEsinASEAN(SelectedYears):(a)Importantforemploymentbutweakintradeandinvestments;(b)SMEsaremostlyinServiceSectors
Policychallenge1:InnovationandRegionalIntegration
• Impactofagglomerationandfragmentationareoccurringatthesametimeduetoinformationandtelecommunicationtechnologies• Agglomeration– clusteringofkeyactivitiesthatcreateexternalities;closedistanceandtechnologycreatesagglomerationandexternalities(informationtechnologies– spacetechnologies)• Fragmentation– breakingdownofkeyactivitiesandlong-distanceandtechnologycreatesfragmentation(telecommunicationtechnologies)• Technologyaffectingagglomerationandfragmentationcouldbethesameordifferent• Thisaffectspolicydesignandimplementation
9
GlobalProductionValueChain:“Unbundling”
• Since1980s,EastAsiaandASEANareinvolvedinthesecond-stageunbundling• SomeASEANcountriesarestillatthesecondstageunbundling• The“third”stageunbundlingiscomingandASEANhastodevelopkeypolicyframework
10
ThetierstructureofutilizingglobalvaluechainsinASEANanddevelopingEastAsia
Under-developedeconomybeforeindustrialization
Hookupwithglobalvaluechains(the1stunbundling):resource-based/labor-intensiveindustries
Participateinproductionnetworks(the2nd unbundling:Jump-startindustrializationwithmachineryindustries
Formindustrialagglomeration:Acceleratetechnologytransfer/spillover
Createinnovationhub:UrbanamenitiesAttract/nurturehumanresources
Source: ERIA(2015).
11
CompetingandComplementaryTechnologies:Informationtechnologies(IT)andCommunicationTechnologies(CT)
TheUniversity ofAdelaide 15
Productivity (Multi-Factor ProductivityGrowth)inASEAN:Declining and lackinnovation –smallerfirmslessproductivity; important fortradeandcompetitiveness
1.Example:LowRateofReturnstoEducationinLaosandCambodia:“MissingCentre– Hollowingout”effectsinEducationsystem,LaoPDRhigher– evenwitheconomicgrowth
Figure5A:RatetoInvestmentinEducationforCambodia(%):1997-2008
Source:MontenegroandPatrinos,2014
Figure5B:RateofReturnstoInvestmentinEducationinSelectedASEANCountries(%):2000-2008
Source:MontenegroandPatrinos,2014
“MissingCentre”Problem
• Thelowrateofreturnsoninvestmentinsecondaryleveleducationandlargeshareoflaborforcewithprimaryschooleducation(laborsupplydecisions)clearlyreflectsindustrialstructuralproblemsandlabormarketmismatch.• “MissingCentre”problemisalsoduetolackofMediumsizedlocalenterprisestolinklargeandsmallindustriesinLaosandCambodia–lackofentrepreneurship• Thisiscriticalissuethegovernmentneedstoaddress
Figure 2: Share of Agriculture, Industry, and Services Sectors to GDP for Selected Asian Countries, 2000–2013
Agriculture Industry Services 2000 2013 2000 2013 2000 2013
China 15.1 10.0 45.9 43.9 39.0 46.1 Hong Kong 0.1 0.1 12.6 7.0 87.3 93.0 Korea 4.4 2.3 38.1 38.6 57.5 59.1 India 23.4 18.4 26.2 24.7 50.5 57.0 Brunei 1.0 0.7 63.7 68.2 35.3 31.0 Cambodia 37.9 33.8 23.0 25.7 39.1 40.5 Indonesia 15.6 14.4 45.9 45.7 38.5 39.9 Laos 48.5 30.0 19.1 30.0 32.4 40.0 Malaysia 8.3 9.4 46.8 41.0 44.9 49.6 Myanmar 57.2 36.9 9.7 26.5 33.1 36.7 The Philippines 14.0 11.2 34.5 31.1 51.6 57.7 Singapore 0.1 0.0 34.8 25.1 65.1 74.9 Thailand 8.5 10.6 36.8 40.1 54.7 49.3 Viet Nam 24.5 18.4 36.7 38.3 38.7 43.3
Source: Asian Development Bank Statistics Database.
Observation 2: Rising Share of Services Sector in Asia
19
0
50
100
150
200
250
300
export Import
Figure4:ASEANExportandImportofServices:2005-2011(US$Billion)
2005 2011
RisingServicesTradeinASEAN:Servicesarebecomingtradable
3.!Industrial!agglomera2ons!and!services�
• Agglomera2on!for!arm’s*length!transac2ons!
• Local!firms!have!opportuni2es!to!have!business!rela2onships!with!mul2na2onals;!technology!transfer!and!process!innova2on.!
• Contribu2on!of!services!– Urban/suburban!transport,!large*scale!port/airport!
– Reduc2on!in!transac2on!costs!– Harmoniza2on/convergence!of!economic!ins2tu2ons�
Technology!transfer!and!process!innova2on�
Evolu2on!of!produc2on!networks�
Source:!ERIA!(2015,!forthcoming).�
�
4.!Urban!ameni2es!and!services
High*Skilled!Employment!Share
Source:!World!Economic!Forum!(2015).!Originally!ILOSTAT!data!from!2014!or!latest!available!as!of!March!2015.!
• To!be!fully!advanced!economies,!urban!ameni2es!are!needed.!(i)!the!presence!of!a!rich!variety!of!services!and!consumer!goods!(ii)!aesthe2cs!and!physical!sehng!(iii)!good!public!services!(iv)!speed!Glaeser,!Kolko,!and!Saiz!(2001)!
• By!a\rac2ng/nurturing!intellectuals,!step!up!to!product!innova2on.!
• Contribu2on!of!services!– Everywhere.!– Possibly!engine!of!growth.!
Product!innova2on
Source:!ERIA!(2015,!forthcoming).
Source:!ERIA!(2015,!forthcoming).
ByNazareth College - Flickr,CCBY2.0,https://commons.wikimedia.o rg/w/index.php?curid =25843794
Observation7.ParticipationandPositionaredrivenbyMajorCitiesinaGVC– ASEANLDCs
PolicyDiscussion1:ImportanceofServicesectorandServicification
• ServicestradeandGlobalProductionValueChain:MappingofservicestoGVC(toppriority),servicesGVC(tourism,financialservices,professionalservices,educationalservices,logistics,etc.)• Trade,StructuralAdjustmentsintheEconomyandProductivitygrowth– Shiftingtoservicessector• Servicestrade,Employment,incomesandupgrading– ImportanceofregionalandglobalGVC:servicesandmanufacturinglinkages• Distributionofvalueaddedandinclusivegrowthwithemphasisontradeliberalization– (a)importanceofhumancapital,(b)institutions,(c)SMEs,(d)hardandsoftinfrastructure• Adjustmenttoglobalisation
Policydiscussion 2:HumanCapitalDevelopment istheKeyandcomplements SMEdevelopment• HumanCapitaldevelopmentisimportantandhavetogenderneutral• Twocomponents:(1)Educationand(2)TrainingandRe-tooling• Educationistheflowofhumancapitalanditaddstothestock• Trainingandre-toolingareimportanttomaintainthestock• However,infragmentedgrowthwewillexperiencegreaterdestructionthencreationsinjobs– greatercreationofnewtypesofjobsleadingtogreaterdepreciationofhumancapital• Needtodevelopamodelfor“LearningforAll”(seethewebsiteforhttp://www.skillsfuture.sg/)• Portfolioofhumancapitalwillallowworkerstoundertakevalue-addedtasks,whichisincreasinglybecomingimportantforGlobalValue-ChainActivities• Thisallowsthemtodiversitytheirskillsandridethefragmentedgrowthbetter
Universityeducationisnotattechnicalandengineering forCambodia,Laos,Myanmar,VietnamandalsoIndonesia(ADBStatisticalDatabase)
Figure 16: Majors of University Graduates
PolicyDiscussion: Skills,GVCandAidforTrade
• Skillsandvocationaltrainingisimportantandshouldstartearlytoemphasizelife-longlearning• Skillsandvocationtrainingasalternativetoformaleducation• Investintheinfrastructureforskillsandvocationaltraining• PublicPrivatePartnershipisveryimportantineducationandtraining–thereturnsaremoretothebusiness• Improvingtheskillsoffemalesarecriticalforhighersocialandeconomicreturns
TheUniversity ofAdelaide 31
PolicyDiscussion3:DevelopingSMEsforTrade
• TherearegreatopportunitiestodeveloplocalSMEsbypushingthemintoregionalactivities– integrationandbuildingintotheregionalsupplychainmapping• OriginalEquipmentManufacturer(OEM)• Tier1Supplier– SupplyingcomponentsdirectlytotheOEM• Tier2Supplier– SupplyingtoTier1supplier• Tier3Supplier– SupplyingtoTier2supplier–machinescomponents,etc.• Tier4Supplier– basicrawmaterialssuchassteel,glass,etc.tohighertiersuppliers
• Example:OEMordersAlternator– Tier1Supplier:SupplierofAlternatorwillordercopperwire– Tier2Supplier:CopperWiresupplierneedcopper– Tier3Supplier:Supplyofcopper
• FinancialInclusion• SMESEZsandIncubatorstosupportVentureCapitalFunds
DevelopmentofSMEsintheAgriculturalSector:GVC• DevelopmentofAgriculturalsectorandproductivity:• DevelopmentofhumancapitalinAgriculture– AgricultureUniversity,diffusionoftechnologyinagriculture
• DevelopmentofservicelinkagesandagriculturalservicesinGVC• Developmentofsoftandhardinfrastructurelinkingagriculturetourbanactivities:(a)dryports,(b)warehousingandcoldstorage,(c)marketinformationtofarmers,(d)marketstructure:agriculturalcooperatives
PolicyDiscussion4:InstitutionalReforms– Policiestoimprovebusinessinvestmentbehaviour• Alignmentofindustrialpolicywitheducationpolicyisimportant• tosustainandincreasethereturnstoeducation• Toreduceanymismatchinthelabourmarketandreducetheskillsgap• CoordinatebetweenMinistries• Coordinatewithbusiness,unionsandgovernment– TripartismandPPP
• Informationgap:Needtocollectmoreinformationontrainingandskillseducation
TheUniversity ofAdelaide 34
PolicyDiscussions5:Importanttoaddressbehindborderissues– AidforTrade• Expansionandstandardizationofprimaryandsecondaryschooleducationtolargerpartoftheeconomy(UrbanandRuralSectors)
• Importantofe-learningande-educationaspartofnarrowingthedigitaldivideanddigitaleducation• Networkeconomyisimportant• Curriculumreformtoemphasizebasicreading,writingandarithmeticskills (Englishlanguageisimportant)– countrieswithcommerciallanguagetendstowellintradeliberalizationsuchasMalaysiaandPhilippines• Investmentinconnectivitysuchassoftandhardinfrastructureisimportant
TheUniversity ofAdelaide 35
PolicyDiscussion 5:AidforTradeMatters• Industrialandeducationalpoliciesmustcomplementandforwardlooking
• Industrialpoliciesdeterminedemandforskills• Deriveddemandfromgrowthofsectors• IdentifygrowthforSMEs
• Educationalpolicies(formaleducationandContinuingeducation(CET))determinesupplyofskillsandhumancapital• Laggingandaccumulatedovertime
• Skillgapandmismatch• DemandforskillsisgreaterthanSupplyofskills• Workersdonothavethenecessaryskillstomeettheindustrialdemandforskills
• Adjustmenttohighervalue-addedsectorscouldleadtoskillsmismatch
PolicyDiscussion6:TradeandTradeAgreementsareimportant• Australia-SingaporeComprehensiveStrategicPartnership(CSP)– settingthestagefornextstageofunbundling• Developmentofservicessectors:Greaterliberalizationofservicessectorsintermsofaddressingthekeyinvestmentissuesthathinderservicestradegrowthintermsofnationaltreatmentandmarketaccess.Inparticular,CSPwilladdressthedevelopmentofe-Commerceservices,educationalservices,financialservicesandtelecommunicationservices.• Educationalliberalizationhasverypositiveimpactonhumancapitaldevelopment– RMITatVietnam,MonashUniversityatMalaysia• Movementofpeople:Theabilityforbusinesspersonstomoveacrossbordersisanintegralfeatureofmodernbusiness• FrameworkforMutualRecognitionofSkillsandEducation
TheUniversity ofAdelaide 37
• Identifyandaddressthe“behind-border-issuessuchas• institutionalalignmentsandcooperationinR&Dandtechnologies,• commercializingtechnologies,• entrepreneurialactivitiesandSMEactivitiesintermsof“businesslaunching”pads,
• institutionalalignmentsintechnologypartnership:e-commerceregulations,institutionalalignmentsintelecommunicationsservices,
• greatertransparencyforinvestments,• bestpracticesfordatamanagementsystems• Regulationandinformationanddatasharingplatforms,• nationaltreatmentofinvestments,• governmentprocurements,e-procurements,• paperlesstrading
38
TradeandTradeAgreementsareimportant
Challenges:TradeandDomesticcapacityandlinkages• ImpactonMSMEs• SMEsandMSMEsutilizationrateofFTAsareverylow(TambunanandChandra,2014)• Lackofinformationandtechnicalknow-howonhowtousetheFTAs• Notabletonetworkwithforeignexporters• Highcompliancecost• OverlappingFTAstoestablishROOs• ComplexROOs
PolicyDiscussion 7:CitiesandIncreasing theEconomic Space
• AstheCitiesmatures,theconstraintsofCity-Statehinderfurthergrowthoftheeconomy• NeedtoincreasetheeconomicspaceofCity-Statebyincreasingtheurbanamenitiesandconnectednesstoregionalandglobalactivities• TheASEANandEastAsianwillbeimportantandidentifyneweconomicspaceintheregion– ASEANConnectivitywillgiveabigpushforSMEdevelopmentintheregion• Moreflexiblemovementofpeople• EfficientCitiesareimportantfornextstageofservicesdevelopment
PolicyDiscussions:Summary• Neednewindustrialpolicytounbundlenewactivitiesandtask• Needtomanagedisruptionsandcreations– howtorecognizetechnologiesasdisruptionsandcreations• Needtomanageservicelinkagesandagglomerationandfragmentation• Needtomanagehumancapitaltoundertakedifferenttask:needlaborpolicyforfutureskillsandtounderstandfutureoccupations;mismatchproblems• NeednewSMEpolicies• Informationas“oil”oftheneweconomyandalsotoregulateinformation• Needtounderstandthebehaviorofproducersandconsumersandthisisadifficultpolicyquestion• Neednewsoftandhardinfrastructureforconnectivity:needpeopletopeopleconnectivity
41