Asian Economic Integration Monitor - October 2013

The Asian Economic Integration Monitor is a semiannual review of Asia's regional economic cooperation and integration. It covers the 48 regional members of the Asian Development Bank. The October 2013 issue includes two theme chapters: i) Toward an ASEAN Economic Community - and Beyond; and ii) World Trade Facilitation Negotiations - Asian Perspectives.

Highlights

• The gradual, plodding economic recovery in the G3 - the eurozone, Japan, and the United States - has begun to strengthen.
• Despite the slightly more positive external environment, developing Asia's growth will likely slow slightly this year before picking up next year.
• The economic outlook for developing Asia is subject to three major risks: (i) increased volatility in global and regional financial markets - in particular due to uncertainties over monetary and fiscal policies in advanced economies; (ii) a more pronounced slowdown in major regional economies than expected - such as the PRC, India, or Indonesia - which will affect other economies within the region; and (iii) a disruption in the G3 recovery.
• Short-term responses are needed to bolster the foundations of financial stability and avoid deterioration in market confidence; and the recent financial turmoil is a timely reminder of the need for continued structural reform.
• Five years after the global financial crisis, the world economy remains in transition; policy responses in advanced economies have been unpredictable, adding to market uncertainty, fueling volatility, and threatening economic stability.
• Market uncertainty increases vulnerability to shocks, particularly in emerging economies; thus, strengthening regional dialogue, cooperation, and integration is critical to sustain growth.
• While there is mixed progress in regional cooperation and integration in Asia - uneven across subregions - most subregions show growing intra-Asian links in trade, finance, and tourism.
• Although national measures continue to protect domestic markets from external competition, regional dialogue and cooperation is increasingly important to craft regional solutions to the key challenges facing the region.

Theme Chapter I: Toward an ASEAN Economic Community - and Beyond

• ASEAN seeks to create an ASEAN Economic Community (AEC) by 31 December 2015; although it has come a long way toward meeting this milestone, it is likely to fall short of its own targets by the deadline.
• Overall, the AEC Scorecard shows that since 2008 ASEAN has made slow but steady progress (68% by 2011) in reaching AEC targets.
• Even if reform proceeds apace, the real test for the AEC will lie in the years beyond - in trade facilitation, liberalization of services, investment, labor mobility, competition policy, regional trade agreements, and compliance, among others.

Theme Chapter II: World Trade Facilitation Negotiations - Asian Perspectives

• Trade facilitation is important to ensure equal access to the potential benefits of trade and regional integration.
• The open framework would bring efficiency gains for non-members' future negotiations and augment resources through special and differential treatment for more challenged states.
• Over the long run, preferential regional trade facilitation measures - as with free trade agreements in general - should be multilateralized on a de facto basis to reduce the administrative burden.