SME Inclusive Free Trade Policy - Support of Regional ...
Transcript of SME Inclusive Free Trade Policy - Support of Regional ...
SMEInclusiveFreeTradePolicyShandreMThangavelu
JeffreyCheahInstituteforSoutheastAsiaSunwayUniversity
UniversityofAdelaide
StructureofPresentation
⢠Overview⢠ChallengesandOpportunitiesforASEANSMEs⢠SMEs,InclusiveandTrade⢠SMEsandGlobalValueChain⢠PolicyDiscussions
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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:ASEANSuccessfulStorybutalsoRebalancingâ GrowthPotentialisslowingdown(doesnotincludeUS-ChinaTradeWarâ 0.5to1%ofGlobalGrowthtofall)
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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:CambodiaandLaoPDRâ releasinglargeresourcesfortrade
⢠LargeMovementoflaborintheregion:Unskilledlabor
Opportunities
⢠RegionallyintegratedthroughGVCactivities:GVCactivitiesarestrong⢠Largetradingblockâ AEC,RCEP,CPTPP,APEC,FTAPP⢠Pro-Business⢠ASEANConnectivitywithhardandsoftinfrastructure⢠Stableinstitutionsandhumancapitaldevelopment(??)
⢠SeveralChallengesareemerginginAsia:Questionsoneconomicandtradeliberalization⢠Risinginequality⢠RisingWagegapbetweentheskilledandunskilled⢠Middleskillsaredisappearingâ Polarizationofskills⢠Neweconomicsterms:âworkingpoorâ,âmiddle-incometrapâ,outsourcing,GlobalProductionValue-Chain,âdemographicdividendâ⢠Inclusivegrowth:PPP,socialenterpriseandentrepreneurs⢠MovingfromSkillsdevelopmenttoTaskâ importanceoftraining⢠Agingpopulationanddemographicdividend
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NewPolicyChallengesforMicro-foundationsinAsia
SMEsinASEAN(SelectedYears):(a)Importantforemploymentbutweakintradeandinvestments;(b)SMEsaremostlyinServiceSectors
Policychallenge1:InnovationandRegionalIntegration
⢠Impactofagglomerationandfragmentationareoccurringatthesametimeduetoinformationandtelecommunicationtechnologies⢠Agglomerationâ clusteringofkeyactivitiesthatcreateexternalities;closedistanceandtechnologycreatesagglomerationandexternalities(informationtechnologiesâ spacetechnologies)⢠Fragmentationâ breakingdownofkeyactivitiesandlong-distanceandtechnologycreatesfragmentation(telecommunicationtechnologies)⢠Technologyaffectingagglomerationandfragmentationcouldbethesameordifferent⢠Thisaffectspolicydesignandimplementation
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GlobalProductionValueChain:âUnbundlingâ
⢠Since1980s,EastAsiaandASEANareinvolvedinthesecond-stageunbundling⢠SomeASEANcountriesarestillatthesecondstageunbundling⢠TheâthirdâstageunbundlingiscomingandASEANhastodevelopkeypolicyframework
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ThetierstructureofutilizingglobalvaluechainsinASEANanddevelopingEastAsia
Under-developedeconomybeforeindustrialization
Hookupwithglobalvaluechains(the1stunbundling):resource-based/labor-intensiveindustries
Participateinproductionnetworks(the2nd unbundling:Jump-startindustrializationwithmachineryindustries
Formindustrialagglomeration:Acceleratetechnologytransfer/spillover
Createinnovationhub:UrbanamenitiesAttract/nurturehumanresources
Source: ERIA(2015).
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CompetingandComplementaryTechnologies:Informationtechnologies(IT)andCommunicationTechnologies(CT)
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Productivity (Multi-Factor ProductivityGrowth)inASEAN:Declining and lackinnovation âsmallerfirmslessproductivity; important fortradeandcompetitiveness
1.Example:LowRateofReturnstoEducationinLaosandCambodia:âMissingCentreâ HollowingoutâeffectsinEducationsystem,LaoPDRhigherâ evenwitheconomicgrowth
Figure5A:RatetoInvestmentinEducationforCambodia(%):1997-2008
Source:MontenegroandPatrinos,2014
Figure5B:RateofReturnstoInvestmentinEducationinSelectedASEANCountries(%):2000-2008
Source:MontenegroandPatrinos,2014
âMissingCentreâProblem
⢠Thelowrateofreturnsoninvestmentinsecondaryleveleducationandlargeshareoflaborforcewithprimaryschooleducation(laborsupplydecisions)clearlyreflectsindustrialstructuralproblemsandlabormarketmismatch.⢠âMissingCentreâproblemisalsoduetolackofMediumsizedlocalenterprisestolinklargeandsmallindustriesinLaosandCambodiaâlackofentrepreneurship⢠Thisiscriticalissuethegovernmentneedstoaddress
Figure 2: Share of Agriculture, Industry, and Services Sectors to GDP for Selected Asian Countries, 2000â2013
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
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export Import
Figure4:ASEANExportandImportofServices:2005-2011(US$Billion)
2005 2011
RisingServicesTradeinASEAN:Servicesarebecomingtradable
3.!Industrial!agglomera2ons!and!servicesďż˝
â˘âŻ Agglomera2on!for!armâs*length!transac2ons!
â˘âŻ Local!firms!have!opportuni2es!to!have!business!rela2onships!with!mul2na2onals;!technology!transfer!and!process!innova2on.!
â˘âŻ Contribu2on!of!services!â⯠Urban/suburban!transport,!large*scale!port/airport!
â⯠Reduc2on!in!transac2on!costs!â⯠Harmoniza2on/convergence!of!economic!ins2tu2onsďż˝
Technology!transfer!and!process!innova2onďż˝
Evolu2on!of!produc2on!networksďż˝
Source:!ERIA!(2015,!forthcoming).ďż˝
ďż˝
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.!
â˘âŻ 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)!
â˘âŻ By!a\rac2ng/nurturing!intellectuals,!step!up!to!product!innova2on.!
â˘âŻ Contribu2on!of!services!â⯠Everywhere.!â⯠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.ParticipationandPositionaredrivenbyMajorCitiesinaGVCâ ASEANLDCs
PolicyDiscussion1:ImportanceofServicesectorandServicification
⢠ServicestradeandGlobalProductionValueChain:MappingofservicestoGVC(toppriority),servicesGVC(tourism,financialservices,professionalservices,educationalservices,logistics,etc.)⢠Trade,StructuralAdjustmentsintheEconomyandProductivitygrowthâ Shiftingtoservicessector⢠Servicestrade,Employment,incomesandupgradingâ ImportanceofregionalandglobalGVC:servicesandmanufacturinglinkages⢠Distributionofvalueaddedandinclusivegrowthwithemphasisontradeliberalizationâ (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,infragmentedgrowthwewillexperiencegreaterdestructionthencreationsinjobsâ greatercreationofnewtypesofjobsleadingtogreaterdepreciationofhumancapital⢠NeedtodevelopamodelforâLearningforAllâ(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⢠PublicPrivatePartnershipisveryimportantineducationandtrainingâthereturnsaremoretothebusiness⢠Improvingtheskillsoffemalesarecriticalforhighersocialandeconomicreturns
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PolicyDiscussion3:DevelopingSMEsforTrade
⢠TherearegreatopportunitiestodeveloplocalSMEsbypushingthemintoregionalactivitiesâ integrationandbuildingintotheregionalsupplychainmapping⢠OriginalEquipmentManufacturer(OEM)⢠Tier1Supplierâ SupplyingcomponentsdirectlytotheOEM⢠Tier2Supplierâ SupplyingtoTier1supplier⢠Tier3Supplierâ SupplyingtoTier2supplierâmachinescomponents,etc.⢠Tier4Supplierâ basicrawmaterialssuchassteel,glass,etc.tohighertiersuppliers
⢠Example:OEMordersAlternatorâ Tier1Supplier:SupplierofAlternatorwillordercopperwireâ Tier2Supplier:CopperWiresupplierneedcopperâ Tier3Supplier:Supplyofcopper
⢠FinancialInclusion⢠SMESEZsandIncubatorstosupportVentureCapitalFunds
DevelopmentofSMEsintheAgriculturalSector:GVC⢠DevelopmentofAgriculturalsectorandproductivity:⢠DevelopmentofhumancapitalinAgricultureâ AgricultureUniversity,diffusionoftechnologyinagriculture
⢠DevelopmentofservicelinkagesandagriculturalservicesinGVC⢠Developmentofsoftandhardinfrastructurelinkingagriculturetourbanactivities:(a)dryports,(b)warehousingandcoldstorage,(c)marketinformationtofarmers,(d)marketstructure:agriculturalcooperatives
PolicyDiscussion4:InstitutionalReformsâ Policiestoimprovebusinessinvestmentbehaviour⢠Alignmentofindustrialpolicywitheducationpolicyisimportant⢠tosustainandincreasethereturnstoeducation⢠Toreduceanymismatchinthelabourmarketandreducetheskillsgap⢠CoordinatebetweenMinistries⢠Coordinatewithbusiness,unionsandgovernmentâ TripartismandPPP
⢠Informationgap:Needtocollectmoreinformationontrainingandskillseducation
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PolicyDiscussions5:Importanttoaddressbehindborderissuesâ AidforTrade⢠Expansionandstandardizationofprimaryandsecondaryschooleducationtolargerpartoftheeconomy(UrbanandRuralSectors)
⢠Importantofe-learningande-educationaspartofnarrowingthedigitaldivideanddigitaleducation⢠Networkeconomyisimportant⢠Curriculumreformtoemphasizebasicreading,writingandarithmeticskills (Englishlanguageisimportant)â countrieswithcommerciallanguagetendstowellintradeliberalizationsuchasMalaysiaandPhilippines⢠Investmentinconnectivitysuchassoftandhardinfrastructureisimportant
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PolicyDiscussion 5:AidforTradeMatters⢠Industrialandeducationalpoliciesmustcomplementandforwardlooking
⢠Industrialpoliciesdeterminedemandforskills⢠Deriveddemandfromgrowthofsectors⢠IdentifygrowthforSMEs
⢠Educationalpolicies(formaleducationandContinuingeducation(CET))determinesupplyofskillsandhumancapital⢠Laggingandaccumulatedovertime
⢠Skillgapandmismatch⢠DemandforskillsisgreaterthanSupplyofskills⢠Workersdonothavethenecessaryskillstomeettheindustrialdemandforskills
⢠Adjustmenttohighervalue-addedsectorscouldleadtoskillsmismatch
PolicyDiscussion6:TradeandTradeAgreementsareimportant⢠Australia-SingaporeComprehensiveStrategicPartnership(CSP)â settingthestagefornextstageofunbundling⢠Developmentofservicessectors:Greaterliberalizationofservicessectorsintermsofaddressingthekeyinvestmentissuesthathinderservicestradegrowthintermsofnationaltreatmentandmarketaccess.Inparticular,CSPwilladdressthedevelopmentofe-Commerceservices,educationalservices,financialservicesandtelecommunicationservices.⢠Educationalliberalizationhasverypositiveimpactonhumancapitaldevelopmentâ RMITatVietnam,MonashUniversityatMalaysia⢠Movementofpeople:Theabilityforbusinesspersonstomoveacrossbordersisanintegralfeatureofmodernbusiness⢠FrameworkforMutualRecognitionofSkillsandEducation
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⢠Identifyandaddresstheâbehind-border-issuessuchas⢠institutionalalignmentsandcooperationinR&Dandtechnologies,⢠commercializingtechnologies,⢠entrepreneurialactivitiesandSMEactivitiesintermsofâbusinesslaunchingâpads,
⢠institutionalalignmentsintechnologypartnership:e-commerceregulations,institutionalalignmentsintelecommunicationsservices,
⢠greatertransparencyforinvestments,⢠bestpracticesfordatamanagementsystems⢠Regulationandinformationanddatasharingplatforms,⢠nationaltreatmentofinvestments,⢠governmentprocurements,e-procurements,⢠paperlesstrading
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TradeandTradeAgreementsareimportant
Challenges:TradeandDomesticcapacityandlinkages⢠ImpactonMSMEs⢠SMEsandMSMEsutilizationrateofFTAsareverylow(TambunanandChandra,2014)⢠Lackofinformationandtechnicalknow-howonhowtousetheFTAs⢠Notabletonetworkwithforeignexporters⢠Highcompliancecost⢠OverlappingFTAstoestablishROOs⢠ComplexROOs
PolicyDiscussion 7:CitiesandIncreasing theEconomic Space
⢠AstheCitiesmatures,theconstraintsofCity-Statehinderfurthergrowthoftheeconomy⢠NeedtoincreasetheeconomicspaceofCity-Statebyincreasingtheurbanamenitiesandconnectednesstoregionalandglobalactivities⢠TheASEANandEastAsianwillbeimportantandidentifyneweconomicspaceintheregionâ ASEANConnectivitywillgiveabigpushforSMEdevelopmentintheregion⢠Moreflexiblemovementofpeople⢠EfficientCitiesareimportantfornextstageofservicesdevelopment
PolicyDiscussions:Summary⢠Neednewindustrialpolicytounbundlenewactivitiesandtask⢠Needtomanagedisruptionsandcreationsâ howtorecognizetechnologiesasdisruptionsandcreations⢠Needtomanageservicelinkagesandagglomerationandfragmentation⢠Needtomanagehumancapitaltoundertakedifferenttask:needlaborpolicyforfutureskillsandtounderstandfutureoccupations;mismatchproblems⢠NeednewSMEpolicies⢠Informationasâoilâoftheneweconomyandalsotoregulateinformation⢠Needtounderstandthebehaviorofproducersandconsumersandthisisadifficultpolicyquestion⢠Neednewsoftandhardinfrastructureforconnectivity:needpeopletopeopleconnectivity
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