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BALI – Recent global shocks and geopolitical trade protectionism could disrupt growth in ASEAN, an Asian Development Bank (ADB) report says.
It calls for the region to strengthen its positions in global value chains to bolster resilience against new challenges, including pandemics, geopolitical instability and climate change.
The report titled ASEAN and Global Value Chains (GVC): Locking in Resilience and Sustainability was released on Mar. 30 on the sidelines of the Southeast Asia Development Symposium (SEADS) in Bali, Indonesia.
The report surveys the challenges and opportunities facing global value chains in Southeast Asia as countries seek to build greater resilience and promote sustainable and green development.
ADB senior economist James Villafuerte said the Russian war in Ukraine and the US-China trade war had hampered supply chains across the globe, forcing many companies to relocate to more friendly places.
According to the report, the stakes are high for ASEAN economies as the recent global shocks and geopolitical trade protectionism could disrupt growth in ASEAN and elsewhere.
The report explores the sizable policy impact and benefits of deepening Asia’s trade cooperation and expanding it to include other regions.
The report also found that global value chains proved more resilient to the impacts of COVID-19 than expected, even as firms had to adjust to the disruption, given their dependence on only a few suppliers for essential inputs and goods.
As such, the region needs to build stronger resilience in its global value chain segments while expanding trade, investment and regional integration, it said.
ADB senior economist James Villafuerte (R) and Bank Southeast Asia Department director-general Ramesh Subramaniam (C) speak in the press conference on March 30. Photo: Torn Chanritheara
The competitive advantage of employing low-skilled labor is diminishing as new technology continues to upgrade global value chains, the report said. It was imperative that the region creates a critical mass of workers equipped with new technology and technological skills.
The report also underlined the need for ASEAN economies to go green as policies promoting decarbonization also strengthen ASEAN’s global value chains. The countries in the region should accelerate trade digitalization and promote climate-smart trade, green transport infrastructure and carbon pricing.
“As ASEAN countries continue their recovery from COVID-19, we must ensure that economic revitalization happens in a greener and more sustainable way,” ADB president Masatsugu Asakawa said.
Bank Southeast Asia Department director-general Ramesh Subramaniam said the global value chain is instrumental in reducing poverty, addressing the inequality and playing an important role in the transition to net zero.