Reducing EA Development Gap: Strategic Issues

1. Reducing EA Development Gap: Strategic Issues Nattapong Thongpakde National Institute of Development Administration

2. Theme of the presentation • Does globalization and economic integration reduce income gap? • How can EA community reduce the development Gap among members? • What are the imperative strategic domestic policy measures?

3. Does globalization and economic integration reduce income gap? • What do empirical facts tell us about economic convergence? • Why can’t some developing countries get full advantage of globalization? • What are the characteristics of EA?

4. Empirical Evidence: Trade and Development • The studies generally show that country's liberalization of trade can provide growth especially in EA. • Growth can reduce poverty. • However, it may not reduce domestic and international equity. • Benefits from liberalization depend on initial conditions and linkage to sectors resulting from globalization

5. Obstacles to obtaining full benefits from globalization • Lack of high levels of skills, technology leading to low productivity. • Poor infrastructure. • Lack of financial sector that can provide capital at reasonable interest rates. • Being small players; limited range of exports; few linkages between productive sectors. • Enclave-type growth pattern—certain sectors do reasonably well, but leave the rest behind.

6. What are the characteristics of EA? • It is apparent that the disparity among ASEAN+3 countries are high. • The initial conditions are diverse. Less -developed countries face many obstacles preventing utmost gains from integration. • There is no evidence that trade integration alone will reduce development gap. • Special measures and efforts are required to fillthe development gap.

7. How can EA community reduce the Development Gap among members? • Trade measures • Reducing trade restrictions especially on Non-tariff barriers (NTBs). NTBs limit the market access to developed countries and this not only hurts less-developed countries but also middle -income countries. • Enhancing tourism cooperation. • Technical and financial assistance • It is obvious that initial conditions for CLMV are obstacles for reaping benefits from integration. Target assistances on infrastructure development and human capital development are needed. • Energy projects especially hydro electricity are strategically important.

8. Migration policy • Labor movement benefits both sending and receiving countries. It can reduce income gap with remittances. • Strategic issues are to coordinate and formalize the movement across borders in the region. It is imperative to include immigration in the agenda of EA cooperation.

9. Strategic Domestic Issues. • Reducing gap is a means to increasingsocial welfare or happiness. • Developing countries need to build up their capability to obtain benefits from integration. • Significant investment in education and infrastructure, macroeconomic stability, generally flexible domestic labor markets, efficient regulatory institutions, and good governance. • Do not weaken agricultural sector development. • Balanced and quality growth strategy must be pursued.

10. Conclusions • For regional harmony and long term growth, reducing development gaps is desirable. However, trade integration alone will not reduce inequality. • We need to initiate measures to get it done especially in the case of EA, where the disparity is evident. • Reducing trade barriers especially NTBs, promoting infrastructure and human capital development, implementing energy project development, and encouraging freer movement of people are strategic issues.

11. These measures need political wills and sincere efforts to convert promises into practical actions • All countries have to adjust themselves to gain from trade. • Thus, it is imperative to implement appropriate domestic policies for capability building, avoid unbalanced growth, advance human development,and guard against negative impacts of globalization.