The Asia-Pacific region remains the most dynamic pole of the global economy, but growth in trade and investment flows is yet to return to its levels of strength prior to the global financial crisis, a new United Nations report said.
But the report adds that growth in regional trade is expected to accelerate to 7 percent next year, barring unforeseen global macroeconomic crises.
According to the 2014 Asia-Pacific Trade and Investment Report (APTIR), a recurrent publication prepared by the Trade and Investment Division of the United Nations Economic and Social Commission for Asia and the Pacific (Unescap): “The regional trade growth weakened in 2013, and in the first half of 2014, and although growth in 2015 is expected to increase to 7 percent, ongoing uncertainties in global macroeconomic prospects mean this is far from assured.”
For the Philippines, the report noted strong growth in merchandise exports and foreign direct investment inflows (FDI) in 2013.
“Merchandise exports grew by 8.8 percent in 2013. Similarly, services exports grew by 6.7 percent. This was higher than the Asia-Pacific total of 2.1 percent growth in merchandise exports and 4.9 percent growth in services exports,” it said.
“Merchandise imports contracted by 0.4 percent, whereas services imports grew by 5 percent. Despite the strong growth of exports, the Philippines continues to run a trade deficit. The total trade deficit in 2013 was $8.3 billion in 2013.”
The report said that in 2013, the Philippines experienced a sharp expansion in FDI inflows, with an increase of 20 percent to $3.8 billion. “This continues the strong growth notable since 2011. This growth in FDI inflows compares favorably with the regional total of 6.6 percent. By contrast, FDI outflows fell by 12.7 percent to $3.6 billion in 2013.”
The largest single source of FDI in the Philippines was the United States, which accounted for 27 percent of total greenfield FDI inflows, followed by Japan with 17 percent, the report said.
In terms of outward investment, companies from the Philippines invest mainly in China and Gabon, with 23 percent and 19 percent of outward greenfield FDI going to those destinations, respectively.
The report noted that compared to the regional average, the Philippines has a relatively open trade regime, with average MFN (most favored nation) bound and applied tariffs, tariffs applied on imports among WTO members, at 25.7 percent and 6.2 percent, which are lower than the Asia-Pacific average.
It said the effectively applied average tariff rate of 4.1 percent, which also reflects preferential tariff rates where available, is slightly below the regional average of 7.2 percent.
The report noted that the Philippines has nine trade agreements in force, which is above the regional average of 7.2. Sixty-three percent of its total exports are to PTA partners, while the average figure for the Asia-Pacific is 32 percent. For imports, 72 percent are from PTA partners compared with a regional average of 45 percent.
The 2014 edition of APTIR provides information on and independent analyses of trends and developments in: (a) intra- and inter-regional trade in goods and services; (b) foreign direct investment; (c) trade facilitation measures; (d) trade policy measures; and (e) preferential trade policies and agreements.
The report also offers insights into the impact of these recent and emerging developments on countries’ abilities to meet the challenges of achieving inclusive and sustainable development.
A key finding of the report, however, is that concentrations of exports and imports remain uneven across the region. East and North-East Asia alone accounted for about 60 percent of both total regional merchandise exports and imports in 2013. In a similar vein, 65 percent of all services exports from the Asia-Pacific region are attributable to just six economies.
“This implies that large gaps remain between countries in terms of their trade competitiveness and level of diversification, and that great potential remains still untapped, especially in the services sectors of many countries,” it said.
“The availability of competitive business and trade services, which support industrial exports, is also increasingly essential. Policymakers should take steps to lower barriers to trade. Progress in multilateral negotiations, including effective and speedy implementation of the WTO Trade Facilitation Agreement, would help. Regional trade liberalization agreements can also boost trade and integration, especially if many of the existing agreements can be consolidated,” it said.
“Completion of the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership as open-ended agreements, for example, could lead to the cancelling or consolidation of as many as 54 separate preferential trade agreements, and vastly simplify the Asia-Pacific “noodle-bowl” problem, while also addressing investment and other barriers to trade,” the report said.
South-East Asia’s performance in 2013 as measured by key trade and investment indicators was positive. Merchandise exports increased by 1.7 percent while the services sector had strong export growth of 6.9 percent, positioning the subregion as the second largest exporter of services in Asia-Pacific after East and North-East Asia.
The subregion’s positive growth in 2013 was in line with the overall Asia-Pacific total of merchandise export growth of 2.1 percent and services export growth of 4.9 percent As for the subregion’s imports, merchandise imports and services imports grew by 1.9 percent and 3.9 percent, respectively.
South-East Asia’s intra-regional trade with the Asia-Pacific is significant: 68 percent of exports go to destinations within the Asia-Pacific region. Similarly, the subregion imported around 64 percent of its merchandise from the Asia-Pacific, higher than the 49 percent figure for intraregional imports within the Asia-Pacific as a whole.
The report said FDI inflows to the subregion continue to rise. However, the growth in 2013 of 6.7 percent was more moderate than in the previous year when it rose by 18 percent. The 2013 growth figure is similar to the Asia-Pacific regional total of 6.6 percent growth. In contrast, FDI outflows from South-East Asia have been broadly flat since 2010.
Greenfield FDI into South-East Asia from Asia-Pacific countries increased by 7 percent to $35 billion in 2013. The fastest growth in greenfield FDI was seen in Myanmar which registered an increase of over 633 percent, up to $12 billion from only $1.6 billion in 2012.
Positive greenfield FDI growth in South-East Asia is in contrast to the overall fall in greenfield FDI flows in the Asia-Pacific region, which contracted by 20.4 percent to $84 billion, the report said.
Over the period 2010-2012, an average of 63 percent of total exports from South-East Asian countries went to Preferential Trade Agreements (PTA) partners. Imports from PTA partners were even higher at 68 percent on average, the report said.