Transcript Sub-regional Economic Cooperation : A Case of IMT-GT

Sub-regional Economic
Cooperation : Implications
for Central Asia and South
Caucasus
Mya Than
Regionalism: Conditions
 Countries
must have
1. Geographical proximity
2. Cooperation of countries either in
economic, political or social fields
3. Setting up a regional cooperation for the
achievement of common purposes
Regional Economic Cooperation
& Integration
1.
Members: Transnational economic region (or
sub-region) established by 2 or more countries
or territories
2. Objective: To promote free movement of factors
of production & effective distribution of outputs
3. Mechanism: To gain from economy of scale
Economic Cooperation and Integration
6 stages from Economic Cooperation to Economic
Integration
 Harmonization: to adjust trade policies to minimize
discrimination
 Free Trade Area (FTA): to remove tariffs between the partners
without adopting a common tariff policy
 Customs Union (CU): FTA adopting a common tariff policy
against third countries
 Common Market (CM): CU removing restrictions on factor
movement
 Economic Union (EU): CM coordinating their policies on fiscal,
monetary, etc.
 Economic Integration: Extreme type of Economic Cooperation
when policy matters and their implementation is governed by
some supra-national agency
Forms of Regional Economic
Cooperation/Integration
Forms
FTA
Customs Union
Common Market
Economic Union
Free intratrade
Common
trade policy
Free factor Common
mobility
monetary &
fiscal policy
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
Yes
Yes
No
No
No
Yes
Free Trade Area (FTA)
Definition: Economic cooperation between two or
more countries within the region or outside the
region by removing tariffs between partners
without adopting a common tariff policy.
Objectives of FTAs
 Greater market access in goods and services
 Increased investment opportunities
 Reduction in Business costs
Formation of FTAs in Southeast Asia
World Total
250 (2002)
300 (2005) estimates
East Asia Total
Signed
Under negotiation
Under study
Proposed
72 (2003)
20
20
19
13
Southeast Asia
Signed
Under negotiation
Under study
Proposed
51
14
23
12
2
Building Blocks for FTAs
Push factors
 Competition for export markets in the face of increasing
FTAs in other regions
 Rising of China
 The end of the Cold War/Thawing of political tension
 Obstacles in trade liberalization under GATT/WTO (eg.,
Doha Round)
Pull factors
 Transformation of former command/controlled
economies into market-oriented economies
 Increase or maintain market access
 Promotion of economic or other types of cooperation
Conditions for enjoying benefits
 Trade
liberalization
 Trade and Investment facilitation
 Economic cooperation
 Harmonization
Impacts of East Asian FTAs
Positive impacts
 Trade creation effect
 Improved terms of trade
 Increase in economic welfare
 Trade diversion effect will be reduced
 Increased business access to members’ markets
 Economy of scales
 Competition enhancing effect
 FDI creation effect (among member countries)
 Promotion of regionalization
Negative Impacts
 Extra-ASEAN trade expands faster than intra-ASEAN
trade
Interdependence: Intra-Regional Trade
(%)*
1990
1995
ASEAN
18.0
21.0
ASEAN+3
28.6
37.1
NAFTA
37.3
42.0
EU (25)
65.2
65.2
Mercosur
* Total trade as % of their total world trade
2000
22.8
37.3
46.9
64.6
17
2003
22.3
38.9
44.9
66.1
-
Stumbling Blocks for FTAs in East Asia
Political
 Different political systems
 Lack of strong political will
 Territorial disputes
 Nuclear issue (PR Korea)
Historical
 Historical baggage
 Visits to a War Shrine
Stumbling Blocks for FTAs in East Asia
(Cont’d)
Economic
 Different economic systems
 Different development levels
 Different legal systems
 Likely opposition from non-competitive sectors
 Two-speed ASEAN in terms of trade
liberalization
Technical
 Spagetti Bowl effect
Sub-regional Economic Cooperation in
Southeast Asia
I. Economic Geography
1. Growth Triangle
(a) IMS-GT (Indonesia-Malaysia-Singapore)
(b) IMT-GT (Indonesia-Malaysia-Thailand)
2. Growth Quadrangle
(a) Golden Quadrangle (Yunnan-Laos-Myanmar-Thailand)
(b) BIMP-EAGA (Brunei-Indonesia-Malaysia-Philippines)
Or (East ASEAN Growth Area)
Sub-regional Economic Cooperation in
Southeast Asia (Cont’d)
II. River-based Cooperation
1. GMS (Greater Mekong Sub-regional Eco.
Cooperation)
(Cambodia, Laos-Myanmar-Thailand-YunnanVietnam)
2. ACMECS (Cambodia-Laos-Myanmar-ThailandVietnam) Or (Ayeyawady-Chao Phra-Mekong
Eco. Cooperation Strategy)
3. MG-EC (Mekong Ganga Eco. Cooperation)
(Mekong Countries and India)
Sub-regional Economic Cooperation in
Southeast Asia (Cont’d)
III. Cross-subregional Cooperation
1. BIMST-EC (Bay of Bengal Multi-Sectoral
Technological Eco. Cooperation)
(Bangladesh-Bhutan-India-MyanmarNepal-Sri lanka-Thailand)
GROWTH TRIANGLE
Concept: To link three areas with different factor
endowments and different comparative advantages for a
larger region with greater potential for economic growth.
Definition: A sub-regional economic zone encompassing
geographically contigous areas of two or more countries
in the economic integration process which involves the
flow of goods, services, investment and people. GTs
also could be considered as “cross-border economic
zones”.
Rationale: To exploit the complementarities of the
geographically contiguous areas to achieve accelerated
economic development by means of enhancing
competitiveness of participating areas and of promoting
their exports in the global marketplace
Types of Growth Triangles
1. Metropolitan Spillover into Hinterland
(IMS-GT, IMT-GT)
2. Joint Development of Natural Resources
(GMS)
3. Common Geo-political Interest
(ASEAN before 1997)
Sub-regional Eco. Cooperation Arrangements:
Growth Triangles and Other Cooperation Arrangements
GMS
IMS-GT
IMT-GT
EAEG/ BIMP
ACMECS
BIMSTEC
Estb:
1992
1989
1993
1994
2004
1997
Popn:Mil
245
35
25
50
124
1,252
Area
(sq.km)
2.3 mil
0.33mil
0.23mil
1.56mil
1.61mil
4.69mil
GNP
($bil)
226.7
29.6
31.8
27.8
14.0
64.1
Type
Formal,
state,
natural
Formal,
non-state,
natural
Informal, state,
natural
Informal, state,
constructed
Formal,
natural
Formal,
state
Actors
Govts:,
ADB
Private
Govts, ADB
Govts, ADB
Formal,
natural
Formal,
state
Objectives
Infrstr,,trade
FDI& devl.
Infrastr.
Trade,
FDI
FDI, eco.
Develop.
Eco.
Development
Infrastr.,
Trade,
FDI
Infrastr.,
Trade.
Tourism
Achievements
Infrastruc,
Hydropower
Navigation
management
tourism
Infrastr.
FDI,
jobs
Eco.
Growth,
HRD,
Tourism
Joint-FDI &
projects
Infrastr.,
Trade,
Loans from
Thailand
FTA in
2007
MOTIVATING FACTORS

Geographical Proximities/Existence of old trade routes
 Historical Links
 Cultural Proximities and Ethnic Ties
 Economic Complementarities
 Thawing of Political Tensions
 Economic Reforms in Formerly Command/Controlled
Economies
 Rising of China and India/Competition for Foreign
Investment
 Emergence of Regional and Sub-regional Groupings and
Trade Blocs
 Fear of Protectionism
Challenges and Issues
Political
 Different political systems
 Lack of political will
 Territorial disputes
Historical
 Historical baggage
Cultural
 Common ethnicity
 Common/similar culture
Challenges and Issues
Economic
 Different economic systems
 Different levels of development
 Different financial and banking systems and legal
systems
 Likely opposition from non-competitive sectors
Environmental
 Degradation of environment
Cross-border Issues
 Illegal trade
 Human trafficking
 Drug trafficking
 Spread of HIV/AIDS
Key Factors behind the Success of
Growth Triangles
 Economic
Complementarity
 Geographical proximity
 Political Commitment and Policy
Coordination
 Infrastructure Development
GTs Complement the FTAs

GT as a form of regional cooperation provides competitive model to
attract investment and technology as well as building block towards
FTA.

GT as a starter, with relatively less rigid and formal cooperation
structure as compared to FTA, is expected to be more innovative,
flexible, and most importantly always ready to attend to the everchanging needs of investors and alike.

GT as a strategy promoted by those regional leaders keen on
expanding “embedded exportism” and by global enterprises involved
in international production see it as having a “facilitating effect” upon
“open regionalism” championed in the Bogor declaration.

GT has become a building block towards free trade arrangements
since the changes that are manifested in the growth triangle strategy
provide supports for ASEAN’s FTAs and APEC’s free trade plans.
Indonesia-Malaysia-Thailand Growth Triangle
(IMT-GT)
What Is IMT-GT

Early attempt at economic cooperation and integration in ASEAN.

Formally endorsed by all 3 governments’ heads of IMT-GT nations in 1993.

Expected to boost economic, social and cultural ties between their areas.

The private sector is expected to drive the economic agenda & the
development of the IMT-GT by supporting and facilitating its activities.

IMT-GT Joint Business Council (JBC) was inaugurated in 1995 as the
official vehicle to mobilize private sector participation.

ADB took initiatives to conduct a detailed feasibility study and formulated
the framework for cooperation.
Indonesia-Malaysia-Thailand-Growth
Triangle
Goals of IMT-GT:

Overall goal of the IMT-GT is to accelerate private sector-led
economic growth in the IMT-GT region by:

increasing trade and investment by exploitation the underlying
economic complementarities and comparative advantages;

increasing exports to the rest of the world by enhancing
competitiveness for exports and investment;

increasing the welfare of the people by creating employment,
educational, social, and cultural opportunities in the IMT-GT
region; and

Encouraging the private sector to play a leading role, while the
public sector facilities and supports as much as possible.
IMT-GT: Members
Indonesia:
 1994: North Sumatera and Aceh
 2005: Aceh, Sumatera Utara, Sumatra Barat, Bangka Belitung,
Riau,Kepulauan Raiu, Lampung, Sumatera Selatan, Kepulauan Natuna
 (The entire island of Sumatra is included in the IMT-GT)
Malaysia:
 1994: Kedah, Perlis, Perak, Pulau Pinang, Selangor
 2005: Kedah, Perlis, Perak, Pulau Pinang, Selangor Kedah, Perlis, Perak,
Pulau Pinang, Selangor Melaka, Kelantan, Negeri Sembilan, Terengganu,
 (Kuala Lumpur can also be considered as an IMT-GT market due to its
location and proximity to Selangor)
Thailand:
 1994: Yala, Satun, Narathiwat, Songhla, Pattani
 2005: Yala, Satun, Narathiwat, Songhla, Pattani, Trang, Nakhon Sri
Thammarat, Pattulung
 Potential Consumer Base: 100 million
IMT-GT: Selected Economic Indicators
Country
Population Area (‘000 GDP$ bil.
(‘000)
sq.km)
Indonesia 219,142
GDP/
Cap$
1,904,600
(’92)109,481
(’04)261,267
573
1,193
Malaysia
26,207
329,800
(’92) 53,454
(’04) 121,175
2,846
4,625
Thailand
64,994
513,100
(’92) 89,391
1,548
2,537
(’04) 164,905
IMT-GT: Selected Social Indicators
Country
Literacy Rate
(’90)
(’04)
Indonesia (M) 89.6 98.5
Life Expectancy Fertility Rate
(’98)
(’04)
(Both Sex)
(’99)
(’03)
66.7
70.7
2.5
2.1
(F) 78.7 97.6
62.6
66.5
Malaysia
(M) 87.0
(F) 74.6
97.2
97.3
69.7
74.8
70.0
76.4
3.1
2.9
Thailand
(M) 95.6
(F) 91.2
98.1
97.8
66.0
72.0
68.0*
75.0*
2.0
1.7
IMT-GT: Foreign Direct Investment
Country
1995
2003
(95-03)
Indonesia
4,346
596
38,380
Malaysia
5,815
2,473
36,062
Thailand
2,070
1,869
31,924
IMT-GT: Intra Subregional Trade
(US$Million)
Country
1998
2004
Growth
(%)
Indonesia
4,369
12,807
193
Malaysia
4,963
15,565
214
Thailand
6,357
16,677
163
The Public Sectors of the IMT-GT

Coordinating secretariat in each of the IMT-GT
countries;

Coordinating the activities, plans & progress of
their respective ministries and government
agencies involved in one way another with the
IMT-GT;

Holding the annual Senior Officials Meeting
(SOM) and Ministerial Meeting (MM) to take
stock of the problems & progress faced by the
IMT-GT; and others.
The Role of the Private Sector (JBC)

The Joint Business Council (JBC) is the official
representative body for the IMT-GT business community;
 Created in 1995 with mandate from the IMT-GT
governments;


Meeting three or four time a year on rotation basis;
Annual JBC meeting in conjunction with the annual IMTGT meeting with Senior Officers Meeting (SOM) and
Ministerial Meeting (MM);

Instrumental in guiding government policy in IMT-GT
countries in regard to IMT-GT, especially in the areas of
trade and investment, people mobility, education &
training, tourism, cultural & sports linkages, agriculture
and fisheries;
The Role of the Private Sector (JBC)
(cont’d)





Facilitated an estimated US$3.8 billion worth of
projects between 1995-2005;
Mobilize private sector involvement in exploring
the many opportunities;
Coordinate with the IMT-GT governments on the
issues of mutual concerns;
Acting as a channel for business information and
exchange of business opportunities;
Promote IMT-GT as an attractive investment
destination for foreign investors; among others.
JBC’s Achievements

Enabling several thousands Indonesians & Thai students
to undergo training in Malaysia;

Boosting the number of operators and frequency of
marine & flight linkages within the IMT-GT;

Enabling the “fiscal tax” on Indonesian citizens departing
the country to be waived for those departing from any
IMT-GT airports;

Getting involved in reconstruction and rehabilitation
efforts in tsunami-affective areas;

Boosting trade, investment & tourism; among others.