Asian Economic Integration Report 2023
Trade, Investment, and Climate Change in Asia and the Pacific
The Asian Economic Integration Report (AEIR) reviews Asia and the Pacific’s progress on regional cooperation and integration and the states of trade, cross-border investment, financial integration, and the movement of people. According to the 2023 report, integration in the region is progressing steadily and remained stable in 2020 despite the COVID-19 pandemic. This year’s theme chapter, “Trade, Investment, and Climate Change in Asia and the Pacific”, examines how trade and investment, which have been the main driver of the region’s economic growth and industrialization, contribute to climate change, and what policy measures need to be taken to make trade and investment part of climate solutions.
Regional integration is progressing steadily, with Southeast Asia integrating faster than other Asian subregions. Economies covered by the subregional initiatives in Southeast Asia, specifically the Association of Southeast Asian Nations and the Greater Mekong Subregion are relatively more integrated than others.
Asia’s regional trade integration continues to deepen as measured by its intraregional trade share. The region still has great potential to further cultivate deeper value chain linkages in high-tech and services industries by lowering trade barriers and forging closer economic relationships in these areas.
Global FDI recovered in 2021, accelerating by over 60% compared with 2020. While global growth for 2022 may be tempered by external economic pressures, the outlook for Asia and the Pacific remains stable given the region’s consistent reputation as a hub for inward investments.
Increased financial integration in Asia and the Pacific could help recycle a greater portion of regional savings into regional investments. Yet, policy makers in the region need to remain vigilant in monitoring financial market conditions and guarding against spillover effects and financial distress.
International migration continued as more borders reopen and travel requirements ease, helping bolster remittance inflows to Asia and the Pacific which grew 3.4% in 2021. Recovery in international tourism is gaining ground but arrivals remain well below the 2019 level.
Asia and the Pacific is on the frontline of climate change, with high exposure to extreme weather and many people living in low-lying coastal areas. Almost 40% of disasters worldwide have occurred in Asia and the Pacific.
The Asia and Pacific region needs to embrace “climate smart” policies to ensure trade and investment can be part of the climate solutions.
Policy makers can promote trade in environmental goods and services; nurture green businesses; enhance international cooperation on regulations; and develop carbon pricing mechanisms.
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