Asian Economic Integration Report 2024
Decarbonizing Global Value Chains
The Asian Economic Integration Report (AEIR) 2024 examines the impact of economic factors on the movement of goods, services, and people across borders. It analyzes how regional economies in Asia and the Pacific respond to economic and geopolitical challenges by deepening economic inter-relationships.
This year’s AEIR theme chapter focuses on the pressing issue of decarbonizing global value chains (GVCs). The chapter delves into the carbon emissions generated at various stages of GVCs and emphasizes the need for policymakers to address this environmental challenge while maximizing the economic advantages of globalization and global production networks. It evaluates the impact of initiatives like the EU’s Carbon Border Adjustment Mechanism for Asian subregions, suggesting strategies such as carbon pricing, emission accounting, enhanced trade cooperation, technology upgrades, and international collaboration for technology transfer to mitigate carbon emissions.
Amid global uncertainties, Asia’s 2023 trade growth stagnated, necessitating regional efforts to bolster resilience in the face of a subdued 2024 global economic outlook.
Post-pandemic, Asia’s global value chain activity rebounded strongly with increased regional integration driving these dynamics.
As Asia progressively embraces modern trade agreements, initiatives towards lifting restrictions, diversifying trade, and deepening regional cooperation are pivotal to foster resilience in essential sectors such as food trade.
FDI in strategic sectors offers opportunities to Asia and the Pacific, with higher investments and broader destinations on the horizon.
Efficiency-seeking FDI remains critical to Asia’s industrial development, while active policies for market-seeking FDI can also bring benefits to the region.
Capital flows to Asia and the Pacific reversed in 2022, and in part recovered in 2023, but remain below the pre-pandemic average.
Rising US dollar funding costs could negatively affect capital flows to Asia and the Pacific, further amplified by the region’s US dollar dependence.
Migrant outflows from Asia and the Pacific are recovering while major host economies broaden access to skilled migrant workers to reduce labor shortages.
Remittance inflows to Asia and the Pacific maintained resilience, bolstered by digitalization—inflows grew by 4.4% in 2023 to $371.5 billion.
Asia and the Pacific continues to recover from its pre-pandemic tourism arrivals level, with some subregions reaching at least 90% of their 2019 levels.
Between 1995 and 2018, carbon dioxide emissions from global value chains grew faster than those from other sources, which concerns developing Asian economies as critical players within global value chains.
EU’s Carbon Border Adjustment Mechanism would have a limited effect on global carbon emissions and will likely reduce global and Asia’s exports to the EU and downstream production within EU.
Extending carbon pricing and carbon border adjustment mechanisms to other regions may reduce global emissions significantly.
Increasing investments in green infrastructure, promoting technological advancement, and prioritizing sustainable investment are needed to decarbonize global value chains.
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