ASEAN in the global economy & Laos economic changes Workshop on “Lao PDR towards AEC 2015”...

ASEAN in the global economy & Laos economic changes

Workshop on “Lao PDR towards AEC 2015”19 and 21 February 2013,

Lao PDR

Dr. Witada Aunkoonwattaka

Trade and Investment Division, ESCAP

anukoonwattaka@un.org

2

3Source: ASEAN Community in Figures 2011

The region of huge potential

The region of economic divide

GDP per capita by ASEAN states

Source: ASEAN Economic Community Chartbook 2011

5Source: ASEAN Community in Figures 2011

The region of high trade dependence

….But, limited intra-ASEAN trade

• Extra-ASEAN trade remains playing a dominant role..

Source: ASEAN Economic Community Chartbook 2011

7Source: ASEAN Community in Figures 2011

…and limited intra-ASEAN investment

What are the implications?

• High diversity : Integrating the markets will be very difficult.

• Limited intra-ASEAN trade & investment: intra-ASEAN market Integration is not a major driver of ASEAN Integration.

• AEC with free movement of goods, services, skilled labour, and freer movement of capital: AEC will bring “production integration” more than market integration

ASEAN IPN for Automobiles

9

Made in the World

10Source: Meng and Miroudot, based on Xing and Detert (2010))

11Source: ASEAN Community in Figures 2011

Reflected in sources of investment,

12Source: ASEAN Community in Figures 2011

…in country we trade,

…. in products we trade

13Source: ASEAN Community in Figures 2011

Loa PDR: Economic changes

Real GDP growth in Loas

0

2

4

6

8

10

12

14

16

18

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Per

cen

t

GDP

Agriculture

Industry

Services

A decade of robust growth

Source: Base on data from CEIC

Robust export performanceReal exports of selected ASEAN countries

Indonesia

Malaysia

Philippines

Thailand

Viet Nam

Cambodia

Laos PDR

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

20

00

=1

00

Source: Base on UNcomtrade data from WITS

Increasing opennessTrade to GDP

2001

2001

2005

2005

20102010

0

5

10

15

20

25

30

35

40

Exports to GDP Imports to GDP

Pe

r c

en

t o

f G

DP

Source: Base on IMF data from CEIC

Heavy reliance on natural resourceExport composition (2011)

AgricultureAgriculture Agriculture

Fuels

Fuels Fuels

Manufactures Manufactures

Manufactures

Ores & metalsOres & metals

Ores & metals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

midASEAN5 CLM Laos PDR

Source: Base on UNcomtrade data from WITS

Crowding out manufacturing exports

Source: Base on UNcomtrade data from WITS

What lies ahead with a membership in WTO and AEC?

• Higher degree of economic openness– Increasing trade dependence (within the ASEAN

and ASEAN+6 but perhaps even wider?)

• Inflows of FDI – Natural resources and hydro electricity– Light manufacturing– Tourism– Agriculture

• Higher export revenue– Driven mainly by mining and electricity exports

Challenges• Will Lao PDR be fitted into the “Factory of Asia”?

– Real value is productivity gains

• Fighting the natural resource curse– Volatility of mining commodity prices– Real exchange rate appreciation– Crowding out manufacturing– Fiscal over-spending in response to high revenue– Rent seeking and corruptions– Increasing inequality

Way forward• Powering development with resource income

– Efficient logistics– Hard and soft infrastructure– Human capital development

• Create attractive and competitive environment for FDI– Improving institution mechanisms– Remove barriers to trade and investment

• Prudential macro-management– Structural budget rules– Well-managed foreign exchange reserve– Using financial derivatives to control volatility

Thank you

http://www.unescap.org/tid/ti_report2012/download/index.asp

Appendix

Service exports

2001 2010

Service exports

(billion USD)

140,600 488,800

Services in total export

30.6% 21.9%

Travel services (in total services)

69.4% 78.1%

Source: Base on WTO service-trade data