Asean members need to enhance connectivity and further liberalize trade and investments to ride out the coronavirus disease 2019 (Covid-19) crisis and withstand similar shocks in the future.
A policy brief released by the Economic Research Institute for Asean and East Asia (ERIA) said these important policies can improve the attractiveness of the Asean region as an investment destination, as the current disruption in the global value chains (GVCs) raises concerns about reshoring by multinational enterprises (MNEs) that so far have invested in the region.
“Therefore, Asean needs to embark on policy actions to mitigate such concerns, by further opening up investment regimes and by encouraging MNEs to balance their investment portfolios [in the post-pandemic era],” it said. The paper said trade liberalization is focused on nontariff measures and the service sector, with the aim of minimizing restrictions from NTMs and providing sufficient services to support GVCs within domestic economies. Countries, it said, could start raising the bar for sanitary and phytosanitary (SPS) food safety measures amid the pandemic.
Citing the Global Trade Alert report, the ERIA policy brief said some Asean members have imposed other forms of NTMs, such as export prohibitions on essential goods like medical equipment and masks, in response to concerns about supply shortages.
“The uncertainty caused by the pandemic could force additional countries to apply more restrictive NTMs, which could become permanent if regional efforts do not monitor and control it. More restrictive NTMs increase the cost of inputs in the value chains for manufacturers,” it added.
The paper said the pandemic affects manufacturers operating in various sectors, especially those that are part of GVCs, and it may induce them to implement new strategies as they learn how to deal with the pandemic.
“The adoption of the technology of the Fourth Industrial Revolution [IR 4.0]—such as artificial intelligence, IoT [Internet of Things], automation, and robotics—gives manufacturing firms a better chance of rapidly increasing production when the economy recovers,” it said.
The paper further underscored the importance for Asean to have sustained connectivity within East and Southeast Asia to maintain the competitiveness of regional production networks.
“There is also an urgent need for workable mechanisms to facilitate public-private partnerships, as many countries are still in recovery mode after huge stimulus packages during the pandemic,” it said.