Key Takeaways
Collective action played a major role in combating the coronavirus disease (COVID-19) pandemic, and expanding and deepening cross-border cooperation in Asia and the Pacific will help the region navigate newer economic challenges, along with the worsening climate crisis.
The Russian invasion of Ukraine, hard on the heels of the pandemic, and rising geopolitical uncertainty in other parts of the world, have exacerbated economic hardships for many countries, leaving hundreds of millions of families struggling to afford basic commodities such as food and fuel. Recent acts of trade protectionism and signs of fragmentation of the global economy into blocs with different trade and technology standards are threatening to undermine economic progress and set back development gains. Unprecedented flooding and droughts in Asia and other parts of the world over the past year are a stark reminder of the existential threat climate change poses.
“Globalization has helped deliver extraordinary outcomes to the developing world, but with increased economic and financial interdependence comes a need for stepped-up cooperative efforts to tackle common challenges,” said Cyn-Young Park, Director, Regional Cooperation and Integration Division of the Asian Development Bank (ADB) Economic Research and Regional Cooperation Department.
Cooperation amidst crisis
While the pandemic has caused enormous economic, health, and social strains on Asia and the Pacific, the region’s response also highlighted the benefits of cooperation. To stop cross-border contagion of COVID-19 at the start of the pandemic, countries closed their borders—but there was a quick realization that their health systems and economies could not be successfully managed without intercountry cooperation.
Working with partners, including ADB, countries quickly came together to take collective action to track and control coronavirus infections, to support health services, to keep essential goods flowing across borders, to stabilize public finances, and to provide welfare support, especially to vulnerable groups. The multibillion-dollar ADB Asia Pacific Vaccine Access Facility played an important role in helping developing countries across the region procure and deliver safe and effective COVID-19 vaccines.
The health crisis failed to dent the enthusiasm of Asia and the Pacific for moving ahead with a key pact to expand trade. A treaty establishing the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between the Association of Southeast Asian Nations and partner states in Asia and the Pacific, was signed in November 2020. The member countries of the partnership account for 30% of the world’s population and 30% of total global gross domestic product, and the agreement is expected to play a crucial role in expanding trade in Asia and the Pacific, helping power a recovery in the region.
Stronger and more coordinated collective action will allow economies across Asia and the Pacific to reconnect, help restore the free movement of people, enhance resilience to health, financial, and environmental risks, and promote inclusive, green growth.
Cyn-Young Park
Director, Regional Cooperation and Integration Division, Economic Research and Regional Cooperation Department, ADB
Areas for collective action
Much more collective action is needed, however, if the region is to successfully navigate the current threats to its growth and development.
More high-quality infrastructure is required to further expand cross-border trade and investment and to promote global value chains, while shared threats to the environment and public health, brought into sharp focus by the climate crisis and COVID-19, highlight the urgency for more regional public goods.
An unexpected byproduct of the pandemic has been an increase in the digitalization of economies, but for digital systems to be truly effective, they need to adopt harmonized standards to make them more interoperable across borders. In addition, making information and communications technology services accessible to all groups ensures the benefits of economic growth are distributed more equitably.
As inter-regional migration continues to grow, policy makers across the region will need to work together to put in place skills training and social protection programs to ensure migrants have the tools to succeed and safety nets to support them.
ADB regional operations
ADB works closely with subregional groups, among them Central Asia Regional Economic Cooperation, Greater Mekong Subregion, Pacific Islands Forum, and South Asia Subregional Economic Cooperation to drive physical and soft connectivity, trade, investment, financial links, and the promotion of regional public goods across Asia and the Pacific. These subregional groups have a long-established track record in promoting regional cooperation and integration.
Global trade and supply chains are a crucial tool for growth and prosperity, and in response to the pandemic. The ADB Trade and Supply Chain Finance Program (TSCFP) played an important role in supporting small and medium-sized businesses and intraregional trade transactions, which had been badly affected by a slowdown in economic activity and difficulties accessing finance. In 2021, the TSCFP saw a record number of transactions, providing trade financing assistance that supported over 2,800 small and medium-sized enterprises, and 2,300 trades between developing Asia countries.1
The TSCFP has also been active in establishing a Digital Standards Initiative to develop common digital standards and protocols for trade and supply chain transactions, that make them more transparent and efficient.
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Asia and the Pacific is stronger and more resilient when it works collectively to address challenges such as climate change, pandemics, and financial shocks.
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Reducing regional vulnerability to pandemics is important. More than 78 million people fell into extreme poverty in 2020 as a result of COVID-19 in Asia and the Pacific.
As many developing economies’ finances come under extreme pressure from inflation and rising debt, driven by a spike in the value of the US dollar and higher interest rates, ADB has been supporting them through the regional Credit Guarantee and Investment Facility. This facility helps companies issue local currency denominated bonds, reducing their need to rely on costly US dollar-denominated debt paper for fund raising. It is part of the Asian Bond Markets Initiative, which seeks to make it easier to tap the region’s vast resources for its own investment needs.
“Rising inflation and interest rates in the US and advanced economies have often triggered currency and financial volatility in emerging market economies,” said Ms. Park. “ It is important to deepen regional financial cooperation to boost financial resilience and reinforce financial safety nets to cushion potential spillovers from global shocks.”
The launch of the ADB-supported Asia Pacific Tax Hub in 2021, meanwhile, is helping developing member countries automate tax administration, formulate revenue gathering strategies, and participate in international tax initiatives. Collectively, these measures will help boost much needed domestic resource mobilization while strengthening cross-border tax cooperation.
Given the urgency of the climate crisis, ADB is putting a strong focus on helping countries work together to mitigate climate change and to build up their disaster risk resilience. This support includes investments promoting low carbon development and healthy oceans, along with assistance for the provision of regional goods to combat common cross-border challenges, such as communicable diseases.
“Ultimately, stronger and more coordinated collective action will allow economies across Asia and the Pacific to reconnect, help restore the free movement of people, enhance resilience to health, financial, and environmental risks, and promote inclusive, green growth,” said Ms. Park.
