Linking Trade & Development for Inclusive & Sustainable Growth
On 20 July, the SWITCH-Asia Network Facility's Team Leader Dr. Uwe Weber spoke on 'Circular Economy and Global Value Chains' at the 2017 Trade and Development Regional Forum organised by Thailand's International Institute for Trade and Development.
About 400 invited representatives from governments, international organisations (e.g. UNESCAP, UNCTAD), researchers and experts from about 30 countries participated to the conference, held in Bangkok on July 19-20.
This year's edition debated the current international tendency of replacing multilateralism with pro-national trade agendas, particularly among OECD countries in times of so-called "New Normal", i.e. characterised by overall and long-term low growth perspectives.
According to Dr. Supachai Panitchpakdi, former UNCTAD Secretary-General (2005-2013) and WTO Director-General (2002-2005), in this scenario Asian and ASEAN countries cannot expect substantial growth impulses from OECD countries, today and in the foreseeable future, but rather need to sustain their economic growth through deepened regional cooperation. This message was reinforced by the keynote speech of former ASEAN Secretary (2008-2013) Mr. Surin Pitsuwan.
Presentations given during the event are available here.
Despite the actual growth rates of many Asian economies in the range of 5-6% p.a., predictions for the future include an unmet and substantially rising demand for qualified labour in Southeast Asia. As they embrace digitalisation in the 'Industry 4.0' era, OECD economies were alerted of the risk of developing along a 'jobless growth' path which, coupled with the so-called 'Internet of Things', i.e. digitally networked production facilities, may turn a significant amount of low skilled factory workers in Asia redundant.
Hence the education of a qualified workforce, more digitalisation and improved connectivity in the Asian economic region were recurrently presented and discussed.
From a sustainability viewpoint, the potential decline in intercontinental logistics, resulting of more digitalised economies, would reduce related energy consumption. In addition, in terms of circular economy, a return to more regional production networks in OECD countries would facilitate closing material loops.
DEVELOPING AND FINANCING REGIONAL INFRASTRUCTURES
As Asian populations continue to grow and improve their livelihoods, their middle classes are expected to grow and generate signification consumption demand. While this development will continue to fuel economic stimulus, it also poses the need to heavily invest in additional infrastructures, such as ICT, public transport in cities and overland, airports, road network for private and commercial traffic, container terminals, etc.
In this context, the China-led 'One belt one road' (Obor) initiative and the Thai Eastern Seaboard development plan were presented.
By magnitude, the actual Obor plan exceeds by about EUR 860 billion the Marshall Plan for post-World War II Europe. Building and operating this massive infrastructure expansion will increase material and energy consumption. This will drastically enlarge the global footprint of Asian economies and require additional efforts to manage and limit the negative impacts on already strained global ecosystem services.
Hence, the development of joint activities between European actors and Asia was encouraged, to support sustainable investment in infrastructure and consumer goods industry. In particular promoting material and energy efficiency together with related technology transfers and capacity building would be welcome in these regions.
Speakers pointed to how governments will need to develop new legislation, while industry will be required to invest in sustainable production processes and technology upgrades, a topic which was also addressed in the SWITCH-Asia presentation. In turn, the industry's response to the needed switch to more responsible production will trigger investments in technology, workforce qualification and higher education, which will generate new financing needs.
During the conference, green finance for SMEs was thus a recurrent theme, where a constructive government role was commonly advocated. Speakers encouraged governments not to provide finance in the form of subsidies but rather to define frameworks that increase the competitiveness of companies that make 'green investments'. This would facilitate the presentation of investment proposals as bankable projects for financing institutions.
Further, taking into account the particular situation of SMEs in Asia, governments in the region were invited to improve the creditworthiness of companies with streamlined corporate registration schemes and by devising simple but robust accounting requirements. Currently, complex business administration schemes and cumbersome bookkeeping requirements keep large sections of SMEs in informal settings, with no access to finance.
From their side, banks in the region were encouraged to continue learning about the economic benefits associated with companies that invest in green technologies and actively support them in the process.
THE SWITCH-ASIA EXPERIENCE
Besides introducing the cornerstones of the SWITCH-Asia programme, Dr. Weber's presentation provided an updated overview of the regional development towards the circular economy, highlighting the opportunities and challenges from closing material loops in global supply chains.
Circular economy opportunities exist for Asian companies: their competitive human resources enable investments into material recovery facilities. However, the reverse logistics will substantially increase traffic and energy consumption, besides claiming additional ecosystem resources (e.g. water, air, land) and creating CO2 emissions.
In addition, companies which are closing loops in their own production as part of supply chains will find it easier to compete within a future business environment that demands strict reduction of waste streams and material recovery. Cases from Mongolia's construction industry, where companies start to recycle building materials, and or India's foundries, which are re-using moulding sand for the production of pavement blocs, illustrate SWITCH-Asia's approach in this direction.