Aid for Trade in Asia and the Pacific: Promoting Economic Diversification and Empowerment

AID FOR TRADE IN ASIA AND THE PACIFIC

Promoting Economic Diversification and Empowerment

JULY 2019

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ISBN 978-92-9261-664-9 (print), 978-92-9261-665-6 (electronic)

Publication Stock No. SPR190243-2

DOI: http://dx.doi.org/10.22617/SPR190243-2

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CONTENTS

TABLES, FIGURES, AND BOXES

TABLES

FIGURES

BOXES

FOREWORD

International trade continues to be a major driver of economic transformation across developing Asia where more than a billion people have been lifted out of poverty since 1990. Aid for Trade (AfT), in particular, has played an important part in making economic growth more inclusive. Emerging challenges to the global trade landscape are now making its role more of an imperative.

These challenges include the risk of sluggish global economic growth, the adoption of more inward-looking trade policies in some parts of the world, and widening social and income inequalities. There is now greater need for well-targeted Aid for Trade to catalyze financing that boosts services trade and enables the benefits of open trade to be shared more equitably.

As our 2019 report shows, AfT is recalibrating to tackle these challenges. Consistent with the Sustainable Development Goals, AfT is increasingly focused on vulnerable groups—particularly women, small firms, and those disadvantaged by lack of access to digital technology. AfT disbursements to developing Asia with gender equality as a main or significant objective have nearly tripled since the beginning of the initiative in 2005, as have disbursements to develop micro, small, and medium-sized enterprises.

The report demonstrates that AfT to the services sectors of developing Asia presents great opportunities to promote economic diversification and support vulnerable groups by expanding trade for small firms. Services generate over half of the region’s output, comprise a quarter of its trade, and employ more women than men. AfT more targeted at trade in services can encourage structural transformation toward services, and generate employment and more socially inclusive growth. The potential return from fostering entrepreneurship among women is enormous, too.

There is still much to be done. Most women still tend to work in low-productivity traditional services associated with vulnerable employment and lower value-added roles. More efforts must be made to bring down the large barriers that make it difficult for small, women-owned firms to reach international markets and integrate into global supply chains. While aid for economic infrastructure takes the largest share of AfT, gender mainstreaming in these sectors remains minimal. AfT can contribute to women’s access to economic opportunities by increasing gender mainstreaming in aid for economic infrastructure. It can also improve gender targets in trade policies and regulations, thereby further advancing gender equality and empowering women.

Digital connectivity holds great promise as an area in which AfT could help unlock trade benefits for micro, small, and medium-sized enterprises (MSMEs) and women in developing Asia. The report draws attention to high returns for inclusive growth and empowerment from expanding information and communication technology and helping socially vulnerable and disadvantaged groups to access it. Aid targeted at digital connectivity can boost these groups’ economic opportunities by opening up export avenues for participation in global markets through e-commerce and facilitate trade in services such as offshore business processing and ICT-enabled services.

More focus must be placed on promoting innovative solutions such as e-commerce and digital transactions, enabling more robust trade in services, and helping small firms to access finance. By lowering barriers to market participation, AfT can significantly increase export opportunities for MSMEs and women-owned firms.

AfT accounts for about 40% of official development assistance in Asia and the Pacific, so how to enhance its effectiveness will characterize the future of the region’s economic development. This report will contribute to generating bold ideas for effective strategies to deepen the gains. The Asian Development Bank looks forward to continuing to work closely with AfT stakeholders in the region to facilitate more inclusive and sustainable trade growth.

Bambang Susantono

Vice-President

Knowledge Management and Sustainable Development

Asian Development Bank

ACKNOWLEDGMENTS

This report was prepared by the Regional Cooperation and Integration (ERCI) Division of the Economic Research and Regional Cooperation Department (ERCD) of the Asian Development Bank (ADB) under RETA-9710: Aid for Trade for Inclusive Growth, 2019–2020 (Subproject 1) cofinanced by the Department of Foreign Affairs and Trade (DFAT), Government of Australia.

Cyn-Young Park, director of ERCI, led the preparation of this report. Cyn-Young Park, Fahad Khan, and Cindy Jane Justo were the main contributors. Cindy Jane Justo, Ana Kristel Lapid, Jolly D. La Rosa, and Mara Claire Tayag provided technical support.

Fahad Khan coordinated the production with support from Paulo Rodelio Halili and Mara Claire Tayag. Pia Tenchavez provided administrative support.

Background papers or box articles