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China Daily Global / 2022-04 / 29 / Page003

Asian economies urged to deepen complementarity

By YANG HAN in Hong Kong | China Daily Global | Updated: 2022-04-29 00:00

Enhanced trade collaboration, facilitation 'crucial to mitigate challenges'

The indirect impact of the Russia-Ukraine conflict on food and energy will affect countries worldwide, making it important for Asian nations to enhance trade cooperation and complement each other, experts said.

The high energy and food prices will depress consumer spending, while the sanctions on Russia will hurt the European Union's economy, and this will eventually affect Asia's trade, since the EU is a major trading partner, said Henry Chan, visiting senior research fellow at the Cambodian Institute for Cooperation and Peace.

Amid the current conflict, Chan sees a "natural substitution effect "in which Asian countries, prompted by disruptions, cooperate on developing regional supply chains. This effect will enhance the complementarity among Asian economies, especially with the Regional Comprehensive Economic Partnership taking effect this year, he said.

Chan said that "the most important thing" for Asian countries right now is to deepen such complementarity.

As an example, he said, Southeast Asian countries have been importing cellphones from China instead of Western countries, as they did in the past. This kind of move would help develop a more complete supply chain within the region and mitigate the impact of such things as the Russia-Ukraine conflict.

The ongoing conflict and Western sanctions on Moscow have led to disrupted supply chains and rising food and energy prices.

"Because of the sanctions, every country's trade with Russia is affected," Chan said, adding that the moves to remove Russian banks from the Society for Worldwide Interbank Financial Telecommunication, a major global financial system, and to freeze Russia's foreign reserves, are alarming.

Conflict's impact felt

The impact can already be felt in Asia. For example, rising energy prices have been one of the biggest factors affecting South Korea's trade performance, and the country could see a trade deficit in April for the second consecutive month.

In the first 20 days of April, South Korea's exports increased 16.9 percent year-on-year to $36.3 billion, according to data from the Korea Customs Service. Imports rose 25.5 percent to $41.5 billion over the same period, resulting in a deficit of $5.2 billion.

In particular, the country spent $6.88 billion on crude oil, up 82.6 percent from the same period in 2021, mainly due to the rise in prices.

For many countries in Southeast Asia, trade balances with Russia and Ukraine have been heavily affected by the conflict and related sanctions.

In Indonesia, trade balances with Russia and Ukraine were in deficit due to the conflict, according to Indonesia's state-owned Antara news agency. The trade deficit with Russia, in particular, reached $204.6 million between January and March, compared with a surplus of $42.2 million during the same period last year.

As for Thailand, a net importer of oil, Kobsak Pootrakool, senior executive vice-president of Bangkok Bank, was quoted by the Bangkok Post as saying on April 18 that exports are unlikely to be the main economic contributor this year, as the Thai economy has seen indirect impacts such as inflation and soaring global energy prices.

The economic slowdown could be more pronounced outside of Asia, said Juthathip Jongwanich, associate professor of economics at Thammasat University in Thailand. She forecast continued supply chain disruption from the Russia-Ukraine conflict and the sanctions.

A case in point is that exports by many Asian countries, including China, Singapore and Malaysia, continued to see double-digit growth in March. Juthathip said that this makes trade cooperation among Asian countries more important, and she warned against protectionist sentiment, as that would cause more price hikes and supply shortages.

Juthathip said that "enhancing cooperation concerning nontariff measures, services trade, as well as enhanced digital trade or trade facilitation, are crucial to mitigate the challenges brought by the Russia-Ukraine conflict".

She added that cooperation beyond Asia will also be key to helping create economic resilience.

Chan from the Cambodian institute said China, as the major trading partner for many countries, must keep its economy vibrant to keep regional trade at a high level.

"China can help regional trade cooperation by keeping its economy stable," said Chan.

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