The Conceptual Framework of New Development Strategies

Fukunari Kimura and Keita Oikawa

Chapter 1 in The Comprehensive Asia Development Plan (CADP) 3.0: Towards an Integrated, Innovative, Inclusive, and Sustainable Economy, pp 2-56 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: In the past three decades, East Asia – including Northeast Asia and Southeast Asia – has aggressively used globalisation forces in its development strategies and has led the world in developing the task-by-task international division of labour or the second unbundling and in building up Factory Asia (Ando and Kimura, 2005; Baldwin, 2016). Factory Asia has overcome a number of economic crises and natural disasters since the 1990s. The global financial crisis caused a serious trade collapse in 2008–2009, but the sophisticated international production networks (IPNs) in East Asia revived strongly. World trade growth decelerated in the slow trade period of 2011–2016 when growth in international trade became slower than global gross domestic product (GDP) growth. However, IPNs in East Asia did not stop growing, contrary to public belief (Obashi and Kimura, 2018). East Asia has taken advantage of globalisation forces effectively, backed by long-lasting peace and the rules-based trading regime. Further, the relative importance of Factory Asia for the world, particularly in producing general and electric machineries, has steadily enhanced over time. However, the situation has rapidly changed since the latter half of the 2010s. Factory Asia is now facing two immediate challenges that could generate structural changes: the coronavirus disease (COVID-19) and enhancing geopolitical tensions. COVID-19 was a huge tragedy for the whole world, and brought into question the fragility of global value chains (GVCs). In this context, it is important to ascertain whether the international division of labour has qualitatively changed in the COVID-19 era. In parallel, geopolitical tensions have intensified. This started as a tariff war between the United States (US) and China under the Trump Presidency in the US in 2017. The confrontation has since expanded to a more widely scoped competition between superpowers, and the decoupling pressure from both sides has intensified the move towards managed trade and investment. As many articles in the mass media claim, the recent geopolitical tensions may mark the end of the globalisation era. On the other hand, a couple of new elements have been added to our development scene: digital technology and environmental concerns. The application of digital technology has expanded from relatively simplistic matching businesses to all aspects of our economy and society. How we take advantage of digital transformation for economic development is becoming a crucial issue. In addition, environmental concerns have intensified even during the COVID-19 pandemic, particularly in Europe and other developed countries, and the transition to a low-carbon society is a global trend. Many countries in the Association The Comprehensive Asia Development Plan 3.0 (CADP 3.0): Towards an Integrated, Innovative, Inclusive, and Sustainable Economy 3 of Southeast Asian Nations (ASEAN) and East Asia have had higher dependence on fossil fuels and have been relatively slow in setting up a feasible long-term plan for a zeroemissions strategy. Digital technology and environmental concerns are issues that need to be incorporated more explicitly in our development strategy. The CADP 3.0 proposes that ASEAN and developing East Asia should still believe in the globalisation forces for their economic development. The following sections briefly discuss the two challenges stated above as well as some new elements.

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