Asia deepens regional ties as disruptions roil global trade

Countries in Asia-Pacific have strengthened their regional integration during the pandemic, which helped to insulate their economies as supply-chain bottlenecks and restrictions to restrain the virus choked trade elsewhere.

Intra-regional trade grew more than 31% in the first three quarters of 2021, after contracting 3% in the same period the year before, according to a report Wednesday from the Asian Development Bank. Trade within Asia made up 58.5% of the region’s total trade in 2020, its highest share in three decades.

Successful virus containment and swift vaccination in Asia’s major economies allowed them to become hubs for medical and consumer goods, boosting exports as other countries reopened and demand recovered, the ADB said. The new Regional Comprehensive Economic Partnership trade agreement is expected to boost trade prospects further.

“Asia supply chains have been more resilient compared to those in advanced countries,” ADB Principal Economist Jong Woo Kang told Bloomberg Television on Wednesday. This has helped keep any widespread inflation pressures at bay in the region, save for sporadic spikes in food prices, he said.

Foreign direct investment into the region also remained resilient, slipping only 1.3% in 2020 compared to a decline of nearly 35% globally. Digital services—driven recently by fintech, payments, data processing, and cloud computing—are emerging as a key sector, accounting for nearly one-quarter of the region’s FDI on average since 2003.

“The strengthening trade and value-chain linkages among economies in Asia and the Pacific are an encouraging sign for a resilient recovery from Covid-19,” ADB Chief Economist Albert Park said in a separate statement, adding that the pandemic reversed hard-won gains in reducing poverty.

Mobility remains a concern, as continued virus outbreaks curb the flow of migrant workers and tourists. Still, remittances are estimated to have grown by 2.5% last year, supported by increased use of digital channels and currency depreciation in their home economies, the ADB said.