Full Report - Subregional Office for East and North-East Asia - escap

THE STATE OF INCLUSIVE AND SUSTAINABLE DEVELOPMENT IN UNCERTAIN TIMES CHAPTER 1
Box 1.5. (continued)
Given the above, ESCAP analysis shows that if South Asia, Africa and Latin America and Caribbean, whose trade costs remain
significantly high, could improve their trade logistics performance closer to the levels of their East Asian peers, their total
exports could increase by an additional $258 billion over 2013-2014, of which $194 billion dollars would be in South-South
exports (see figure B). The findings clearly indicate the potential of South-South cooperation to enhance the trade capacity of
low-performing developing countries.
Figure B. Additional South-South exports in 2013-2014, in billions of dollars (right) associated with
improvements in trade logistics, in Logistics Performance Index (LPI) scores (left)
4
3.5
3
2.5
2
1.5
1
East Asia South Asia Africa LAC
900
800
700
600
500
400
300
200
100
0
South Asia Africa LAC
Year-on-year change (%)
40
20
0
-20
-40
-60
Jap
Improvements assumed Current LPI scores
Additional exports
Baseline
Source: ESCAP.
This analysis is unique in that it applies recent estimations of export-cost elasticity in the context of narrowing the gap in
trade costs among the world’s major developing regions. In line with recent trade literature, the ESCAP analysis uses the
Logistics Performance Index (1=low to 5=high) as a proxy for trade costs and assumes an export-cost elasticity of 0.5. Taking
East Asia as a benchmark, the analysis assumes that South Asia, Africa and Latin America and Caribbean would each narrow
the differences in LPI scores by one-fifth. Baseline export volumes are calculated using 2011 export volumes from the World
Trade Organization (WTO) and 2012-2014 export growth projections from the United Nations Department of Economic and
Social Affairs. The share of South-South exports in total exports of South Asia, Africa and Latin America and Caribbean are
taken from the United Nations Conference on Trade and Development.
2008
1992
a Hoekman and Nicita (2008) find a one point reduction in the Logistics Performance Index score (1=low to 5=high) to be associated
with some 50% increases in both export and import volumes. Similarly, Arvis, Duval, Shepherd and Uktotham (2012) find a 10% improvement
in the Liner Shipping Connectivity Index score (max. value in 2004=100) to be associated with a 3.8% decrease in trade costs.
b ECOSOC (2008) estimated net disbursements of Southern development cooperation in 2006 at $12.1 billion, with China, India and Brazil
contributing between 0.04% and 0.11% of their GNI to ODA. Similarly, Zimmerman and Smith (2011) estimate that gross development
flows from selected countries beyond the OECD/DAC stood at nearly $11 billion in 2009, representing approximately 8% of global gross
ODA.
c China, Information Office of the State Council (2011).
2008
1992
Downside risks
World
Asia Pacific
Overall risks for the growth forecasts in 2013 remain
tilted to the downside. A key downside risk is a
sharper-than-expected economic slump in Europe.
Although the region’s direct financial exposure to
banks in the euro zone is not sizeable, systemic risks
could rise further under this scenario. Fiscal policy
uncertainty in the United States, commodity price
hikes due to heightened global financial liquidity and
World
Asia Pacific
continued geo-political risk in oil-producing areas, and
possible food price hikes due to droughts in major
food-producing countries pose additional risks. Within
the region, the pace of growth deceleration in China
and its implications for the direction of domestic
policy, such as through rebalancing the economy’s
sources of growth and property market corrections,
as well as a return of economic dynamism in India,
are important. On the upside, there is room for
macroeconomic policy responses to counteract the
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