Early delivery of RCEP could increase demand for new port facilities in Asia-Pacific

By Hu Weijia Source:Global Times Published: 2017/11/20 22:18:40

As Southeast Asian countries engage in fierce competition for investment in port construction, issues such as excessive infrastructure construction deserve attention.

Southeast Asia is probably at the point of maximum intensity for port development, with countries such as Singapore, Malaysia, Indonesia and the Philippines all having shown an intent to build new ports or modernize existing ones. These steps are necessary to raise each country's economic competitiveness, but some projects do not bring the expected economic benefits.

An ambitious plan to build a $45.5 billion mega port in Malaysia has been put on hold due to falling cargo volumes after global shipping alliances moved their operations to Singapore, the Straits Times reported on Friday. Malaysian Transport Minister Liow Tiong Lai subsequently denied that the port project had been shelved.

Still, it's undeniable that some ports in Southeast Asia will face the problem of insufficient utilization if too many ports are expanded or built.

Although some statistics show that 60 percent of the world's seaborne trade passes through Asia, exports from China, Japan and South Korea to the US and Europe account for a considerable portion of the business. As for the intermediate goods trade among Asian countries, that segment has grown slowly or even contracted in the past few years, according to a report released in March at the Boao Forum for Asia.

These factors mean that there's insufficient demand for port development in Southeast Asia, regardless of investment plans. But stopping construction is not a good solution. As Asian ports are growing, there is a need to boost Asia's intra-regional trade.

According to the World Bank, South Asia is the least integrated region in the world, with intra-regional trade accounting for less than 5 percent of the total, dwarfed by East Asia's 35 percent and Europe's 60 percent.

Increasing demand for port development by promoting regional integration is the optimal solution. An early delivery of the Regional Comprehensive Economic Partnership (RCEP), a free trade pact among 16 economies in the Asia-Pacific region, will help achieve this goal.

Southeast Asian countries should take advantage of their economic complementarity with China, Japan and South Korea to further integrate themselves into the Asian industrial chain. To do that, they will have to curb trade protectionism within their borders to promote the free flow of capital. Economic restructuring in Southeast Asia should be promoted gradually and patiently, but nobody can afford to be complacent. The effort is fundamental to boosting Asia's intra-regional trade.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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