Liberalisation of trade and FDI, along with increased investment in Asian infrastructure and human capital, will be necessary to revive the flagging trade and FDI links between Asia and Europe, according to discussions at the 2016 Asian Development Bank (ADB) annual meeting held in Frankfurt in May 2016.  

In the couple of decades prior to 2010, there was a dramatic increase in trade and FDI between Europe and Asia. But trade growth has since been sluggish, while FDI has become more volatile. “A combination of cyclical and structural factors has pulled down the growth in trade and FDI,” said Stephen Groff, vice-president, ADB. “The global financial crisis has had a big impact, together with the structural slowdown in the Chinese economy.”

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“It is now time for a new phase of trade liberalisation, especially with Asean [Association of South-East Asian Nations], the bloc of south-east Asian countries, which has the potential to be a new source of growth,” said Pierre Amilhat, a director from the European Commission’s directorate general for international co-operation and development. But as he explained, this will require attacking non-tariff barriers, which are more complex. The European Commission explored launching trade negotiations with Asean, but it proved too difficult. It is now resorting to bilateral trade negotiations with individual Asean countries.  

Mr Groff added that “many Asian countries also need to improve their logistics, connectivity and infrastructure to support renewed growth in trade and FDI”.  Liqun Jin, president of the Asian Infrastructure Investment Bank, noted that “many smaller Asian countries had not even benefited from the earlier boom in Asia-Europe trade and FDI due to their poor connectivity”.

Meanwhile, Bart Édes, the ADB’s director for social development, governance and gender, made a number of suggestions for improving emerging Asia’s attractiveness for FDI. “It is imperative for Asia’s emerging economies to improve the education and skills of their populations, especially through technical and vocational education and training, to be competitive and receive more FDI,” said Mr Édes. “They cannot just rely on low-cost labour to increase their productivity and move up the value chain”.  

Mr Édes stressed, in particular, “the necessity of giving more access to education and training to emerging Asia’s women, who in most cases suffer from discrimination”. He also emphasised the importance of fostering more healthy workers. “Most governments in emerging Asia spend very little on healthcare”, added Mr Édes.  “Improving Asia’s weak and fragmented social protection systems could also be helpful.”