Rapid economic growth in East Asia:

Foreign trade, FDAs direct drivers

Sanjeevi JAYASURIYA

There is a shift from market driven regional economic integration to institution driven regional economic integration. The prime drivers of the rapid economic growth in East Asia despite the global financial crisis are the foreign trade and foreign direct investment, said Graduate School of Asia- Pacific Studies, Waseda University, Tokyo Economics Professor Shujiro Urata.

Delivering a lecture on the recent trends of East Asian economy and Japan-Sri Lanka relationship he said Sri Lanka needs to analyze the possible ways to participate in regional production networks to benefit from recent developments in the regional economic integration in East Asia.

Rapid expansion of foreign trade by East Asian countries, especially by China, advances in regional economic integration, increased shares of machinery, electronic machinery and increase in parts and components trade could be seen in the recent past. These are results of regional production networks constructed in machinery sectors.

Among the factors contributed to rapid expansion of trade and FDI are stable macro economic environment, availability of low wage workers, business friendly environment, well- functioning infrastructure and liberalization of policies in trade and FDI. However, the challenge is to maintain and improve these factors, he said.

There is a marked increase in FTAs in Asia from three agreements in effect in 1989 to 92 agreements in effect by 2010. A total of 238 agreements have been entered into during this period. Bilateral trade between Japan and Sri Lanka remains more or less constant since 2000. The importance of bilateral trade in overall trade is declining. The potential for increase in bilateral trade seems large as their trade complementarity is high, he said.

Japan ranks 11th major export country while being the 5th major import country for Sri Lanka. Export value to Japan in 2010 was 219,514 million dollars while imports from Japan recorded 584,841 million dollars.