China's Transportation Plan Will Boost Post-Pandemic Logistics – The Diplomat

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As China’s infrastructure improves further, it’s going to be harder than ever for U.S. multinationals to move to underdeveloped countries like Vietnam and Indonesia.
On January 18, China’s State Council released the 14th five-year plan for improving its transportation system. The document lays out ways in which to build and strengthen roads, railways, ports, and waterways, as well as the technology and human capital involved in the transportation industry. After the COVID-19 pandemic ends, supply chain bottlenecks will ease as new infrastructure addresses pre-pandemic constraints.
China’s transportation infrastructure has been a major focus throughout the development process. Currently, China has eight “vertical” (north-south) and eight “horizontal” (east-west) high-speed railways and has eliminated bottlenecks in regular speed railways. The ports have been modernized, and there have been improvements in waterway networks of inland rivers. Highways and bridges have been built up, connecting cities throughout the country.
China has struggled with some logistics issues, including the poor state of warehouses and transportation equipment, urban traffic congestion, and talent shortage in the logistics sector. The plan addresses these issues, promoting the development of intelligent warehousing and distribution facilities, improving equipment standardization, focusing on reducing urban and national expressway congestion, and devoting an entire section to strengthening talent and innovation. The plan will also improve the infrastructure of suburban railways, multimodal freight transportation, and specialized transportation services. The nation aims to go further by developing intelligent transportation technology and low-carbon transportation as well.
The 14th five-year transportation plan will complement increases in urbanization and consumer demand, in addition to factor supply movements. The government has elevated the goal of raising domestic demand for almost a decade, as China moves up the development ladder. In addition, customers are increasingly ordering goods online, increasing the need for specialized and express transportation services. As demand grows, existing transportation infrastructure must carry greater capacity. As a result, there will be a focus on improving internal and external land bridges, including those with connectivity between Beijing-Shanghai, Shanghai-Kunming, Guangzhou-Kunming, Beijing-Hong Kong-Macao, Heihe-Hong Kong-Macao, Ejin-Guangzhou, Qingdao-Lhasa, and Xiamen-Kashgar. This will ensure that demand is satisfied not only in major urban areas, but in sparser and more inland provinces as well.
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The plan also focuses on improving the logistics functions of key manufacturing industries, expanding transportation support for intelligent and flexible manufacturing. This is in line with China’s objective to spur innovation and implement new technologies throughout the economy. There has been much emphasis not only on developing new technologies for new industries, but also on infusing new technologies into existing industries, such as manufacturing and now logistics. The overall goal is to reduce logistics costs and increase efficiency. Costs are to be decreased by ensuring more flexible adjustment mechanisms for railway freight prices, reducing port shipping charges, and decreasing logistics taxes and fees.
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There is also a focus on improving international logistics, including cooperation with ASEAN and Maritime Silk Road countries, with a special call for increasing logistics information connectivity. This aspect of the transportation development plan meshes with the design of Belt and Road Initiative, which seeks to construct infrastructure across multiple continents.
China’s ongoing efforts to build up its transportation infrastructure and logistics sector make it even harder for multinationals considering a production shift to other Asian nations due to geopolitical conflict to leave China. Firms have found Vietnam and Indonesia to be at a severe disadvantage in terms of infrastructure development. As China strengthens its capacity to cater to multimodal and specialty transportation, its transportation infrastructure is rising to world-class levels.
Despite China’s extensive transportation infrastructure, the nation has faced severe supply chain bottlenecks during COVID-19 due to its zero COVID tolerance policy. Bottlenecks arose due to production and transportation shutdowns, followed by a surge in demand when the pandemic declined in severity in China and other nations. Some of the bottlenecks have been resolved through greater use of technology, particularly autonomous drones, which were used to transport goods and passengers to and from quarantine areas. The pandemic also shifted preferred modes of transportation from public to private to some extent, driving an increased use of motorized vehicles and bicycles.
Post-pandemic transportation will adjust to normal, as supply and demand in this sector calibrate to pre-pandemic levels or higher. China’s infrastructure will continue to be a selling point for multinationals producing and doing business overseas.
Dr. Sara Hsu is an expert in Chinese fintech, economic development, informal finance, and shadow banking. She is the author of “China’s Fintech Explosion.”

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Covid: Australia likely to see rise in intensive care cases – Daijiworld.com

Tulu comedy – 9pm IST
Sydney, Jan 2 (IANS): Increasing Covid infection is likely to push more people to intensive care units in Australia’s Queensland in the next 24 hours, the state’s chief health officer has warned.
The accelerating rate of Covid-19 cases after the borders reopened meant it was inevitable that more people would wind up in ICUs, Dr John Gerrard was quoted as saying by the Sydney Morning Herald on Saturday.
Although only one man was in intensive care on Saturday, Gerrard noted that the state’s doctors warned him that the intensive care situation would quickly change.
“As of last night, we still only had one man in the intensive care unit of one of our hospitals. He is not on a ventilator, and I spoke to one of his doctors last night and he was improving,” Gerrard said.
“However, I’m also led to believe by doctors in hospitals that we are likely to see additional admissions to intensive care in this next 24-hour period.”
Gerrard said even though the majority of people contracting Covid-19 would experience acean illness like the flu”, others “will still get seriously ill”.
“We must not underplay how severe this disease can be, and hence the increased need for masks indoors,” he said.
In just 12 hours on Friday, 2,266 Covid-19 cases were reported in Queensland, the report said.
On Saturday, Gerrard and Deputy Premier Steven Miles announced masks would be compulsory indoors, except where people were eating or drinking.
“I think the main thing is that if you are indoors and you are in doubt, wear a mask,” Gerrard said.
In the previous 24 hours, 149 people were in Queensland hospitals with Covid-19.
“Of those, doctors report they are treating 80 people in the wards with Covid-19,” Gerrard said.
He added that there was an increase in Covid-19 hospital care in the previous 24 hours.
“There does seem to be an increasing demand in the wards for the treatment of Covid-19 as we move more and more people who are relatively well into alternative accommodation or into their homes.”
As on January 1, Australia reported 35,326 new cases of Covid, setting a new record, while Queensland recorded 2,266 cases, a new record for daily case numbers. There is currently one person in ICU and 80 people in hospital.
 
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RCEP to boost ASEAN's post-pandemic economic recovery, says Malaysian analyst – Macau Business

The economies of the Association of Southeast Asian Nations (ASEAN) states will receive a much needed boost in their post-pandemic economic recovery with the implementation of the Regional Comprehensive Economic Partnership (RCEP) agreement, a Malaysian analyst has said.
In an interview with Xinhua, Oh Ei Sun, principal adviser for Malaysia’s Pacific Research Center, said that beyond the economic benefits of the world’s largest free trade deal to date, RCEP is a victory for multilateralism and a strong affirmation of China’s strong and continuous push for global free trade to be inclusive and balanced.
“China is the major trading partner of a number of Southeast Asian countries and ASEAN as a whole also became China’s largest trading partner,” Oh said.
“On that very successful basis, why not we extend it to include some other regional major economies right, such as Japan, South Korea, New Zealand and also Australia,” explained the Malaysian analyst.
Hopefully, with this extension, RCEP will become the world’s largest free trade bloc, and it should then serve as a leading light for the free trade movement in the world, he said.
This would spur post-pandemic economic recovery efforts by participating economies, allowing better integration of supply chains, common standards, and infrastructure through the China-proposed Belt and Road Initiative (BRI), and allowing the movement of goods, services and technology between RCEP participants, Oh said.
Oh pointed out that the trade agreement will serve as a demonstration of the success and benefits of multilateralism over narrow, nationalistic approaches to world trade, serving to bring up less developed countries, allowing for an inclusive and balanced sharing of prosperity.
“It doesn’t make sense anymore to be nationalistic, and simply confine your production, your marketing to your local national markets. It makes more sense for you to diversify, for example, your production bases to other ASEAN countries or even to countries such as Japan, China, South Korea, and so on. And similarly, you must explore markets beyond your own country, or even beyond ASEAN,” he said.
“Now with RCEP, you could explore the huge China market, you could explore the Japanese and South Korean markets and you could go down south to Australia and to New Zealand to explore the markets there,” he added.
RCEP, which took effect on Jan. 1, is made up of 10 ASEAN members, as well as China, Japan, South Korea, Australia and New Zealand, covering about 30 percent of the world’s population, as well as its gross domestic product and trade volume.
While Malaysia is a signatory, it has yet to ratify the pact due to delays in its parliamentary proceedings caused by the COVID-19 situation in the country.
RCEP is expected to be ratified when the lower house of Malaysian parliament convenes in February.

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ATF shows dependency of ASEAN nations in each other for growth – Khmer Times

The Minister of Tourism stated that the ASEAN Tourism Forum 2022 (ATF), ASEAN Plus Three (APT) ASEAN-India, ASEAN-Russia and all relevant partner organizations meetings have shown that the ASEAN nations have to work together to achieve growth.
The statement was made at the closing ceremony of the 40th ATF 2022 on the night of January 20 in Preah Sihanouk. The ceremony was held under the Minister of Tourism Thong Khon and Representative of Sandiaga Salahuddin Uno, Minister of Tourism and Creative Economy of the Republic of Indonesia, Ni Wayan Giri Adnyani.
In his closing ceremony, Minister Khon said, “ATF 2022 really shows how much we need each other for growth and connectivity.”
The Minister said that ATF 2022 has brought great results and achievements, with the member states having agreed on step-by-step announcement of the resumption of ASEAN tourism. The announcement of the revival of ASEAN tourism is a message of hope for tour operators and will boost trust and confidence of tourists.
Minister Khon stated that the success of ATF 2022 would not be possible without the strong support of all member countries and the diplomatic representation of each ASEAN country, as well as partners and journalists.
Indonesia speaks highly of Cambodia’s effort in Myanmar crisis
PM calls Indonesian President to discuss recent comment by Malaysia’s Foreign Minister

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 The Rohingya issue is currently an important international issue. More than 1.1 million Rohingyas have taken refuge in Bangladesh since August, 2017, due to genocide and ethnic cleansing in Myanmar. About 50,000 newborn Rohingya children are added to it every year.
The National Security Policy document issued by Islamabad last week is an effort to codify the Bajwa Doctrine into an actionable statement of purpose and a strategy for its realisation.
Oxfam, a confederation of charitable organisations, released a survey saying that over 160 million more people were forced into poverty during the first two years of the COVID-19 pandemic.
The US strategy in targeting China as an enemy can only bring about adverse consequences in the form of an intensified arms and militarisation race.
Rector of the Royal University of Fine Arts, Dr Heng Sophady, presided over the opening to the “Phnom Penh is a Fertile City.”
Previously, Dara is all excited about him getting a scholarship to study in the US. This week, Dara and his wife recall painful and emotional experiences they encountered during Khmer Rouge.
A major movie production slated for filming at Angkor has been put on hold, a further immediate blow to the local economy as international movie shooting brings big bucks.
Siem Reap’s 2020 arts and lifestyle coverage kicked off the year on an optimistic note that, with the wisdom of hindsight, turned out to be somewhat ironic.
Because our baby is now at the centre of our life, it has been mentally challenging since even getting a good night’s sleep or a decent meal has suddenly become a real task.

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PRIMER: ASEAN Taxonomy for Sustainable Finance – Version 1 – International Financial Law Review

This content is from: People & Culture
IFLR’s latest explainer looks at how the framework compares with other taxonomies and what implementation challenges it will present
January 07 2022
With a goal to provide a framework for the public and private sectors to work together on the development of an ASEAN taxonomy, the ASEAN Taxonomy for Sustainable Finance – Version 1 is a collaborative initiative of the sectoral bodies that make up the ASEAN Taxonomy Board.
What is the taxonomy about?
Taking into account the diversity of ASEAN countries, the taxonomy has a principles-based Foundation Framework that provides a qualitative assessment activities and a Plus Standard with metrics and thresholds to further qualify and benchmark eligible green activities and investments.

Key components include four environmental objectives and two essential criteria for the assessment of economic activities that promote transition to low carbon practices, such as climate change mitigation and adaptation; a list of focus sectors that the Plus Standard will cover, such as agriculture, electricity and manufacturing; a sector-agnostic decision tree in classifying economic activities under the Foundation Framework; and the stacked approach that will be used to determine thresholds and technical screening criteria under the Plus Standard.
“The ASEAN taxonomy is key to establishing a common language for sustainable finance among the ASEAN member states, as a strategic policy focus of the ASEAN finance ministers and central banks,” said Vivien Teu, partner and head of ESG at Dentons Hong Kong. “It reflects the capacity and will for a regional coordinated effort towards sustainability among the 10 members states, although the stages of development, cultural fabric and economic structure can be quite different from one country to another.”

What does the ASEAN taxonomy aim to achieve?
The ASEAN taxonomy seeks to create an umbrella framework which will harmonise other frameworks within scope in the region.

“Ultimately, taxonomies are designed to aid the flow of capital towards sustainable investment opportunities and in particular, to scale climate finance, providing a level of confidence for investors that they are funding activities that will be significant in the transition to a low carbon economy,” said Helena Fung, head of sustainable investment, APAC at the London Stock Exchange. “Given the amount of private capital required to transition economies in Asia towards alignment with the objectives of the Paris Agreement, ensuring that private capital is mobilised towards meeting these goals in ASEAN will be critical.”

The ASEAN taxonomy is intended to assist in that process.

“Investors welcome taxonomies as they can avoid greenwashing and help fund managers refine and benchmark sustainability at a more granular level,” said Rebecca Mikula-Wright, CEO at Asia Investor Group on Climate Change. “But they have to be credible to be effective in building trust and confidence.”

“The ASEAN taxonomy is significant for the region and it has moved quickly in parallel with other market-based taxonomies,” she continued. “Investors need clear and consistent standards and the ASEAN taxonomy can boost confidence in financial products in ASEAN and enhance transparency through a common framework.”

Mandatory climate risk disclosure requirements have come through quickly across Asia so there is strong likelihood that the ASEAN taxonomy would become mandatory as well, added Mikula-Wright.

See also: EU, China produce first Common Ground Taxonomy  

How does the ASEAN taxonomy compare with other taxonomies?
Compared with the EU taxonomy, the ASEAN taxonomy has a number of differences and the biggest one is that it takes a multi-tiered approach in classifying activities whereas the EU taxonomy uses a binary approach.

“The definition of whether an activity is sustainable is singular as the EU taxonomy has defined one threshold per activity that is applicable across all EU member states,” said Kelvin Tan, head of sustainable finance and investments, ASEAN at HSBC.

In contrast, the ASEAN taxonomy has a Foundation Framework that classifies activities into green, amber and red depending on whether an activity contributes to climate change mitigation. It also includes a Plus Standard that uses a stacked approach to determine thresholds and technical screening criteria.

“This means that for each activity, there are multiple decarbonisation pathways and, therefore, there could be more than one threshold that can be referenced at a single point in time,” said Tan. “The main motivation for multiple thresholds is to cater to the different starting points of entities across ASEAN undertaking a particular activity.”

However, the EU has realised the limitations to its binary approach and has published a draft report on an extended taxonomy to support transition activities.

One issue is the potential inclusion of gas-fired power into the ASEAN taxonomy. “This has been a concern for Europe and Korea’s taxonomies and might be asked of ASEAN,” said Mikula-Wright. “There is a need to avoid confusion around energy as too much inclusion could hurt the taxonomy.”

The ASEAN Taxonomy working group has been clear in setting out that the ASEAN Taxonomy has been developed and catered for ASEAN at a localised and regional level. “This is to cater for real and practical differences between ASEAN member across multiple facets: national and institutional differences, differences across stages of development, and sophistication and make-up of markets,” said Jeremy Saw, director and general counsel at InfraCo Asia, a company of the Private Infrastructure Development Group (PIDG).

For example, Singapore is a heavily services dependent economy, whereas agriculture, manufacturing, heavy industry may be significantly relevant to Indonesia, Vietnam or Cambodia, for example. These differences affect the thinking behind sustainability pathways and outcomes across ASEAN.

The ASEAN taxonomy seeks to provide an overarching framework for existing regional approaches, including the Bank Negara principles-based taxonomy and the work being undertaken by the Green Finance Industry Taskforce (GFIT) coordinated by the Monetary Authority of Singapore. “Of these, the Singaporean taxonomy is most similar to the EU taxonomy in that it contains a level of granularity in technical specifications for eligible activities and references the UN sustainable development goals,” said Fung.

Tan added: “The Singapore taxonomy will possibly dovetail with the Plus Standard in the ASEAN taxonomy and use a science-based glide path approach, compatible to international standards, and address some of the challenges highlighted on the ASEAN taxonomy.”

What will be the biggest implementation challenges?
The ASEAN taxonomy is not legally binding and is intended to provide a framework for interoperability across markets which may already have their own approach or be developing one. “Both Singapore and Malaysia have been involved with the International Platform for Sustainable Finance which released the Common Ground Taxonomy,” said Fung. “As many of the users of the taxonomies will be international financial organisations, there still needs to be some consideration given as to how these documents will fit together.” 

In addition, while the sector agnostic decision tree in the ASEAN taxonomy provides a clear guideline for categorisation of use of proceeds and project finance, it needs to do more. “One of the biggest challenges for taxonomies generally will be applying definitions towards assessing what companies are doing on the ground and how existing reporting enables classifications to be mapped against revenue streams as well as capital expenditures and operating expenses,” said Fung. 

Compared to the current need to disclose only entity-level data, the ASEAN taxonomy will require companies to disclose activity-level data to assess and classify activities under the taxonomy.

“Efforts will be required from companies to understand and determine what data they need to disclose as well as put in place processes to collect and report on such data,” said Tan. “Data reported by the companies may not be verified by a third party, which could also pose questions around the data’s quality and reliability.”

While the multi-tiered approach of the ASEAN taxonomy provides flexibility, its structure is complex. “It may be difficult for users to track how a given activity is being assessed in different countries across ASEAN, as the same activity could be qualified under one threshold in one member state and a different one in another,” said Tan.

Investors need to keep up with the changes to the taxonomy, such as new sectors that may be added and thresholds for activities may be included or excluded or change over time. “For fund managers, meeting disclosure requirements and engaging with portfolio companies is complex so harmonisation is critical,” said Mikula-Wright.

As not all activities under the taxonomy would be aligned with a ‘net zero by 2050’ goal and pathway, this introduces uncertainties around its interoperability with other taxonomies. “Investors outside of ASEAN, in particular those in jurisdictions with more stringent taxonomies, such as the EU, would have to navigate and decide whether they could leverage the ASEAN taxonomy while considering local requirements they may have to meet,” said Tan.

See also: DEAL: Bank of China’s world first sustainability re-linked bond

What aspects could be improved?
There are a few key areas that subsequent versions of the taxonomy will need to address, according to sources. “Firstly, determining a list of activities which could potentially be classified automatically as green or red activities,” said Tan. “Secondly, as the current draft of the taxonomy only addresses one environmental objective (climate change mitigation), there is a need to integrate the remaining three environmental objectives.”

These are climate change adaptation, protection of healthy ecosystems and biodiversity, and promotion of resource resilience and transition to circular economy, into the overall classification framework.

“Thirdly, more work can be undertaken to elaborate on the sector-agnostic decision tree template under the Foundation Framework,” said Tan. “More targeted questions can be designed to cater to ‘buckets’ of sectors with similar attributes and allow for a more targeted assessment of activity classification. Finally, thresholds can be developed for the focus sections under the Plus Standard.”

According to Saw, adoption, acceptance and broad-based market participation is where implementation in the near term will be focused. “In the end, wider adoption will likely be driven by the engagement, prerogatives and expectations of likely capital providers, stewards of capital, investment research houses and shareholder or stakeholder activists,” he said. “This will drive demand and green capital flows to relevant markets, corporates and financial products, which is then expected to drive disclosure and standard-setting demand.”

“As expectations adjust and markets adapt, we may in future see developments in reporting and disclosure requirements similar to EU markets,” he continued. “And perhaps a ratcheting up of minimum expectations and standards.”

“What would be interesting at that stage is to observe whether individual ASEAN markets start introducing individual rules such as stock exchange disclosure requirements, or whether an ASEAN consensus is sought first,” he concluded. “Another thing to watch out for is how different taxonomies start to interplay and align with the adopted IFRS standards and future audit outcomes around ESG pathways, taxonomies and financial reporting.”

See also: Green Islamic finance faces critical challenges
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Regional trade agreement burdens global carbon emissions mitigation – Nature.com

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Nature Communications volume 13, Article number: 408 (2022)
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Regional trade agreements (RTAs) have been widely adopted to facilitate international trade and cross-border investment and promote economic development. However, ex ante measurements of the environmental effects of RTAs to date have not been well conducted. Here, we estimate the CO2 emissions burdens of the Regional Comprehensive Economic Partnership (RCEP) after evaluating its economic effects. We find that trade among RCEP member countries will increase significantly and economic output will expand with the reduction of regional tariffs. However, the results show that complete tariff elimination among RCEP members would increase the yearly global CO2 emissions from fuel combustion by about 3.1%, doubling the annual average growth rate of global CO2 emissions in the last decade. The emissions in some developing members will surge. In the longer run, the burdens can be lessened to some extent by the technological spillover effects of deeper trade liberalization. We stress that technological advancement and more effective climate policies are urgently required to avoid undermining international efforts to reduce global emissions.
Regional trade agreements (RTAs) have been sweeping the world and have become ubiquitous in facilitating international trade and investment1,2,3. After an 8-year-long negotiation, the ten countries of ASEAN (Association of Southeast Asian Nations), China, Japan, South Korea, Australia, and New Zealand finally concluded the Regional Comprehensive Economic Partnership (RCEP) in November 2020 and it became the largest RTA in the world in terms of both economic size and population. According to the Schedule of Tariff Commitments in the RCEP Agreement, most trade in goods will be duty-free immediately or within ten years after the agreement enters into force. Tariff elimination in the region will reduce trade and production costs, resulting in considerable trade-creation and production-boosting effects.
However, increased international production fragmentation has raised concerns about the trade-climate dilemma (or pollution haven effect) of international trade4,5,6,7,8,9,10. That is, international trade increases global or regional emissions if developed economies with cleaner production technology and more stringent environmental policies transfer their polluting industries or production activities to developing countries, leading to emission leakages. Most RCEP member countries are typical developing economies that are less emission efficient in their manufacturing industries. In 2018, the amount of CO2 emitted by RCEP member countries accounted for a high share (39.1%11) of global CO2 emissions from fuel combustion. Therefore, the rapid growth of production activities and trade in an increasing number of less developed nations could impose non-negligible burdens on global and national emission mitigation. Since all the RCEP member countries have also committed under the Paris Agreement and the 2030 Sustainable Development Goals (SDG) of the United Nations12, quantifying both the potential economic gains and environmental burdens following RCEP is vital for balancing economic and environmental development when implementing RTAs.
There are two main strands of literature relevant to our study. The first strand of literature deals with the economic effects of RTAs by focusing on quantifying the economic welfare effects of RTAs13,14,15,16,17,18 and has largely neglected environmental problems. The second strand deals with the environmental side effects of international trade, which has substantially accounted ex post for the large carbon flows between countries via international trade19,20,21,22,23,24,25,26,27,28. The effect of international trade on emission level and intensity has also been intensively studied in the past decade29,30,31. Some studies consider the effect of international trade and foreign direct investment (FDI) when studying the energy-economy-environment relationship32,33,34. In fact, few studies have ex ante quantified the environmental effects of a trade agreement.
In this work, we estimate the carbon emission effects after evaluating the economic effects of RCEP tariff reductions. We estimate how and to what extent RCEP tariff reductions affect trade and economic welfare using a multi-sector and multi-country general equilibrium model13 from the perspective of global production networks or global value chains (GVCs)35,36. The results show that the RCEP tariff reduction will unleash trade-creation effects and improve all member countries’ economic welfares. However, we also find that complete tariff elimination within the RCEP bloc would increase the yearly global CO2 emissions by 3.1% if the emission intensities (CO2 emissions per unit of output) keep unchanged. Given that the annual average growth rate of global CO2 emissions from fuel combustion in the last decade was ~1.5%11, 3.1% represents a substantial burden on global CO2 emissions mitigation. The environmental burdens on some developing countries such as Vietnam and Thailand will surge. In the longer run, the learning-by-doing effects of deeper trade integration reduce the emission intensity and thereby lessen the emission burdens to some extent. However, they are not large enough to completely offset the burdens. As a result, we emphasize that technological advancements in reducing pollutant intensity are urgently required in more developing countries to offset the extra emissions caused by the RCEP. We also suggest that more effective climate policies for international trade should be designed and implemented.
In this subsection, we evaluate how and to what extent trade and welfare are affected by tariff reductions committed in the RCEP Agreement. Our estimation draws on three types of datasets: input–output (I.O.) tables, bilateral trade flows, and bilateral tariff data. Supplementary note 1 provides detailed descriptions of all the data used in our evaluation. We set the effectively applied ad valorem tariff rates in 2019 as the base world tariff structure before the RCEP enters into force. The effects of the RCEP tariff changes are evaluated by changing the tariff structure among RCEP member countries and leaving the tariff structure unchanged for countries outside the agreement.
Figure 1 presents the aggregate changes in multilateral trade for RCEP member countries when tariffs within the bloc decline to zero after the agreement enters into force. Unsurprisingly, tariff elimination will gradually unleash the agreement’s trade-creation effect and substantially strengthen the trade linkages between these countries before the RCEP. We also observe that the trade effects vary across members. First, the RCEP will significantly increase trade between China, Japan, and South Korea. Specifically, China’s exports to Japan and South Korea will increase by 17.6% and 33.9%, and Japan’s exports to China and South Korea will increase by 29.1% and 58.6%, respectively. Second, the RCEP will boost more trade for some ASEAN economies. For example, Indonesia’s exports to China, South Korea, Thailand, and Vietnam will increase quite markedly by 109.8%, 118.8%, 91.4%, and 103.0%, respectively. Similar effects will occur for certain other ASEAN economies, such as Malaysia, the Philippines, Thailand, and Vietnam. It is apparent that tariff elimination in the RCEP bloc will improve South-North and South-South trade. The equilibrium model indicates that the trade effects are determined by the magnitude of tariff reduction, export bundles, trade elasticity, and the intermediate input structure for the production of each sector in each country. The divergent effects shown in Fig. 1 are the complete results of these differently weighted factors. Another observation is that some bilateral trade (e.g., the exports of Singapore to Australia and Japan) will decline after the RCEP enters into force. This negative effect arises from trade diversion. For example, Singapore was already an almost entirely free-trade country before the RCEP. The RCEP tariff reduction substantially reduces the costs of trade with other members and raises their relative competitiveness. This process facilitates trade diversion from Singapore.
The figure presents the change rates in multilateral trade for the situation in which trade in goods among the Regional Comprehensive Economic Partnership (RCEP) members has zero tariffs. Two ASEAN (Association of Southeast Asian Nations) countries (Laos and Myanmar) are classified into the rest of the world because input–output tables for Laos and Myanmar are not available. We thus cannot provide results for these two countries. According to the Schedule of Tariff Commitments in the RCEP agreement (Supplementary note 1), most tariff reductions will be implemented within ten years, which implies that most of the impacts will be achieved within ten years. The results for the cases in which the tariffs decline to the committed level in years 1, 5, 10, and 20 after the RCEP enters into force are provided in Supplementary Tables 47. The results for any other years are also available upon request.
Table 1 presents the results of welfare effects for RCEP members. It shows that all members benefit from the RCEP tariff reductions, with most small countries gaining more than large ones. The first column presents that all RCEP members’ real wages will increase, with Cambodia increasing the most. The second column shows that the welfare (the summation of labor income, tariff revenues, and trade deficits) of Vietnam, Cambodia, and Singapore will increase the most, by 15.6%, 8.5%, and 3.8%, respectively. The effects for large economies such as China and Japan are smaller. This result supports the convergence theory that trade liberalization enables small developing economies to develop faster than more developed countries.
To reveal how each member’s welfare is improved, we decompose the total welfare effects into the volume of trade effect (columns 3 and 4) and terms of trade effect (columns 5 and 6), which are further decomposed separately into the results of trade with RCEP members versus trade with other economies outside the RCEP Agreement (the rest of the world, RoW). Columns 3 and 4 show that trade with RCEP members rather than the RoW is the most important contributor to the increase in all members’ volume of trade. Comparing with the results in columns 5 and 6, we can find that creating more trade within the RCEP bloc also makes the most significant contribution to the increase in welfare for member countries—South Korea, Cambodia, Malaysia, the Philippines, Thailand, and Vietnam. In addition, trade reductions with the RoW generate slightly negative welfare effects for most members. The reason for such negative effects stems from the RCEP diverting trade from non-RCEP member countries.
Columns 5 and 6 show that the aggregate terms of trade for almost all members improve, whereas South Korea’s and Thailand’s terms of trade deteriorate slightly. This differential performance can be attributed to the divergent changes in the export prices of each country, as terms of trade compare the price of a country’s export with the price of its import. The model shows that export prices are determined by the unit costs of input bundles, namely, the combination of labor costs (i.e., wages) and the prices of intermediate inputs. Column 1 shows that the RCEP will increase the real wages of all members, which increases export prices. However, other things being equal, the prices of intermediate inputs will decline with tariffs on imported intermediates. Such effects can further be propagated through input–output linkages. As a result, the change in the prices of intermediate inputs decreases export prices. Ultimately, for most RCEP members, the increase in real wages is larger than the decrease in the prices of intermediate inputs, which results in a positive effect on terms of trade. For other economies, the contrary is the case.
Supplementary Tables 8 and 9 provide the welfare effects of RCEP tariff reductions on economies outside this agreement. The effects are twofold. On the one hand, as explained above, the agreement generates trade diversion towards RCEP members. On the other hand, in an era of increased international fragmentation, the production activities of trade products in countries outside the RCEP require intermediate inputs from RCEP members. The decreased prices of such intermediate products due to RCEP tariff reductions also change the production costs, export prices, and terms of trade in economies outside the RCEP. As a result, the effects are negative for some non-RCEP economies but positive for others. However, the impact is minimal.
For each RCEP member, we calculate the sectoral contribution to its aggregated change in volume of trade and terms of trade. First, as shown in Fig. 2, the contribution varies considerably across countries and sectors. For example, mining is the sector with the most significant contribution to the change in Australia’s terms of trade, whereas electrical equipment is the most significant contributor for China and Japan. Second, agriculture (and food products for some countries) significantly contributes to changes in the volume of trade in many countries, including China, Japan, South Korea, New Zealand, the Philippines, and Thailand. The reason is that agriculture is strongly protected in most countries, as the current tariffs are relatively high. For example, the average tariffs applied by Japan to its imported food products and agriculture in 2019 were 10.74% and 5.84%, respectively, which were the largest and second-largest import tariffs among all Japanese goods sectors. Agriculture (and food products) is a homogeneous goods sector with high-import tariff trade elasticity. A slight reduction in the tariffs for this sector can improve the trade volume considerably because it is relatively easy to change suppliers. Petroleum in some countries is similarly affected for similar reasons.
The left graph presents the sectoral contribution to the aggregate changes in the volume of trade in the case that all trade in goods among the Regional Comprehensive Economic Partnership (RCEP) members are duty-free, while the right graph presents the results for terms of trade. For a country, the column-wise summation of all sectors’ contributions equals 100%. The description of the tradable sectors is provided as follows (Supplementary Table 1). Agriculture: agriculture, forestry, and fishing; Mining energy: mining and extraction of energy-producing products; Other mining: mining and quarrying of non-energy-producing products; Mining service: mining support service activities; Food: food products, beverages, and tobacco; Textile: textiles, wearing apparel, leather, and related products; Wood: wood and products of wood and cork; Paper: paper products and printing; Petroleum: coke and refined petroleum products; Chemicals: chemicals and pharmaceutical products; Plastic: rubber and plastic products; Minerals: other nonmetallic mineral products; Basic metals; Metal products: Fabricated metal products; Computer: computer, electronic, and optical products; Electrical: electrical equipment; Machinery nec: machinery and equipment, nec; Motor vehicles: motor vehicles, trailers, and semi-trailers; Other transport: other transport equipment; Other: other manufacturing, repair, and installation of machinery and equipment.
Another notable observation is that a handful of sectors—electrical equipment, machinery and equipment, and motor vehicles—explain a high proportion of the changes in terms of trade in many countries (China, Japan, South Korea, and some ASEAN economies). This is the combined result of tariff reduction, the share of intermediate inputs required in the production process, and intersectoral linkages. Although the tariff reductions in these technology-intensive sectors are not the largest, they are considerable for some countries. More importantly, these sectors use a considerably larger share of intermediate inputs in production than other sectors. They also have stronger input–output linkages with other sectors. Therefore, a decrease in the unit production costs in these sectors has a larger multiplicative effect and thus a larger impact on terms of trade.
The synergy of tariff elimination within the RCEP bloc substantially reduces the costs of intraregional trade and production and thus increases the outputs of the member countries. As a result, carbon emissions will also increase significantly if the emission intensities (emissions per unit of output, tonnes CO2 per US dollar in 2015) do not decrease enough to offset the extra emissions caused by the increase in production outputs. Assuming the emission intensities of all countries stay at the same level as that in the year 2015, the global CO2 emissions from fuel combustion would increase by 251.4 million tonnes (Mt; 0.8% compared to the amount in 2018) when the tariff structure changes to that specified for the first year after the RCEP enters into force. When the tariffs continue to decline to the level in the 5th and 10th years and then to zero, global CO2 emissions will increase by 463.7 Mt (1.4%), 756.4 Mt (2.3%), and 1046.5 Mt (3.1%), respectively. Recalling that global CO2 emissions grew at an annual average rate of 1.5%11 in the last decade, these results indicate substantial burdens on carbon-emission mitigation.
The increased CO2 will be emitted mainly by RCEP member countries. In the situation of all trade in goods in the RCEP region becoming duty-free, the production of RCEP members would increase emissions by 789.1 Mt CO2 (Fig. 3d), accounting for 75.4% of the increased global emissions. Among, Mainland China will be the largest contributor in terms of absolute value (495.7 Mt CO2, 47.4% of the increased global emissions), followed by the ASEAN economies (164.7 Mt CO2, 15.7%) and Japan (52.7 Mt CO2). In terms of magnitude, Vietnam will increase the most (16.5%), followed by Malaysia (16.1%) and Thailand (13.6%). The results indicate that the emission intensities in these countries must decrease by the same magnitude to ensure that the CO2 emissions do not increase. The magnitude of the decrease should be larger if countries aim to reduce their emissions. Such an ambitious target could be a non-negligible burden, especially for some developing ASEAN economies.
a, b, c present the changes and change rates in the amount of CO2 emissions emitted by different economies for the cases, in which the tariffs within the Regional Comprehensive Economic Partnership (RCEP) bloc declined to the level in year 1, 5, and 10 after the RCEP enters into force, respectively. d presents the corresponding results for the case in which trade in goods among RCEP members is ultimately duty-free. e gives the ratio of economic welfare change to the CO2 emission change rate for RCEP members (Supplementary Table 10). ASEAN denotes the Association of Southeast Asian Nations. Here, Laos and Myanmar are still classified into the rest of the world (RoW) for the same reason as given in the note of Fig. 1.
In Fig. 3e, we also present the ratio of welfare change to the CO2 emission change rate for RCEP members. The ratio gives the welfare gains at the cost of a 1% increase in carbon emissions. Vietnam, Singapore, and Cambodia are the greatest gainers in this ratio, whereas China and Japan rank at the lower end.
The increased carbon emissions are driven by the rise of production for both domestic expenditures and trade. As mentioned above, the RCEP tariff reductions bring mainly trade-creation effects within the RCEP bloc and cause trade diversion between RCEP members and non-RCEP economies. An RCEP member may emit more CO2 in its increased trade with other RCEP members and reduce carbon emissions because of its decreased trade with non-RCEP economies. We employ the environmentally extended inter-country input–output (ICIO) model to account for the comprehensive carbon-emission changes due to trade changes. The results show that trade changes in the case of all trade in goods within the RCEP bloc becoming duty-free would increase CO2 emissions for China, the ASEAN countries, South Korea, Japan, Australia, and New Zealand by 130.2 Mt, 70.4 Mt, 27.2 Mt, 22.5 Mt, 4.8 Mt, and 0.5 Mt, respectively.
We also find that trade changes slightly increase the amount of CO2 (61.2 Mt) emitted by RoW (non-RCEP economies). The emission effects of RCEP on non-RCEP economies are twofold. On the one hand, RCEP tariff reductions reduce the direct exports of some non-RCEP economies to RCEP members for reasons we discussed in the previous section, which will reduce the emissions of some non-RCEP economies. On the other hand, the increased production for trade within the RCEP bloc requires more intermediate inputs from some economies outside the RCEP. The economic activities associated with the increased production of such intermediate products generate more CO2 emissions in non-RCEP economies. Due to the increased international production fragmentation, the emissions generated by these indirect linkages can be substantial. The fact that the RCEP increases overall emissions by economies outside indicates that the indirect effects are larger than the direct effects.
Figure 4 visualizes increased CO2 emissions due to changes in bilateral trade flows, which tells us who emits increased CO2 for whom. It shows the amount of CO2 emitted by a region of origin for the production of its increased exports to the destination. The largest flow is 44.3 Mt CO2 for China’s increased exports to the ASEAN countries. Other large flows include emissions for the increased exports of the ASEAN countries to China (40.2 Mt CO2), China to Japan (36.1 Mt CO2), and China to South Korea (27.8 Mt CO2). Figure 4 also shows that the increase in exports of Japan (20.4 Mt CO2) and South Korea (29.3 Mt CO2) generates a relatively small increase in the CO2 emissions of these countries. However, their imports generate considerable increases in CO2 emission (57.8 and 60.3 Mt CO2) in the source countries. The results indicate that developing RCEP members, including China and some ASEAN economies will increase CO2 for the developed members.
The graph distinguishes seven regions as the origin (the left) and destination (the right). These are China, the ASEAN (Association of Southeast Asian Nations, not including Laos and Myanmar), Japan, South Korea, Australia, New Zealand, and the rest of the world (RoW). The graph presents the increased amount of CO2 emitted in the region of origin for its production of exports to a destination (Supplementary Table 11).
Figure 5 shows the sectoral contribution to aggregate CO2 emission changes generated by trade changes for RCEP members. The exports of electrical equipment contribute the most to China (14.5%), the ASEAN countries (12.7%), Japan (18.7%), and South Korea (23.7%). The other two large contributors are machinery and equipment (second largest for China and the ASEAN countries, third-largest for Japan and South Korea) and computer, electronic, and optical products (second for South Korea, third for China, and fifth for Japan). The motor vehicle industry makes the second-largest contribution (17.8%) to Japan, but its contribution to other countries is relatively small, indicating Japan’s strong comparative advantage in this industry. For Australia and New Zealand, the increased trade generates a very small increase in emissions. The major contributors are mining for Australia and agriculture for New Zealand.
The pie charts present for the Regional Comprehensive Economic Partnership (RCEP) members the sectoral contribution to their CO2 emission changes caused by trade changes (Supplementary Table 12). ASEAN denotes the Association of Southeast Asian Nations, but Laos and Myanmar are not included due to data unavailability. The sector classification is the same as in Fig. 2, but here we aggregate the three mining-related sectors into one mining sector. Agriculture: agriculture, forestry, and fishing; Mining: mining and extraction of energy-producing products, mining and quarrying of non-energy-producing products, mining support service activities; Food: food products, beverages, and tobacco; Textile: textiles, wearing apparel, leather and related products; Wood: wood and products of wood and cork; Paper: paper products and printing; Petroleum: coke and refined petroleum products; Chemicals: chemicals and pharmaceutical products; Plastic: rubber and plastic products; Minerals: other nonmetallic mineral products; Basic metals; Metal products: fabricated metal products; Computer: computer, electronic and optical products; Electrical: electrical equipment; Machinery nec: machinery and equipment, nec; Motor vehicles: motor vehicles, trailers, and semi-trailers; Other transport: other transport equipment; Other: other manufacturing, repair, and installation of machinery and equipment.
The finding that RTAs increase participants’ economic welfare at the cost of environmental burdens can be explained by the fact that in real economic interactions, what, how much, and with whom to trade are still determined based on economic profitability rather than environmental considerations. In a Ricardian world, a country exports more products in which it has a comparative advantage in terms of production. The advantage is defined as using fewer of the resources under consideration. Traditionally, labor was such a resource, and additional trade generated from lower trade costs led to increased welfare and emissions in each trading country. Alternatively, if we consider environmental aspects, the story changes. For instance, if we define the advantage as generating fewer emissions in producing a certain product37, increased trade in this product will reduce emissions in both countries.
The main channels through which a country’s emission is determined are the scale effects, the sectoral composition effects, and the technique (intensity) effects30. The results of emission burdens presented above focus on the first two channels holding the last channel constant. Next, we examine how trade liberalization following RCEP may affect the emission intensity and whether such effects lessen or intensify the emission burdens driven by the scale effects and the sectoral composition effects. Specifically, we examine the effects of global value chain (GVC) participation on emission intensity. GVC participation indicators measure to what extent countries/industries/firms are involved in globally fragmented production. GVC participation may affect emission intensity via pollution outsourcing arising from imports of intermediate inputs, intensified competition or knowledge spillover which encourages process innovation and technological upgrading, and other channels29. As the deepened GVC participation can be considerably attributed to the reduction of trade costs in the past decades38, we use GVC participation as a proxy of trade liberalization to examine its effects on emission intensity. We distinguish between forward and backward GVC participation because they reflect two different ways of participating in GVCs. Therefore, they may have different effects on the emission intensity of developed countries and developing countries. The forward participation reflects a country’s supplying intermediates to other countries for further production, while the backward GVC participation measures to what extent the country imports intermediate inputs to produce its products39.
In Supplementary Note 2, we provide in detail how we measure forward and backward GVC participation using the ICIO table and how we capture the effects of GVC participation on emission intensity using panel regression techniques. Table 2 presents the results. We observe that the effects of forward and backward participation on developed countries and developing countries are different. Forward participation has significant reducing effects on the emission intensity for developed countries, while it has no consistent significant effects for developing countries. A possible explanation for this observation could be their difference in forward GVC participation. For developed countries, forward integration into GVCs typically means outsourcing parts of relatively dirty production activities. This process helps to lower its emission intensity. However, for developing countries, forward participation in GVCs tends to be providing (cheap) labor and raw materials and specializing in emission-intensive production40. This process may generate economic gains and increase emission levels but does not necessarily alter emission intensity in developing countries.
Backward GVC participation has no significant effects until an extended time period (about 3–5 years). The effects do not materialize in the short run. Deeper backward participation indicates that a country increases its imports of intermediate inputs to process into products for domestic consumption and/or export. It does not suggest that the country will necessarily substitute its domestic production with imports. This explains that we do not observe a significant negative effect on emission intensity contemporaneously. In the medium and long run, we observe that increased backward participation reduces emission intensity for both developed and developing countries, and it reduces more of the emission intensity for developing countries than for developed countries. It increases a country’s foreign market access to cleaner intermediate inputs, creating knowledge spillovers, stimulating upgrading, and thus reducing the emission intensity. However, such upgrading-by-doing effects materialize in the long run rather than contemporaneously. The results also suggest that backward participation provides more upgrading opportunities for a developing country. This finding is consistent with the convergence theory that learning-by-doing enables lagging countries to catch up with the leaders of emission efficiency in the longer run.
Forward and backward GVC participation focuses on the effects of trade in intermediate inputs on emission intensity. We also examine the effects of trade in final goods on emission level and emission intensity. We find that imports of final goods can substitute domestic production and thus reduce domestic emissions. However, we find no robust significant effect of trade in final goods on emission intensity, which attests that trade in final goods alters a country’s emission level but does not necessarily change the emission intensity.
Comprehensively considering the effects of GVC participation and trade in final goods, we conclude that trade liberalization reduces the emission intensity of developed countries to a larger extent. The effects of GVC participation on developing countries materialize mainly via backward participation in the medium and long run. Therefore, we conclude that the intensity effects of deeper GVC participation following RCEP can lessen the emission burdens that we present in the section above for developed members such as Japan and South Korea in a relatively short run. The intensity effects can also lessen the emission burdens for developing countries. However, it takes longer, and the intensity effects are not strong enough to completely offset the burdens. To be specific, our estimations indicates that China’s emission intensity can potentially decline by 0–1.8% due to the deeper GVC participation. This reduction in emission is not large enough to offset China’s burdens, recalling the results above that RCEP increases China’s emissions by 2.7% and 4.0%, respectively, in the 5th and 10th year after it enters into force. A similar situation applies to most developing ASEAN economies.
The world trade system has been seriously undermined due to huge shocks, such as the COVID-19 global pandemic, the United States–China trade conflict, and Brexit, which to some extent have stimulated the formation of more RTAs. In this paper, we estimate the economic gains and the corresponding carbon-emission burdens of the RCEP. The results show that RCEP tariff elimination will substantially reduce intraregional trade costs and product prices, increase the comparative advantage of regional products, and ultimately improve the welfare of all member countries. Meanwhile, we point out that policymakers should pay attention to the environmental impacts of the RCEP since our results indicate non-negligible increases in potential CO2 emissions caused by the RCEP. However, we emphasize that anti-globalization is far from a possible strategy for global emission mitigation. Although de-globalization could reduce international trade and the corresponding embodied carbon emissions in the short term41, it harms the economic welfare of all countries and threatens international efforts to fight climate change in the longer run. Our regression results show that deeper GVC participation reduces the emission intensities of the participating countries. Returning to autarky cuts off developing countries’ opportunities to participate in GVCs and then upgrade their emission technologies through learning-by-doing. In addition, anti-globalization will hinder international cooperation that aims to mitigate global emissions42.
Instead, we emphasize that technological advancements in reducing pollutant intensity are urgently required in more developing countries. We find that the carbon-emission intensities (CO2 emissions per unit of output) in all member countries should decline to offset the extra emissions caused by the RCEP, particularly for the developing member countries. Our calculations based on data for 2015 show that the emission intensities of China (2.83 times) and most ASEAN economies, such as Vietnam (2.25 times), Malaysia (2.11 times), and Thailand (2.04 times), were more than twice that of Japan. Our regression results based on historical data show that the technological spillover effects of trade integration are not strong enough to offset the emission burdens for developing countries. Therefore, on the one hand, strengthening regional and international coordination between developed RCEP members and developing members are very necessary to accelerate the diffusion of cleaner production technologies to the developing members when implementing the trade agreement. This process will help accelerate improvements in emission performance in developing countries. On the other hand, developing nations should accelerate efforts to reduce their emission intensity gap with developed nations. For example, as the world’s factory and the largest emitter of CO2, in 2021, China pledged to achieve carbon neutrality before 2060, which is largely consistent with the 1.5 °C warming limit43. The country is making greater efforts and taking a series of measures to achieve this challenging goal.
Since all the RCEP countries have committed to the Paris Agreement and the SDG agenda of the United Nations, these nations are highly motivated to ensure economic development and environmental sustainability in tandem12. The majority of the RCEP members should mitigate their fossil fuel dependencies and improve the share of renewable energy in their energy consumption basket. It is suggested that research and development be strengthened to develop renewable energy and enhance technological innovations to reduce pollutant emission intensity further. Investments (e.g., via carbon tax, green bonds, or other relevant financial tools) should be directed at relatively greener production and consumption activities across these nations.
Our findings also suggest that more effective climate policies for international trade should be designed and implemented as we find that some members will emit increasing CO2 for other countries. Some often discussed policies include levying carbon tax on international trade and setting an international carbon price floor with border tax adjustments44. We stress that the premise of such policies is a robust and fair accounting system to assign responsibility for internationally traded emissions. Currently, the production-based accounting (PBA) system is in practice widely adopted to assign responsibilities for global environmental problems to individual countries, but it ignores potential carbon leakages through international trade. Consumption-based accounting (CBA) includes the emissions that are emitted at home or in a foreign country but which are embodied in the final products that are consumed at home. CBA redistributes the emissions from PBA, but it still has its problems37. Several researchers proposed further refinements in CBA for assigning the responsibilities for global emissions45,46,47,48,49,50,51,52. Despite these efforts in academia, national and global climate policies have not adopted such adjusted accounting systems so far. Therefore, we call for the idea of governments and researchers working together to design robust and fair accounting tools, develop and implement effective global and regional climate policies, and share the responsibility of global emission mitigation53,54,55,56.
This study has potential extensions that are worthy of pursuit. First, we did not measure other potential environmental impacts, of which the most important include air pollutants (e.g., fine particulate matter, PM2.5) associated with fuel burning. Second, we currently measured economic welfare due to tariff reduction following RCEP. We did not incorporate endogenous environmental regulations into the equilibrium model. Therefore, the negative welfare effects caused by pollutant emissions are not included in the welfare. Future studies can extend the model by incorporating environmental regulation into the production function and household utility function31. The extended model can be used to conduct policy analysis by investigating potential environmental regulations that align with economic development goals and optimize the economic and environmental welfares of RCEP members. For example, to explore optimal emission tax levels that maximize the welfares of a specific RCEP member after the agreement enters into force.
Third, we did not consider the influence mechanism by which the barriers in services trade and investment in the RCEP region will also decrease under the agreement. Both international trade and cross-border investment can influence a country’s economic welfare and environmental issues. Although global flows of FDI shrank in recent years57,58 and fell sharply by one third59 in 2020 due to the COVID-19 pandemic, FDI among RCEP members will likely continuously increase after the RCEP enters into force. Increasing FDI may facilitate relocating some climate-unfriendly industries or production activities from industrialized RCEP members to developing countries24,25. FDI may also bring cleaner technology to developing members, which would help reduce the emission intensities. As a result, FDI may cause multidimensional environmental influence on RCEP members. Future studies are expected to provide quantitative analyses of the effects of qualitative cross-border investment rules in the RCEP Agreement on the volume and direction of FDI flows. More in-depth analyses are also expected to allocate the carbon footprints of FDI flows and explore sharing environmental responsibility between FDI home and host countries.
This section outlines the model13 that we employ to quantify the effects of RCEP tariff reductions on trade and welfare. The world consists of n countries, and there are m sectors in each country. Countries are denoted by s and r and sectors by i and j. The households in country r derive utility from consuming final products ({C}_{r}^{j}), and ({alpha }_{r}^{j}) is the corresponding sectoral consumption weight. The function is Cobb–Douglas and given by
There is a continuum of intermediate products ωj produced in sector j. Primary inputs (labor) and a bundle of intermediate inputs from all sectors are used for the production of ωj in country r. The production technology is
where ({z}_{r}^{j})(ωj) denotes the efficiency in producing ωj in country r. ({{lab}}_{r}^{j})(ωj) is labor and ({{int}}_{r}^{i,j})(ωj) are the intermediate inputs from sector i required in the production of ωj. ({gamma }_{r}^{j}) denotes the share of value-added in production output, and ({gamma }_{r}^{i,j}) denotes the share of products from sector i used as intermediate inputs in the production of ωj, with ({sum }_{i=1}^{m}{gamma }_{r}^{i,j}+{gamma }_{r}^{j}=1). The cost of an input bundle is given by
where ({w}_{r}) denotes the wage rate, ({P}_{r}^{i}) gives the price of intermediate inputs from sector i, and ({B}_{n}^{j}) is a constant. ({c}_{r}^{j}) clearly incorporates all the intersectoral linkages which can be obtained from input–output tables.
In an open economy, producers minimize their production costs and purchase intermediate products from suppliers across countries. However, trade is costly. We denote ({k}_{{rs}}^{j}) as the bilateral trade cost for country r’s imports of sector j products shipped from country s. It consists of an ad valorem tariff (({tau }_{{rs}}^{j})) and iceberg trade cost (({d}_{{rs}}^{j})), ({k}_{{rs}}^{j}=(1+{tau }_{{rs}}^{j}){d}_{{rs}}^{j}). Using Eaton and Kortum’s60 representation of technologies which allows production efficiency to distribute Fréchet, we can derive the price of the intermediate product as
where ({G}^{j}) is a constant, ({lambda }_{s}^{j}) reflects absolute advantage as a higher value indicates more likely a draw of high efficiency, and ({theta }^{j}) captures comparative advantage as a lower value indicates a higher dispersion of efficiency. ({lambda }_{s}^{j}) and ({theta }^{j}) reflect Ricardian trade61.
The properties of Fréchet distribution further enable us to derive the bilateral trade share as
As shown, any changes in tariffs (({tau }_{{rs}}^{j})) can affect trade costs (({k}_{{rs}}^{j})) and thus directly affect trade shares. Equations (2) and (3) show that changes in tariffs also affect the cost of input bundle (({c}_{s}^{j})) and thus have an indirect effect on trade.
The total expenditure on the products of sector j in country r is the summation of firms’ expenditures on intermediate products and households’ expenditures on final products. It is given by
where
represents the total household income in country r, i.e., the sum of labor income (({{w}_{r}L}_{r})), tariff revenues (Rr) and trade deficits (Dr). In particular, ({R}_{n}={sum }_{j=1}^{m}{sum }_{s=1}^{n}{tau }_{{rs}}^{j}{M}_{{rs}}^{j}), where ({M}_{{rs}}^{j}={X}_{r}^{j}frac{{pi }_{{rs}}^{j}}{1+{tau }_{{rs}}^{j}}) is country r’s import of sector j products from country s. The trade deficit of a country is the summation of sectoral deficits, ({D}_{r}={sum }_{j=1}^{m}{D}_{r}^{j}), and sectoral deficit is given by ({D}_{r}^{j}={sum }_{s=1}^{n}{M}_{{rs}}^{j}-{sum }_{s=1}^{n}{E}_{{rs}}^{j}), where ({E}_{{rs}}^{j}={X}_{s}^{j}frac{{pi }_{{sr}}^{j}}{1+{tau }_{{sr}}^{j}}).
The next step is to solve for changes in wages and prices given that the tariff structure τ is changed to τ′. Instead of solving for two equilibria under τ and τ′, Caliendo and Parro13 propose solving for an equilibrium in relative changes so that it is not necessary to estimate some parameters that are difficult to identify. Let a variable with a circumflex “(hat{x})” denote its relative change. The equilibrium in relative changes satisfies the following conditions:
Introducing into the model the changes in tariff structure, we can solve for changes in (total and bilateral) trade flows, real wages (({w}_{r}/{P}_{r})), welfare (({I}_{r}/{P}_{r})), and production output for each country. The change in welfare can be decomposed into volume of trade effect and terms of trade effect. The welfare change can also be calculated at both the bilateral and sectoral levels. We can calculate the change in volume of trade and terms of trade between country s and r, and the change in a specific sector j of country r.
The RCEP tariff reductions lead to changes in multilateral trade flows resulting in trade-related carbon emissions changes. We adopt the environmentally extended ICIO model (see Supplementary Table 2 for the stylized table62) to account for the carbon-emission changes. Denote the following as the flows of final products among different countries:
And,
is the global direct input–output coefficient matrix. Its typical element ({a}_{{ij}}^{{sr}}) provides the intermediate input from sector (i(=1,cdots ,m)) in country (s(=1,cdots ,n)) used by sector (j(=1,cdots ,m)) in country (r(=1,cdots ,n)) for producing one unit of output. ({{{{{{bf{A}}}}}}}^{{rr}}) and ({{{{{{bf{f}}}}}}}^{{rr}}) provide intra-country flows of intermediate products and final products. ({{{{{{bf{A}}}}}}}^{{sr}}) and ({{{{{{bf{f}}}}}}}^{{sr}}(s,ne, r)) represent trade in intermediate products and trade in final products, respectively. According to the standard input–output model31, the gross output vector y is
where I is an (nm × nm) identity matrix, and u is a summation vector of appropriate length with all elements being ones.
Let w be the CO2 emission coefficient vector, the elements of which provide the emissions per unit of output. Then, the CO2 emission vector e can be written as
The left side of Eq. (15) equals the summation of CO2 emissions in all sectors in the world, which equals global CO2 emissions. This equation can be adapted to allow us to calculate the CO2 emissions (({{{{{{rm{e}}}}}}}^{r})) in a specific country (r). This can be obtained by replacing the vector ({{{{{bf{w}}}}}}) in Eq. (15) with a vector ({{{{{{bf{w}}}}}}}^{r}). The new vector has equal length, but only the CO2 emission coefficients for the sectors in country (r) are retained while all other elements are set as zeros. This yields
Equation (16) allows us to calculate, for example, the part of Thailand’s CO2 emissions that are generated by the exports of final products from Japan to final users in China. The production processes for trade between Japan and China may consume intermediate products from Thailand, of which the production emits CO2 in Thailand. Using the global Leontief inverse, we can take fully into account these indirect effects in Eq. (16).
To calculate the CO2 emission changes in country (r), we compare two situations. The first is the actual situation, and the second is the case in which multilateral trade flows are changed due to RCEP tariff reductions. Moving forward from Eq. (16), we develop the following equation:
where
Equation (17) enables us to consider the changes in both trade in final products and trade in intermediate products. The changes in bilateral trade flows can be obtained at the sectoral level after solving the equilibrium model described above.
National and ICIO tables are from the most recent OECD Input–Output Database63 (2018 edition, https://stats.oecd.org/), and bilateral trade flows are obtained from the United Nations Commodity Trade (U.N. Comtrade) database (https://comtrade.un.org/data/). Bilateral tariff data are from World Integrated Trade Solution (WITS) software (https://wits.worldbank.org/). The committed tariff reductions among RCEP parties come from the Schedule of Tariff Commitments in the RCEP Agreement. The schedule provides detailed data for each RCEP party’s commitments to tariff reduction for each year after the date of the entry into force of the RCEP Agreement. International Energy Agency (https://www.iea.org/data-and-statistics) provides sectoral CO2 emissions data11, and the most recent available data are for 2018. We include the maximum number of economies, conditional on obtaining reliable data. We ultimately obtain 60 economies and a constructed RoW with 36 sectors in each economy. Trade and tariff data are for 2019, and we employ the most recent available input–output tables for 2015, assuming that input–output coefficients in 2019 are not much different from those in 2015. Supplementary Note 1 provides more detailed descriptions of all data used in our evaluation. Supplementary Tables provide additional results. All datasets generated in this study are available upon reasonable request.
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The authors gratefully acknowledge the financial support from the National Natural Science Foundation of China (grant nos. 71903186 (K.T.), 71673269 (C.Y.), 71874177 (H.D.), 72022019 (H.D.), and 71988101 (S.W.)), Major Program of National Fund of Philosophy and Social Science of China (grant No. 19ZDA062 (C.Y.)), the National Key Research and Development Program of China (2020YFA0608603 (H.D.), the Ministry of Commerce of China (TAHP-2015-ZB-365 (C.Y.)), and the Youth Innovation Promotion Association, CAS (No. 2021164 (H.D)).
NCMIS, MADIS, Academy of Mathematics and Systems Science, Chinese Academy of Sciences, 100190, Beijing, China
Kailan Tian, Yu Zhang, Cuihong Yang & Shouyang Wang
Questrom School of Business, Boston University, Boston, MA, 02215, USA
Yuze Li
School of Economics and Management, University of Chinese Academy of Sciences, 100086, Beijing, China
Xi Ming, Shangrong Jiang, Hongbo Duan, Cuihong Yang & Shouyang Wang
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K.T., Y.Z., and C.Y. designed this research. K.T. determined the methods and contributed to the calculation, interpreting the outcomes, and writing the manuscript. Y.Z. contributed most to collecting the data and carrying out the models. Y.L., X.M., and S.J. contributed to the writing and plotted the figures. H.D., C.Y., and S.W. improved the analysis. K.T., Y.Z., Y.L., X.M., S.J., H.D., C.Y., and S.W. contributed to revising the manuscript.
Correspondence to Hongbo Duan, Cuihong Yang or Shouyang Wang.
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Japan's post-Covid regional dilemma – Bangkok Post

published : 21 Jan 2022 at 04:00
newspaper section: Oped
Among the major powers that are moving forward with an eye on the post-pandemic era, when Covid-19 will eventually become an endemic with flu-like manageability, Japan is second to none. The visit last week by its minister of economy, trade, and industry (METI), Koichi Hagiuda, made front-page news in Bangkok, following similarly notable media coverage in Jakarta and Singapore. But while it has played a critical role in Asean's economic development and regional security, Japan's Indo-Pacific geostrategic environment has become adverse with more downside risks.
Addressing these risks will require strategic planners in Tokyo to bite the bullet and emerge fully into the 21st century by coming to terms with what kind of great power they want Japan to be.
Japan offers more geostrategic weight than, say, Australia, which carries itself as a self-respecting, solid and straightforward middle power that is willing to put up an ongoing fight on tariffs and trade against China in order not to be bullied. This means Australia has been spending more on defence, bolstering its military hardware and capabilities, and aligning itself closer with the United States based on their bilateral alliance.
South Korea is another emerging middle power, less muscular than Australia but no less ambitious in projecting its soft power and positioning itself as a force to be reckoned with in the region, spearheading a “new southern policy” to leverage economic ties with Southeast Asia vis-à-vis structural security risks on the Korean Peninsula. Given North Korea’s nuclear threat, Seoul has no choice but to rely on the US treaty alliance and nuclear umbrella for deterrence and security.
Further afield, India is an upper middle power with nuclear weapons. It does not have the kind of resources and largesse to project soft power compared with Japan and South Korea, but its military reach and hardware are not to be trifled with. Indonesia, on the other hand, is an aspiring middle power that bases its status on its moral authority and power of persuasion. With a history deeply rooted in non-alignment, Indonesia is the largest Muslim country, the third-largest democracy in the world, and the lynchpin of Asean, practising moderate Islam within a secular state.
Thailand does not fit any of these moulds of middle powers, as its international reputation has been undermined by repeated military coups, dismal governance, and meagre growth prospects. But at its peak, perhaps in the late 1980s and early 2000s, there was the potential for Thailand to be a middle power of sorts, leveraging its unique geography and history combined with ambitious growth strategies and regional centrality. Now Thailand ranks more as an also-ran.
Japan ranks among none of these categories. It is more than a middle power but nowhere near being a superpower like the United States or China. If economic size and power were the only benchmarks, Japan would outrank and outstrip most other major powers, as it harbours the third-largest economy in the world. But the key measurement is the calculation of global power and its distribution of military might. This is a category that has hobbled Japan’s global standing since 1945.
That being said, Japan is gradually catching up. Its “defence agency” was upgraded into a fully fledged ministry of defence in 2006, although its armed forces are still referred to as “self-defence forces”. While its defence budget has been on the rise, Japan over the past few years has converted two helicopter destroyers into aircraft carriers capable of launching jump jets with vertical take-off capability. But while its strategic planners may have interpreted Article 9 of Japan’s constitution more loosely, the country’s renunciation of war as a sovereign right remains in place after 77 years.
Unlike other countries, Japan is constitutionally unable to settle international disputes by the threat or use of force. This means it has to rely on the US treaty alliance and nuclear protection much like South Korea but with a different set of geostrategic challenges. Japan, for example, has had to confront China’s aggressiveness in the East China Sea, while America’s reliability was called into question under the administration of former president Donald Trump.
Tokyo has addressed these dilemmas related to its power status by bolstering joint efforts with like-minded allies and partners, such as Australia. It has also taken part in the Quad, which originated from former Japanese prime minister Shinzo Abe’s vision and 2007 speech of the “confluence” of the Pacific and India oceans, with Australia, India, and the United States. There is even talk of Japan’s ability to go “nuclear” at short notice if push comes to shove, and without any viable alternatives.
But Japan’s secret weapon thus far is not its military. Its geoeconomic heft underpins what Japan does geopolitically. METI Minister Hagiuda’s choice of Asean countries on his regional tour — Indonesia, Singapore, and Thailand — was telling. These are places — Southeast Asia’s maritime fulcrum, mainland hub, and island vortex of commerce and finance — where Japan has staked its economic future and plotted its trajectory with Asean for the next decades.
As China is unable and unwilling to reopen its borders while the United States and major European countries are increasingly able to live with the pandemic, the geostrategic environment will likely heat up. China may be forced to rely on its huge internal market, stoking nationalist sentiment at home and possibly lashing out at others outside. The United States may react in kind given its own domestic stress and strain.
While it has Asean as a ready bunch of allies and partners to maintain peace and stability in the region, Japan may soon have no choice but to chart its own geostrategic path. In the post-pandemic “new normal”, Tokyo’s desperate need to normalise the way it defends its national interests and security maintenance will become imperative.
Thitinan Pongsudhirak
A PROFESSOR AT CHULALONGKORN UNIVERSITY

A professor and director of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, he earned a PhD from the London School of Economics with a top dissertation prize in 2002. Recognised for excellence in opinion writing from Society of Publishers in Asia, his views and articles have been published widely by local and international media.
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Families flee their homes as 25 houses collapse into a canal in Samut Prakan on Thursday night.

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ASEAN is poised for post-pandemic inclusive growth and prosperity – here's why – World Economic Forum

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The COVID-19 pandemic caused global investment activities to fall – due to economic uncertainties, lockdowns, supply chain disruptions and postponement of investment by multinational enterprises. ASEAN also recorded a decline in foreign direct investment (FDI) in 2020 to $137 billion, down from its highest-ever inflow of $182 billion in 2019 when it was the largest recipient of FDI in the developing world.
Despite the decline, ASEAN remained an attractive investment destination. The region’s share of global FDI rose from 11.9% in 2019 to 13.7% in 2020, while the intra-ASEAN share of FDI in the region increased from 12% to 17%. Additionally, the longer-term trend shows that the value of international project finance in ASEAN has doubled from an annual average of $37 billion in 2015–2017 to an annual average of $74 billion in 2018–2020.
And the future looks bright. According to the first-of-its-kind ASEAN Development Outlook (ADO) report, the total combined GDP of 10 ASEAN countries in 2019 was valued at $3.2 trillion – making ASEAN the fifth-largest economy in the world, well on track to become the fourth largest by 2030. With a total population of about 700 million people, 61% are under the age of 35 – and the majority of young people are embracing digital technologies in their daily activities.
The outlook remains promising, with coordinated pandemic response efforts and several key developments underway in the region.
ASEAN members took coordinated actions to respond to pandemic challenges, such as the Hanoi Plan of Action on Strengthening ASEAN Economic Cooperation and Supply Chain Connectivity in Response to the COVID-19 Pandemic. Members collaborated on the flow of essential goods and enhanced the resilience of its supply chains and sourcing in the region. This joint response was critical given how the concentration of FDI in ASEAN is connected to global value chain activities or regional production networks that involve intra- and inter-firm linkages.
To support recovery and resilience building, ASEAN launched the COVID-19 ASEAN Response Fund and cooperated with external partners on the ASEAN Centre for Public Health Emergencies and Emerging Diseases (ACPHEED) to enhance regional health security and to sustain ASEAN preparedness and resilience in the face of public health emergencies.
The ASEAN-led Regional Comprehensive Economic Partnership (RCEP) Agreement came into force on 1 January 2022 for Australia, Brunei Darussalam, Cambodia, China, Japan, Lao PDR, New Zealand, Singapore, Thailand and Vietnam. With it, ASEAN resolves to keep markets open while strengthening regional economic integration towards post-pandemic inclusive recovery.
RCEP is the biggest regional free trade agreement in existence and will cover 30% of global GDP and 30% of the world population in addition to accounting for over one-quarter of global trade in goods and services. Key provisions addresses liberalizing and promoting intra-RCEP trade, investment and services as well as developing e-commerce, which is highly relevant for regional value chains and market- and efficiency-seeking investment. Furthermore, non-RCEP companies can also take advantage of RCEP benefits by locating and operating in the region.
Considering that 40% of investment in ASEAN comes from RCEP members – of which 24% comes from non-ASEAN RCEP member countries – opportunities exist to boost more sustainable FDI in the region, particularly value chain-linked FDI taking into account the benefits of RCEP and the recently concluded ASEAN Investment Facilitation Framework (AIFF).
The recent adoption of the Consolidated Strategy on the Fourth Industrial Revolution (4IR) for ASEAN during the 38th and 39th ASEAN Summits and the ASEAN Agreement on Electronic Commerce will advance the region’s push for digital transformation and private investment in digital infrastructure development (5G networks and data centres), cloud computing, cybersecurity, artificial intelligence and smart manufacturing.
The ASEAN Comprehensive Recovery Framework (ACRF) identified digital connectivity as a priority to facilitate regional connectivity and economic recovery. This correlated to the findings of a survey of 86,000 people from six ASEAN countries conducted by the World Economic Forum and Sea, which found respondents (including business owners) who were “more digitalized” tended to be more economically resilient during the pandemic.
However, the survey also found several barriers to digital adoption including affordable access to quality internet and digital devices. The Forum is addressing this global issue through initiatives like the EDISON Alliance, which mobilizes multistakeholder collaboration to expand digital access to more than 1 billion people by 2025.
The ASEAN Digital Integration Framework will also support the ACRF. The Forum has been complementing ASEAN efforts through the Digital ASEAN Initiative on data policy, digital skills, e-payments and cybersecurity.
The Forum’s Centre for the Fourth Industrial Revolution Network, which brings stakeholders together to maximize the benefits of technology while reducing potential risks, have shown that public-private cooperation is instrumental for businesses and government to develop cooperative ecosystems to advance digital transformation and innovation.
Governments have an important role in incentivizing investments in research and development, while the private sector will drive Industry 4.0 transformation through investing in digitalization of manufacturing, using advanced manufacturing solutions, building smart factories and establishing R&D facilities, technology hubs, and centres of excellence in the region.
Embracing 4IR also requires a parallel commitment to environmental sustainability. This can establish new forms of efficiency wherein sustainability and competitive excellence are not only compatible, but, in fact, intertwined. A green future does not only benefit the well-being of the next ASEAN generation but is also good for ASEAN economically, boosting the region`s competitiveness in attracting green FDIs to address new climate-related investment and trade measures adopted by developed economies.
ASEAN has shown strong commitment towards climate change and global sustainability efforts. Several initiatives support ASEAN`s sustainable ambitions, including the Global Plastic Action Partnership in Indonesia and Vietnam.
However, greater commitment to environmental stewardship is also required from the private sector to design corporate purchasing commitments that can drive investment in green technologies and market demand for low-carbon tech to help ASEAN meet climate-related goals. The First Movers Coalition launched during COP26 could offer valuable insights for ASEAN on how the private sector can drive decarbonization in different industries and societies in the region.
World Economic Forum Type may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.
Joo-Ok Lee, Head, Regional Agenda – Asia-Pacific; Member of the Executive Committee, World Economic Forum
Shaun Adam, Community Lead, Regional and Global Cooperation, Asia-Pacific, World Economic Forum
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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ASEAN tourism reopening officially announced – Khmer Times

The Association of Southeast Asian Nations (ASEAN) has officially announced the reopening of the sector, aiming to restore its socio-economy hit hard by the Covid-19 pandemic.
The announcement was made on January 19 evening from Sihanoukville, Preah Sihanouk, during the 40th ASEAN Tourism Forum 2022 (ATF 2022) hosted by Cambodia.
According to the Cambodian Ministry of Tourism, the reopening of ASEAN tourism is based on key principles ranging from the promotion of ASEAN internal tourism, the establishment of ASEAN Travel Corridor and the creation of digital vaccination card to the strengthening of herd immunity against Covid-19 through vaccination and the promotion of the “New Normal” in conformity with the health safety rules and SOPs of each member country.
Ensuring that tourism services and businesses operate in accordance with the ASEAN principles on hygiene and safety for tourism professionals and communities, and promoting trust and confidence through encouragement to all tourism operators and service providers in the region are also very necessary for the ASEAN tourism reopening.
On the occasion, the new ASEAN Tourism Logo and ASEAN Safe Travel Stamp “Safe and Warm” were launched, which is part of the bloc’s tourism recovery plan. AKP-C.Nika
Cambodia, France sign science and technology cooperation
Children affected the most by C-19

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 The Rohingya issue is currently an important international issue. More than 1.1 million Rohingyas have taken refuge in Bangladesh since August, 2017, due to genocide and ethnic cleansing in Myanmar. About 50,000 newborn Rohingya children are added to it every year.
The National Security Policy document issued by Islamabad last week is an effort to codify the Bajwa Doctrine into an actionable statement of purpose and a strategy for its realisation.
Oxfam, a confederation of charitable organisations, released a survey saying that over 160 million more people were forced into poverty during the first two years of the COVID-19 pandemic.
The US strategy in targeting China as an enemy can only bring about adverse consequences in the form of an intensified arms and militarisation race.
Previously, Dara is all excited about him getting a scholarship to study in the US. This week, Dara and his wife recall painful and emotional experiences they encountered during Khmer Rouge.
A major movie production slated for filming at Angkor has been put on hold, a further immediate blow to the local economy as international movie shooting brings big bucks.
Australia Day is going to the dogs this year at Siem Reap’s Star Bar, with a fundraiser for animal welfare non-profit Paw Patrol Cambodia.
Siem Reap’s 2020 arts and lifestyle coverage kicked off the year on an optimistic note that, with the wisdom of hindsight, turned out to be somewhat ironic.
Because our baby is now at the centre of our life, it has been mentally challenging since even getting a good night’s sleep or a decent meal has suddenly become a real task.

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Malaysia Imposes Licensing Requirements for Cloud Service Providers – ASEAN Briefing

Effective from January 1, 2022, Malaysia has imposed a licensing requirement on the provision of cloud services, although it will only be enforced from April 1, 2022.
The new rule, which was introduced by the Malaysian Communications and Multimedia Commission (MCMC), aims to co-develop standard operating procedures surrounding cloud services particularly around data protection, security, and protection with the industry.
Malaysia’s Communications and Multimedia Act of 1998 (CMA) and the Communications and Multimedia Regulations of 2000 were the primary legislation that regulated Malaysia’s communications and multimedia industry.
The CMA regulated cloud service providers from the perspective of integrity, security, and reliability but did not specifically require cloud service providers to be licensed in Malaysia. There were two main categories of CMA licenses:
There are in turn, four sub-categories of licensable activities under the CMA:

Under the new licensing requirements, the MCMC will regulate cloud services under the application service providers class (ASP (C)) license. The ASP (C) license does not impose any foreign shareholding restrictions and if granted, will need to be renewed annually.
The MCMC issued an advisory notice and information paper that defines ‘cloud service’ as any service made available to end-users on-demand via the internet from a cloud computing provider’s server.
It also states that an ASP (C) license is required for:
Providers of Software as a Service (SaaS) are not required to obtain a license.
Foreign cloud service providers that provide IaaS or PaaS services but do not have a presence in Malaysia and do not use local data centers are not required to obtain an ASP (C) license. This is also the case with foreign cloud service providers that have local branches in Malaysia but not a locally incorporated companies.
Other conditions where an ASP (C) license is not required include:

Current ASP (C) license holders that are providing cloud services can continue to do so under their current license. However, they will need to include the provision of cloud services as one of their business activities during the renewal of their license.
 
Malaysia’s licensing requirements for cloud service providers are part of the government’s initiative to accelerate the country’s transformation towards a technologically-advanced economy as envisioned in the Malaysia Digital Economy Blueprint.
The blueprint outlines 48 national initiatives and 28 sectoral initiatives that aim to attract over 70 billion ringgit (US$16 billion) in foreign and domestic investments in Malaysia’s digital economy by 2030, transforming the country into a net exporter of homegrown digital solutions and technologies. The digital economy could make up some 22.6 percent of the country’s GDP and create 500,000 jobs by 2025.
The blueprint will be implemented in three phases:
Accelerating and strengthening the digital foundation needed to adopt the roll-outs for the upcoming Phases 2 and 3.
Drive digital transformation and inclusion across all levels of businesses and across the population.
Position Malaysia as an exporter of digital products and solutions.
ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City, and Da Nang in Vietnam, Munich, and Esen in Germany, Boston, and Salt Lake City in the United States, Milan, Conegliano, and Udine in Italy, in addition to Jakarta, and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines, and Thailand as well as our practices in China and India. Please contact us at [email protected] or visit our website at www.dezshira.com.
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