5. Remaining Policy Challenges to Narrowing the Development Divide
5.1 Trade Policy
In relation to a trade policy that has two major outstanding issues that need to be resolved. The first involved ensuring consistency in the tax regime, while the other. Refers to the need to accelerate efforts to facilitate trade in order to reduce the cost of trade. Next we turn to the main challenge on the trade policy front: trade facilitation. Despite the achievements on this front described in Section 3.1, a number of critical challenges continue to limit the subregion’s potential for reaping further gains from trade. And they are Actions for Transport and Trade Facilitation (TTF), encompassing both (i) transport facilitation, by enhancing exchange and implementation of traffic rights, improving custom transit systems, and strengthening the road transport industry; and (ii) trade
facilitation, by enhancing coordinated border management, strengthening sanitary and
phytosanitary standards, and developing the logistics sector.
5.2 Foreign Investment and Labor Migration Policy with Shifting Demographics Over the long run, the benefits
In the long term, the benefits from trade liberalization would be very large if.
With the reforms in other sectors.This will happen to investors in response to changing incentive structure. With new capital investment and new industries developed in response
to new opportunities. Considering the population statistics of each country in ASEAN, we can forecast the future possibilities, such as: especially given shifts expected to occur over the next decade and beyond. With countries facing an ageing population, there will be a decrease in the labor supply in the future as a result of a ―shrinking‖ labor force, while countries with a relatively young population will
experience the opposite phenomenon of a ―bulging‖ labor force. Specifically, the CLV
countries will experience bulging labor forces, as will Brunei and the Philippines. The ageing phenomenon will also characterize the labor forces of the East Asian countries of the PRC, Japan, and Republic of Korea. The issue of employment conditions will cause. The labor migration within the region and therefore to improve policies related to the labour movement, whether temporary or local address. To protect and defend the interests of all countries. In consideration of the rights of foreign workers and to reduce the security risks associated with the dropped survival.
The capital inflow of workers. The FDI as their investment climates improve and their reform programs mature. There is a considerable amount of capital mobility in ASEAN already, mostly in the form of inflows from outside the region, but both intraregional flows and outflows have also been
growing, albeit from a small base.
5.3 Is Convergence with Cohesion Possible?
We focus on CLMV because they are less development. So it make the gap between original member and new member like CLMV. The link between inequality and growth is derived from the fact that all three are also considered to be primary drivers of growth. ADB (2012) examines inequality in Asia in detail and identifies these three processes as the key drivers for rising inequality in developing Asia. They note that these forces have tended to favor owners of capital over labor, high skilled over low-skilled workers, and urban and coastal areas over rural and inland regions. All three factors are present in the CLMV, although globalization and market-oriented reforms are the dominant ones. Reducing growth in order to reduce inequality is not a sensible policy option. Similarly, reversing the trend toward greater openness and market orientation is not the way to go in order to redress inequality, if these factors are the main ones driving it. So it can possible if CLMV prepare in all aspect such as an important barrier to overcome in the CLMV is the quality of primary and secondary education, and vocational training. Increased access to health care services must also complement improvements to education systems. This feature of the labor force, when combined with a conducive investment climate.
Convergence between but divergence within countries
While rapid growth in Cambodia, Laos and Vietnam has reduced per-capita income differentials with the other ASEAN members, the distribution of these gains have been uneven and income inequality within these countries has remained unchanged or worsened (Table 1). It would appear that inter-country differences in economic conditions are being narrowed at the same time that intra-country differences are being increased. All kinds of within-country inequities have remained stubbornly high or have increased, including rural-urban, along ethnic lines and across gender. What is alarming is the increase in polarisation, both economic and social, in these converging countries. These factors can threaten cohesion, and pose major risks to social stability. High and/or rising income inequality can also threaten growth itself, as well as the poverty elasticity of growth. How can these consequences of rapid growth be avoided, or at least minimised?
6. Further narrowing of these gaps will require an increase in the speed and breadth of policy reforms. With trade, the focus needs to shift to behind-the-borders measures that reduce trade costs through transport and trade facilitation. A gaping hole in the policy landscape in ASEAN is the failure to address labour migration adequately. Furthermore, ongoing demographic transitions will require greater capital inflow or labour outflow if massive unemployment is to be avoided. Capital inflows will only increase if there are substantial improvements in the investment climate. These changes will take time and since absorptive capacity is currently nearing its limit, it is an issue for the long run. Greater labour mobility will occur in the interim, but will require effective policy frameworks to be developed in both sending and receiving countries, if it is to be regulated. It would also help if a regional agreement that also deals with low-skilled labour could be struck. The current policy void on labour migration not only limits the benefits from trade and investment liberalisation, but increases the cost of structural adjustment. For Cambodia, Laos, Myanmar and Vietnam, the absence of a functioning exchange-rate mechanism due to varying degrees of dollarisation increases the importance of labour mobility in adjusting to economic shocks.