COVID-19, services trade and greenfield investment in ASEAN+6

Abstract

Given the importance of services for economic activity in general and the salience of reducing service link costs for overcoming the economic and health challenges emanating from COVID-19, we examine the effect of the pandemic on services trade in the original group of ASEAN+6 countries that began negotiating the RCEP agreement. Stylised facts show that ASEAN+6 commercial services’ exports and imports declined by 19.7% and 22.1%, respectively, on a YoY basis during 2020, with considerable heterogeneity across countries and sectors. ASEAN+6 announced greenfield investment in services also fell by a third during 2020, with the intra-ASEAN+6 decline being more severe at 41.8%. Meanwhile, structural gravity estimates suggest that the stringency of containment measures imposed in the wake of the pandemic may have reduced ASEAN+6 services exports by 61.6%.