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EMERGING ASIA:
REGIONAL ECONOMIC CHALLENGES
Mario Pezzini Director, OECD Development Centre & Director a.i. OECD Development Co-operation Directorate OECD Global Parliamentary Network Meeting, 12-13 April 2016, Tokyo
I. Growth prospectsII. Growth risksIII. Regional integration: challengesIV. Regional integration: policy
solutions
2
Outline
I. Growth prospects
3
Shifting Wealth is reshaping the world economy
Source: Perspectives on Global Development 2010: Shifting Wealth, author’s calculations based on World Bank Data 2009
Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map.
The “Three Speed World” in the 1990s
Source: Perspectives on Global Development 2010: Shifting Wealth, author’s calculations based on World Bank Data 2009
Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map.
The “Three Speed World” in the 2000s
La contribución de la región al proceso de reequilibrio de la riqueza es relativamente modesta
Contribution to global GDP growth (1990-2012)(as percentage)
Source: Authors’ calculations based on data and regional aggregates from IMF, World Economic Outlook.
Contributions to Global Growth:Regional Views
50%
19%
8%
4%
1%18%
1990-1995
32%
41%
9%
6%
3% 9%
2005-2012
46%
27%
7%
7%
3% 10%
2000-2005
59%20%
8%
5%
2%6%
1995-2000
6
Advanced economies
Emerging Asia
Latin America
Middle East and North Africa
Sub-Saharan Africa
Rest of the world
7
Real GDP growth of ASEAN, China and India
Real GDP growth of ASEAN, China and India (Annual percentage change)
Country 2016-20 (average) 2011-13 (average)ASEAN-5 Indonesia 5.5 6.2Malaysia 5.0 5.2Philippines 5.7 5.9Thailand 3.6 3.2Viet Nam 6.0 5.6Brunei Darussalam and Singapore Brunei Darussalam 1.8 0.9Singapore 2.6 4.1CLM countries Cambodia 7.3 7.3Lao PDR 7.3 8.1Myanmar 8.3 6.9China and IndiaChina 6.0 8.2India 7.3 5.5Average of ASEAN 10 countries 5.2 5.4Average of Emerging Asia 6.2 7.0
8
Approx. 20-40 years MORE required to reach high-income level
Note: Based on World Bank’s criterion for classifying economies, high income countries are defined as having GNI per capita above USD 12 800 in 2014. Growth prospects in this simulation are in line with MPF-2016. Population projections are based on UN data.
Source: OECD Development Centre.
Updated best-scenario simulation of estimated time required to become high income countries for selected Asian middle income countries (years) from 2015
India
Viet Nam
Philippines
Indonesia
Thailand
China
Malaysia
0 10 20 30 40 50 60(years)
II. Growth risks
9
10
Risk 1:Effects of China’s slowdown
Exports to China by major product Items by selected ASEAN countries
Percentage of GDP
Source: CEIC
Malaysia
Singapore
Thailan
d
Philippines
Indonesia
02468
101214161820
Agriculture Products and Prepared FoodstuffsMineral ProductsChemicalsPlastic, Rubber and other Articles
Indonesia
Malaysia
Philippines
Thailan
d0
2000
4000
6000
8000
10000
12000
14000
2009 2010 2011 2012 2013
China FDI flows to ASEAN countriesMillion USD
• The tightening has been widely anticipated and is unlikely to significantly surprise markets.
• The GDP of ASEAN-5 as a whole may be lowered by as much as 0.56% - 0.68% of GDP.
11
Risk 2: Impact of US monetary normalisation
Impact of US monetary normalization on GDP growth in ASEAN-5 for 2015-2017Percentage (annual average)
Scenario 1 Scenario 2
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
Source: OECD Development Centre estimate, Note: impacts are estimated by DSGE approach
12
Risk 3: Slowing potential growth and productivity
Figure a) Potential GDP in ASEAN, China and India(Log annual growth)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
Before crisis Full sample
Source: OECD Development Centre's estimation.
Figure b) Relative labour productivity(Log annual growth)
India
Singapore
Thailand
Malaysia
-0.1 0.0 0.1
Finance, real estate, and business activities
India
Singapore
Thailand
Malaysia
-0.4 -0.2 0.0 0.2
Construction
III. Regional integration: challengesEconomic challengesSocial challenges
13
Development gaps have narrowed, but remain
Narrowing Development Gap Indicators (NDGIs): Disparities between CLMV and ASEAN-6, 2012
Infrastructure Gap Sub-Index
Human Resource Development Gap Sub-Index
ICT Gap Sub-Index
Trade and Investment Gap Sub-Index
Tourism Gap Sub-Index
Poverty Gap Sub-Index
0
2
4
6
8
10
3.33.8
3.13.1
1.6
4.2
Note: Each sub-index of the NDGI, whose value ranges from 0 to 10 base points – where 0 denotes no gap and 10 the widest gap – is built from multiple variables within six key policy areas shown above.
Source: OECD Development Centre, Economic Outlook for Southeast Asia, China and India 2014
ECONOMIC challenges toregional integration
15
16
1990 1995 2000 2005 2010 20140
5
10
15
20
25
30
35
40
45
50
ASEAN ASEAN+3 ASEAN+6
%
Intra-regional trade in ASEAN, ASEAN+3 and ASEAN+6, by country group, 1990-2014Total within-group trade as a share of groups’ total world trade
Intra-regional trade has grown
Note: ASEAN+3 includes ASEAN 10 countries plus China, Japan and Korea. ASEAN+6 includes ASEAN+3 plus Australia, India and New Zealand.Source: OECD Development Centre's calculation based on data from IMF-DOTS
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
1
2
3
4
5
6
7
8
4.43
2.72
0.54
3.64
1.740.04
7.51
4.40
1.33
ASEAN ASEAN-6 CLMV%
Average CEPT rates in ASEAN countries, 2000-14
17
Trade in services remains untapped
0 50 100 150 200 250 3000
10
20
30
40
50
60
70
80
90
100
Trade in Goods (% of GDP)
Trad
e in
Ser
vice
s (%
of G
DP) Singapore
Viet Nam
Malaysia
Cambodia
ThailandBrunei Darussalam
Lao PDRPhilippines
IndonesiaMyanmar
Trade in services share of GDP versus trade in goods share of GDP, 2014
Sources: UNCTAD (2015) UNCTADSTAT (database) http://unctadstat.unctad.org, UNSTATS (2014); National AccountsMain Aggregates Database, http://unstats.un.org/unsd/snaama/dnllist.asp.
18
FDI regulation and business environment need strengthening
FDI restrictiveness in selected economies in Emerging Asia, 2014
Index, higher values indicate greater restrictions
Source: OECD (2015a), OECD FDI Regulatory Restrictiveness Index (database), http://stats.oecd.org/Index.aspx?datasetcode=FDIINDEX#.
China
Myanmar
IndonesiaIndia
Malaysia
OECD Average0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
• ACIA- the progress of liberalization varies between countries and sectors
• Providing a good business environment will be key.
19
•Reforms are under way through the ASEAN Banking Integration Framework.
•The Chiang Mai Initiative Multilateralisation and Asian Bond Market Initiative, established by the ASEAN+3 framework, are promoting regional stability and financial integration.
Intra-regional banking needs strengthening
20
Status of the ASEAN Highway Network
Road transport connectivity is improving, but pace is slow
Source: ESCAP (2015), “Status of the Asia Highway in Member Countries”, www.unescap.org/resources/statusasian-highway-member-countries.
21
Tourism revenues in selected ASEAN countries
Co-operation is progressing on tourism but remains underexploited
Source: CEIC.
Cambodia
Indonesia
Lao PDR
Malaysia
Philippines
Singapore
Thailand
0
2
4
6
8
10
12
14
16
18
2010 2011 2012 2013 2014
% o
f GDP
• Regional tourism promotion and agreements are helping to upgrade the tourism sector in ASEAN and facilitate travel.
• Ecotourism is being developed in the region and remains promising.
SOCIAL challenges toregional integration
22
23
Average Food Price Index in Emerging Asia
Food security remains a priority
Note: The Food Price Index is calculated as the ratio of food and non-alcoholic beverage expenditure to actualindividual consumption relative to the United States purchasing power parity terms.Source: FAO (2015), Food Security Indicators, http://bit.ly/14FRxGV.
Brunei D
arussa
lam
Cambodia
Indonesia
Lao PDR
Malaysia
Myanmar
Philippines
Singapore
Thailand
ChinaIndia
World
0123456789
10
2003-2005 2006-2008 2009-2011 2012-2014
• Regional frameworks for co-operation on food security, including the ASEAN +3 Emergency Rice Reserve, are helping to reduce risks in periods of crisis and improve food supply.
• More could be done to protect fisheries, forestry and wildlife
24
Quality of education needs to be addressed
OECD average ASEAN average430
440
450
460
470
480
490
500
510
Mathematics Reading Science
OECD PISA score in Southeast Asia and OECD countries, by area, 2012
Note: ASEAN average includes Indonesia, Malaysia, Singapore, Thailand and Viet Nam. The PISA scale was setsuch that approximately two-thirds of students across OECD countries score between 400 and 600 points.Source: OECD (2012a), PISA database, www.oecd.org/pisa/.
• Regional initiatives are being pursued to integrate and harmonise education systems and promote collaborative research.
• “Quality of education” needs to be improved.
25
India (2005-06)
Cambodia (2010)
Indonesia (2007)
Philippines (2008)
New Zealand (2013)
Korea (2012)
Japan (2011)
Australia (2013)
0 10 20 30 40 50 60 70 80 90 100
4.9
9.3
34.1
42.8
100
100
100
100
%
Health-care insurance coverage in selected Asia-Pacific countries,
latest year available
Sources: OECD/WHO (2014) Health at a Glance: Asia/Pacific 2014: Measuring Progress towards Universal Health Coverage,http://dx.doi.org/10.1787/health_glance_ap-2014-en.
• ASEAN+3 and +6 provide additional platforms for addressing regional concerns in education and poverty management.
• Shared plans for responding to public health issues and natural disasters have been developed.
Social protection systems are evolving, with more to do
IV. Regional integration: policy solutions
26
27
1. Improving co-ordination
Alignment of national and regional targets in ASEAN (Number of policy areas)
• Little overlap between AEC targets and national plans.
• The technical and country-specific expertise of national officials could be used to a greater extent.
020406080
Source: OECD Development Centre.
28
2. Bettering monitoring
ASEAN Economic Community Scorecard
• Uses self-reported results• Not regularly updated (for public)
ASEAN Community Progress Monitoring System (ACPMS)
• Detailed data not available• Not updated
Examples of ASEAN regional integration indicators
• More detailed, transparent and regularly updated monitoring indicators will be needed in the region
• Existing indicators are a start, but of limited use
29
3. Tackling regional disparities
• The Initiative for ASEAN Integration (IAI) was launched in 2000 to narrow the development gaps, guided by IAI Work plan II (2009-15).
• Overall, the progress and level of implementation is very low – issues of planning and finance.
• “Global ASEAN” - ASEAN+3 and ASEAN+6 framework
30
4. Advancing green growth
Renewable electricity generation in ASEAN-6 countries (TWh) in 2013
For example, hydropower and geothermal resources are relatively well exploited but other sources are almost untouched in the region
Type of renewable Indonesia Malaysia Philippines Singapore Thailand Viet NamHydropower 16.9 10.6 10.0 - 5.7 57.1Geothermal 9.4 - 9.6 - 0.0 -Solar 0.0 0.1 0.0 0.0 1.1 -Wind 0.0 - 0.1 - 0.3 0.1Biogas/biomass/waste 0.3 1.1 0.2 1.4 7.0 0.1
Total generation from renewables
26.6 11.9 19.9 1.4 14.1 57.3
Source: IEA.
31
5. Expanding private sector opportunities regionally
• Firms are engaging with the rest of the region, though these activities will need to be diversified beyond a limited range of countries and sectors
• Greater regionalisation and internationalisation will be needed to develop ASEAN enterprises
Year Homecountry
Hostcountry Industry Acquirer Target
1 2012 Thailand Singapore Food and beverage Thai Beverage PCL Fraser & Neave Ltd2 2007 Singapore Malaysia Food and beverage Wilmar International Ltd PPB Oil Palms Bhd
3 2013 Singapore Indonesia Automobiles and components Gallant Venture Ltd Indomobil Sukses Internasional
4 2012 Thailand Singapore Metals and mining PTT Mining Ltd Sakari Resources Ltd
5 2013 Singapore Indonesia Automobiles and components Gallant Venture Ltd Indomobil Sukses Internasional
6 2007 Singapore Indonesia Paper and forest products Investor Group LonSum
7 2011 Thailand Indonesia Chemicals SCG Chemicals Co Ltd Chandra Asri Petrochemical8 2007 Singapore Malaysia Food and beverage Wilmar International Ltd PGEO Group Sdn Bhd
9 2012 Singapore Malaysia Chemicals Reliance Global Holdings Pte
BP Chemicals(Malaysia)Sdn Bhd
10 2010 Thailand Malaysia Containers and packaging Investor Group Malaya Glass Products Sdn
Bhd
Largest intra-ASEAN M&A investments in manufacturing, 2004-13
