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Southeast Asian Economic Outlook 2011 12


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Southeast Asian Economic Outlook 2011 12

  1. 1. SAEO 2011/12 (Southeast Asian Economic Outlook) - Prospects and policy responses Pre-launch SeminarParis, 16 November 2011 Asia DeskOECD Development Centre
  2. 2. Three regional economic outlooksAfrican Economic Outlook Latin American Southeast Asian since 2001 Economic Outlook Economic Outlook since 2007 since 2010 (*) Quarterly publication - ”This quarter in Asia” 2
  3. 3. SAEO - What’s in it? Regional Economic Monitor Coverage: ASEAN Structural Policy Country Note countries, China and India Structure: SAEO comprises Thematic Focus three main parts • 2010 - Transport infrastructure • 2011 - Green growth • 2012 – Narrowing the development gap
  4. 4. Outline1 Regional economic outlook in 2011-20162 Structural Policies (Country Note)3 Thematic Focus: Green Growth
  5. 5. 1 Regional economic outlook in 2011-20162 Structural Policy Country Note3 Thematic Focus: Green Growth
  6. 6. The region’s economic outlook will remain solid in the medium term 2010 2011 2016 Average Average 2003-07 2012-16 Indonesia 6.1 6.3 6.9 5.5 6.6 Malaysia 7.2 4.6 5.6 6.0 5.3 Philippines 7.3 4.5 5.1 5.7 4.9 Singapore 14.5 5.6 4.8 7.5 4.6 Thailand 7.8 2.5 4.9 5.6 4.5 Viet Nam 6.8 5.9 6.7 8.1 6.3 Average of six countries 7.6 5.0 5.9 6.1 5.6 China 10.4 9.3 India 8.8 7.7 Average of Emerging Asia 9.5 8.2 Source: OECD Development Centre, MPF-SAEO 2011/12, Southeast Asian Economic Outlook 2011/12 (forthcoming) and OECD Economic Outlook No 90 (forthcoming).
  7. 7. Recent developments cast a shadow over Asian economies in the near term a) ASEAN average 115 100 85 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 b) Emerging Asia average 115 100 85 Aug-08 Aug-09 Aug-11 Aug-10 Feb-09 Feb-10 Feb-11
  8. 8. Emerging Asia will not be decoupled from global economic slowdown a) Stock indexes in the G7 and Emerging Asia b) Credit default swap premiums in the G7 and Emerging Asia Source: CEIC and Datastream
  9. 9. Two large-scale natural disasters affected the region adversely Production of motor vehicles and components in 2011 (index, Jan 2011=100) Source: CEIC.
  10. 10. Large capital inflows need to be managed Capital inflows and outflows of Southeast Asian countries a) From 2010-Q3 to 2011-Q1 b) From 1996-Q1 to 1996-Q4(Quarterly average, millions of current USD) (Quarterly average, millions of current USD) (Note) Net capital flows for Malaysia, (Source) CEIC
  11. 11. Structural policies to enhance productivity are needed Historical decomposition of output gap (%, 2009-11) a)Indonesia b) Malaysia c) Philippines (Source ) OECD Development Centre, MPF- 2011/12
  12. 12. Domestic demand will be an important engine for the growth Current account balance of six ASEAN countries (percentage of GDP)(Source) OECD Development Centre, MPF- SAEO 2011/12
  13. 13. Fiscal situation will gradually improve and further effort to mobilise domestic resources would be critical a) Fiscal balance of general b) Tax revenues as percentage of GDP government in six ASEAN countries in 2010 (percentage of GDP) (Source ) OECD Development Centre, MPF- 2011/12 and CEIC
  14. 14. Ageing population poses a medium-term risk in the region Percentage of population aged 65 or over (% of total population) 40 FORECAST 35 30 25 20 15 10 5 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Indonesia Malaysia Philippines Singapore Thailand Vietnam China India OECD average Source: UN
  15. 15. Key messages (1) Growth for the region will moderate in the near term but solid growth performance will continue until 2016. Volatility of capital inflows needs to be managed by appropriate macroeconomic policies. Strengthening structural policies is a key to coping with global uncertainties. Domestic demand will be an important engine in the medium term - infrastructure and social policies will play significant roles. There is room for mobilising resources. Ageing population will not be a negligible downside risk. Pension and healthcare systems need to be reshaped.
  16. 16. 1 Regional economic outlook in 2011-20162 Structural Policies (Country Note)3 Thematic Focus: Green Growth
  17. 17. Medium-term development plans of Southeast Asian countries Country Period Theme/Vision Towards the realization of an Indonesia thatIndonesia 2010-2014 is prosperous, democratic and just Malaysia 2011- 2015 Charting development towards a high-income nationPhilippines 2011-2016 In pursuit of inclusive growth High skilled people, innovative economy, distinctiveSingapore 2010-2020 global city A happy society with equity, fairness and resilience Thailand 2012-2016 under the philosophy of Sufficiency Economy (Note) Viet Nam’s forthcoming medium-term planViet Nam 2011-2015 was in the process of formulation as of 1 November 2011. Source: OECD Development Centre’s compilation based on national sources.
  18. 18. Policy focus from Country note in SAEO 2011/12 Human capital Infrastructure developmentIndonesia Human capital Singapore Innovation development Labour market SME development SME development Health Human capital Human capital Malaysia Thailand development development Taxation and fiscal Agriculture system Enterprise development Infrastructure and reform of SOEs Human capital MacroeconomicPhilippines Viet Nam management development Human capital Taxation development Source: OECD Development Centre.
  19. 19. Human capital development: Education systems need to become more outcome-orienteda) OECD-PISA results in 2009 b) Qualifications by sex and urban-rural areas - Indonesia and Thailand in 2009 - Viet Nam (percentage) Source: OECD PISA 2009 database. Source: OECD and CEIC
  20. 20. Infrastructure development needs to be strengthened (Country notes from Indonesia and Philippines) Infrastructure competitiveness (ranking) Source: Global Competitiveness Report, World Economic Forum.
  21. 21. Strengthening SME development is critical in the region (Country notes from Malaysia and Singapore) a) Number of business establishments b) Contribution of SMEs to GDP by size – Malaysia (percentage)- MalaysiaSource: SME Annual Report 2009/10, National SME Development Council.
  22. 22. Key messages (2) - from country notes Speed up transport infrastructure development by improving regulatory environmentsIndonesia Improve the outcome of higher education and reduce urban-rural disparity in access to educational infrastructure Reform labour market regulation to increase employment Enhance SME development with special attention to capacity building and innovation Strengthen the link between industries and academic institutions to Malaysia improve labour force skills and to enhance research and development Reform the tax regime and improve efficiency of public spending to bolster the sustainability of public finances Increase funding for infrastructure development and attract more private participation Improve the access to and the quality of basic education and strengthenPhilippines TEVT Reform the tax system by enhancing tax collection and widening the tax base Source: OECD Development Centre.
  23. 23. Strengthen life-long learning by enhancing pre-school education Raise efficiency of innovation policy through well- coordinatedSingapore policy evaluation system Enhance SME development by improving assistance programmes Reform healthcare schemes to provide higher quality of and equal access to services Improve the outcome of education and reduce urban-ruralThailand disparity Enhance agricultural productivity and raise the attractiveness of the farm sector to workers Speed up the reform of state-owned enterprises (SOEs), in particular improve the governance and management system of SOEsViet Nam Establish an adequate monetary framework to control inflation Increase skilled labour by education reform Source: OECD Development Centre.
  24. 24. 1 Regional economic outlook in 2011-20162 Structural Policy Country Note3 Thematic Focus: Green Growth
  25. 25. Green Growth and Southeast Asia Shift in mindset on National development characteristics Encourage more New sources ofExport-led growth balanced, growth and jobs“Grow First, Clean inclusive and sustainable Social issues and Later” growth equity concerns OECD GGS Regional Dimension
  26. 26. Carbon emissions under the Kyoto Protocol Global CO2 emissions have risen mostly in Developing Asia since 1990 MT CO235,00030,00025,000 ROW20,000 Other Asia ASEAN (6)15,000 India China10,000 OECD 5,000 0 1990 1995 2000 2005 2010
  27. 27. Carbon emissions under the Kyoto Protocol CO2 emissions may differ significantly depending on which accounting methods are used MT CO2 2008p16,00014,00012,00010,000 8,000 6,000 4,000 2,000 0-2,000 OECD (30) DEV ASIA (11)-4,000 PBE CBE Net Transfer
  28. 28. Carbon emissions under the Kyoto Protocol CO2 trade surplus grew large in several Asian economies CO2 trade balance as % of national emissions %3025201510 5 0 -5 OECD (30) DEV ASIA (11) ASEAN (8) China India-10-15-20 1995 2000 2005 2008P
  29. 29. Carbon emissions under the Kyoto Protocol Per capita carbon emissions vary across Asian economiesT CO2201816141210 8 6 4 2 0 2008
  30. 30. Strategy, Policy and Institution: ASEAN Perspectives • Natural capital and stage of developmentDevelopment Strategy • Environmental concern vs. other development concerns (e.g. poverty reduction) • Emission reduction targets (from BAU levels)Green Growth Policy • Nationally appropriate mitigation actions (NAMAs) • Fiscal policy space • Public sector capacityInstitutional Support • Monitoring, verification and reporting (MVR) • Private-sector participation (e.g. green products)
  31. 31. Challenges Ahead for ASEAN Countries• Policy Goals  Reduce GHG emissions voluntarily  Make greater use of clean technologies and green products• Priorities  Sustainable agriculture, land use and forestry management  Shift to clean energy, including renewable energy (e.g. geothermal)  Waste management  Transport and logistics management• Implementation  Legal authority  Financial resources
  32. 32. Types of Environmental Tax Instruments• Direct taxes/fees on a pollutant (e.g. carbon tax)• Taxes/fees on an input or output (‘proxy’) that generates pollution (e.g. motor fuel)• Tradable permit systems (e.g. ‘cap and trade’)• Deposit refund schemes• Subsidies to use less polluting products• Subsidies and other government assistance for to develop and disseminate greener technologies
  33. 33. Priority Areas for Southeast Asia• Motor vehicles– pollution and road congestion• Water quality• Waste management• Management of forests and fisheries• Carbon and other GHG emissions > Meet international commitments (voluntary)
  34. 34. Factors affecting ETI use in ASEAN• High degree of economic openness and linkages in global supply chains > Spillover of taxes & effects on competitiveness• High priority on poverty reduction and support for lowest income groups• Potential conflict between ETIs and development objectives (ex. development of the auto sector)• Limited development of tax systems: > Raises administrative costs > Limits scope for compensation of groups most affected by ETIs
  35. 35. Key messages (3)• Greater use could be made of ETIs and bring significant benefits to the society as a whole:  Especially taxes/fees, since they usually can be more precisely targeted and raise revenues  Care should be taken of the social/equity aspect• Co-operation across ASEAN states in instituting ETIs can enhance their benefits and reduce potential costs• Implementation of more ETIs need not hamper real growth if carefully phased in and could help in fiscal consolidation• International co-operation is essential to promote GG
  36. 36. Southeast Asian Economic Outlook: A Tool for Policy Dialogue Thank you! Contact: 36
  37. 37. ANNEX
  38. 38. Low Carbon Green Growth KoreanDevelopment IT Ventures R&D Semi-conductors Autos Light industry Heavy Industry Source: Kang (2011)
  39. 39. Some lessons from the OECD• Keep it simple• Use compensation rather than mitigation to help most burdened groups where possible• Careful planning and coordination of instruments is critical for cost-effective results• Financial burdens, distribution and competitiveness effects make it very difficult to achieve fully optimal use of ETIs > Transparency and good communication with the public and those most affected is crucial
  40. 40. Criteria for evaluating ETIs• Efficiency: - Pollution reduction at lowest economic cost (‘static’) - Maximum incentives to innovate (‘dynamic’)• Flexibility and robustness to uncertainty• Administrative costs• Budget impact• Impact on development objectives - Growth - Income distribution; poverty reduction - competitiveness
  41. 41. Best uses of ETIs Common ETI Most appropriate when: Examples Pollutant is easily measured; Direct sources are small and diverse; flat Water pollution;taxes/fees marginal damage curve Pollutant-proxy relation is stable; Fuels [and coal]; Proxy proxy contains several pollutants; motor vehicles;Taxes/fees flat marginal damage curve fertilizers Exact control of pollution is very GreenhouseTradable important (steep damage curve); Gases; AirPermits markets are well-developed; pollution; [cross-border spillovers] fisheries
  42. 42. Best uses of ETIs (Cont.) ETIs Most appropriate when: Examples ForestSubsidies to Taxes are politically unacceptable; management;reduce subsidized activity is good purchase ofpollution substitute for polluting activity home appliances R&D subsidies for green Market size, externalities to technologies;Subsidies for innovation, or network subsidies forInnovation considerations are important renewable energy in electricity