ASIAN DEVELOPMENT BANKASIAN DEVELOPMENT BANK

ASIAN DEVELOPMENTOUTLOOK 2017SUSTAINING DEVELOPMENT THROUGH PUBLICPRIVATE PARTNERSHIP

UPDATE

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ASIAN DEVELOPMENT BANK

ASIAN DEVELOPMENT

OUTLOOK 2017UPDATESUSTAININg DEVELOPMENT ThrOUgh PUbLIc-PrIVATE PArTNErShIP

Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)

2017 Asian Development Bank6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, PhilippinesTel +63 2 632 4444; Fax +63 2 636 2444www.adb.org

Some rights reserved. Published in 2017.

ISBN 978-92-9257-959-3 (Print), 978-92-9257-960-9 (e-ISBN)ISSN 1655-4809Publication Stock No. FLS179053-3DOI: http://dx.doi.org/10.22617/FLS179053-3

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ForewordAcknowledgmentsDefinitionsAbbreviations

ADO 2017 UpdateHighlights

Part 1 Confident resurgence in developing Asia

Trade strength lifts regional prospectsRisks from unwinding quantitative easingGauging Asias business cyclesAnnex: Solidifying global recovery

Part 2 Sustaining development through public-private partnership

Applying public-private partnership to Asias infrastructure challengeHurdles to public-private partnershipFinancing public-private partnershipToward better-performing partnership

Part 3 Economic trends and prospects in developing Asia111

Central AsiaEast AsiaSouth AsiaSoutheast AsiaThe Pacific

Statistical appendix

contents

Foreword

The outlook for developing Asia supports optimism. Rather than the slight growth moderation forecast in Asian Development Outlook 2017 in April, this Update envisages a slight uptick this year. Growth in the region is set to pick up from 5.8% in 2016 to 5.9% this year and 5.8% in 2018. Excluding the high-income newly industrialized economies, the region is expected to expand by 6.4% in 2017 and 6.3% in 2018. Anupturn in global trade is backed by strengthening recovery in the United States, the euro area, and Japan. Robust investments in developing Asia and higher growth in the Peoples Republic of China contribute to the healthy outlook.

Risks to developing Asias outlook have become more balanced sinceApril. The US Federal Reserve announced its plan to begin winding down the assets it purchased in the wake of the global financial crisis of 20082009. Analysis in the Update notes that clear communication from the Fed has avoided market overaction to the policy change, but authorities in developing Asia nevertheless need to prepare for tighter global liquidity. In an analysis of the business cycle, this Update notes that many economies are still in the accelerating phase of their growth cycles, but that the pace of growth is weaker than the average of recent upturns. Additional policy support to remove constraints on productivity by, for example, closing infrastructure gaps may be needed to boost future output potential.

Asias infrastructure needs amounts to $1.7 trillion per year until2030. However, even factoring in funds saved through public finance reform or received from multilateral agencies, a significant financing gap remains. The theme chapter in the Update explores how publicprivate partnership (PPP) can help to fill the infrastructuregap. The success of the approach depends on governments identifying projects suitable for it, engaging qualified private partners, and instituting the right process. The Asian Development Bank is a frontrunner in supporting the development of PPP in the region. Our experience has shown that, if the three conditions are met, all stakeholders in PPP projects can expect a fair share of the benefits.

TAKEHIKO NAKAOPresidentAsian Development Bank

Acknowledgments

Asian Development Outlook 2017 Update was prepared by staff of the Asian Development Bank (ADB) in the Central and West Asia Department, East Asia Department, Pacific Department, South Asia Department, Southeast Asia Department, and Economic Research and Regional Cooperation Department, as well as in ADB resident missions. Representatives of these departments constituted the Regional Economic Outlook Task Force, which met regularly to coordinate and develop consistent forecasts for the region.

The authors who contributed the sections are bylined in each chapter. The subregional coordinators were Dominik Peschel and Fatima Catacutan for Central Asia, Akiko Terada-Hagiwara for East Asia, Masato Nakane for South Asia, Kwang Jo Jeong and Dulce Zara for Southeast Asia, and Rommel Rabanal and Cara Tinio for the Pacific.

A team of economists in the Economic Research and Regional Cooperation Department, led by Joseph E. Zveglich, Jr., director of the Macroeconomics Research Division, coordinated the production of the publication, assisted by Edith Lavia. Technical and research support was provided by Shiela Camingue-Romance, Cindy Castillejos-Petalcorin, Marthe Hinojales, Nedelyn Magtibay-Ramos, Pilipinas Quising, Aleli Rosario, Dennis Sorino, and Mai Lin Villaruel. Additional research support was provided by Emmanuel Alano, Raymond Gaspar, and Michael Timbang. The economic editorial advisors Robert Boumphrey, Joshua Greene, Srinivasa Madhur, Richard Niebuhr, and Reza Vaez-Zadeh made substantive contributions to the country chapters and regional outlook.

The theme chapter benefited from the insightful comments from the Office of PublicPrivate Partnership and the publicprivate partnership thematic group, and in particular, Amr Qari, Alexander Jett, Srinivas Sampath, Takeo Koike, and Weonho Yang. The valuable support and guidance of Bambang Susantono, Yasuyuki Sawada, Juzhong Zhuang, and Joseph E. Zveglich, Jr. throughout the production process is gratefully acknowledged. Josef Yap provided editorial advice on the theme chapter.

Peter Fredenburg advised on ADB style and English usage. AlvinTubio handled typesetting and graphics generation, in which he was assisted by Heili Ann Bravo, Elenita Pura, and Azaleah Tiongson. Art direction for the cover design was by Anthony Victoria, with artwork from Design Muscle. Support for the printing and publishing of the report was provided by the Printing Services Unit of the ADB Office of Administrative Services and by the Publishing and Dissemination Unit of the ADB Department of External Relations. Fermirelyn Cruz and Rhia Bautista-Piamonte provided administrative and secretarial support. The Department of External Relations, led by Satinder Bindra, Omana Nair, and Erik Churchill, planned and coordinated the dissemination of Asian Development Outlook 2017 Update.

Definitions

The economies discussed in Asian Development Outlook 2017 Updateare classified bymajor analytic or geographic group. For the purposes of this publication, thefollowing apply: Association of Southeast Asian Nations comprises Brunei Darussalam,

Cambodia, Indonesia, the Lao Peoples Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.

Developing Asia comprises the 45 members of the Asian Development Bank listed below.

Newly industrialized economies comprises theRepublic of Korea, Singapore, Taipei,China, and Hong Kong, China.

Central Asia comprises Armenia, Azerbaijan, Georgia, Kazakhstan, theKyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.

East Asia comprises the Peoples Republic of China, theRepublic of Korea, Mongolia, Taipei,China, and Hong Kong, China.

South Asia comprises Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka.

Southeast Asia comprises Brunei Darussalam, Cambodia, Indonesia, theLao Peoples Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.

The Pacific comprises the Cook Islands, Fiji, Kiribati, the Marshall Islands, the Federated States of Micronesia, Nauru, Papua New Guinea, Palau, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu.

Unless