oecd tokyo centre presentation saeo2011 12 (3)
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SAEO 2011/12 (Southeast Asian Economic Outlook)
- Prospects and policy responses
Kiichiro Fukasaku and Kensuke Tanaka
OECD Development Centre
OECD Tokyo Centre OECD Tokyo Centre 8 December 20118 December 2011
p
8 December 20118 December 2011Tokyo, Japan Tokyo, Japan
Three regional economic outlooksThree regional economic outlooks
African Economic Outlook Latin American Southeast Asian
since 2001 Economic Outlook
since 2007
Economic Outlook
since 2010
(*) Quarterly publication ‐ ”This quarter in Asia”
22
SAEO ‐ What’s in it?SAEO What s in it?
Regional Economic Monitor g
Coverage: ASEAN Structural Policy Country Note
gcountries, China and India
Structural Policy Country Note
Thematic Focus
2010 T t i f t t
Structure: SAEO comprises three main parts
• 2010 ‐ Transport infrastructure
• 2011 ‐ Green growth
2012 N i h• 2012 – Narrowing the development gap
3
OutlineOutline
Regional economic outlook in 2011‐201611
22 Structural Policies (Country Note)
Regional economic outlook in 2011 2016
Structural Policies (Country Note)
33 Thematic Focus: Green Growth33 Thematic Focus: Green Growth
4
R e g i o n a l e c o n o m i c o u t l o o k i n 2 0 1 1 ‐201611
22 Structural Policy Country Note
Regional economic outlook in 2011 2016
22 Structural Policy Country Note
33 Thematic Focus: Green Growth
5
The region’s economic outlook will remain solid in the medium termmedium term
2010 2011 2016 Average2003‐07
Average2012‐162003 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 6.3Average of six countries 7 6 5 0 5 9 6 1 5 6Average 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
6 Source: OECD Development Centre, MPF-SAEO 2011/12, Southeast Asian Economic Outlook 2011/12(forthcoming) and OECD Economic Outlook No 90 (forthcoming).
Recent developments cast a shadow over Asian economies in the near termeconomies in the near term
a) ASEAN average
100
115
85
Aug
-08
Feb-
09
Aug
-09
Feb-
10
Aug
-10
Feb-
11
Aug
-11
115
b) Emerging Asia average
100
85
Aug
-08
Feb-
09
Aug
-09
Feb-
10
Aug
-10
Feb-
11
Aug
-11
7
Emerging Asia will not be decoupled from global economic slowdowneconomic slowdown
a) Stock indexes in the G7 and Emerging Asia
b) Credit default swap premiums in the G7 and Emerging Asia
8Source: CEIC and Datastream
Two large‐scale natural disasters affected the region adverselyregion adversely
Production of motor vehicles and components in 2011 ( d )(index, Jan 2011=100)
9 Source: CEIC.
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‐Q4a) From 2010 Q3 to 2011 Q1
(Quarterly average, millions of current USD)
b) From 1996 Q1 to 1996 Q4
(Quarterly average, millions of current USD)
10 (Note) Net capital flows for Malaysia, (Source) CEIC
Structural policies to enhance productivity are needed
a)Indonesia b) Malaysia c) Philippines
Historical decomposition of output gap (%, 2009‐11)
a)Indonesia b) Malaysia c) Philippines
11 (Source ) OECD Development Centre, MPF‐ 2011/12
Domestic demand will be an important engine for the growth
Current account balance of six ASEAN countries
engine for the growth
(percentage of GDP)
(Source) OECD Development Centre, MPF‐ SAEO 2011/12
12
Fiscal situation will gradually improve and further effort to mobilise domestic resources would be criticalto mobilise domestic resources would be critical
) Fi l b l f l b) T t f GDPa) Fiscal balance of general government in six ASEAN countries
(percentage of GDP)
b) Tax revenues as percentage of GDP in 2010
(*) Viet Nam and India based on 2009 data. OECD average based on 2008 data
13 (Source ) OECD Development Centre, MPF‐ 2011/12 and CEIC
( ) g
Ageing population poses a medium‐term risk in the regionin the region
Percentage of population aged 65 or over (% of total population)
35
40FORECAST
20
25
30
10
15
20
0
5
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 20301980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Indonesia Malaysia PhilippinesSingapore Thailand VietnamChina India OECD average
14
China India OECD average
Source: UN
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.
15
Regional economic outlook in 2011‐201611
22 Structural Policies (Country Note)
Regional economic outlook in 2011 2016
22 Structural Policies (Country Note)
33 Thematic Focus: Green Growth
16
Medium‐term development plans of Southeast Asian countriesSoutheast Asian countries
Country Period Theme/Vision
Indonesia 2010‐2014Towards the realization of an Indonesia that
is prosperous, democratic and just
Malaysia 2011 2015 Charting development towards a high income nationMalaysia 2011‐ 2015 Charting development towards a high‐income nation
Philippines 2011‐2016 In pursuit of inclusive growthpp
Singapore 2010‐2020High skilled people, innovative economy, distinctive
global city
Thailand 2012‐2016A happy society with equity, fairness and resilience
under the philosophy of Sufficiency Economy
Viet Nam 2011‐2015(Note) Viet Nam’s forthcoming medium‐term plan was in the process of formulation as of 1 November
2011.
17Source: OECD Development Centre’s compilation based on national sources.
Policy focus from Country note in SAEO 2011/12
Infrastructure
H i l
Human capital development
Indonesia Human capital development
Labour market
Singapore Innovation
SME development
SME development
H i l
Health
Human capitalMalaysia
Human capital development
Taxation and fiscal
Thailand Human capital development
Agriculturesystem
Infrastructure
Agriculture
Enterprise development and reform of SOEs
Philippines Human capital development
T ti
Viet Nam Macroeconomic managementHuman capital
18
Taxation
Source: OECD Development Centre.
pdevelopment
Key priority areas in the regiony p y g
• Human capital development
• Infrastructure development
• Tax reformsTax reforms
• SME development
19
Human capital development: Education systems need to become more outcome‐orientedneed to become more outcome oriented
a) OECD‐PISA results in 2009 ‐ Indonesia and Thailand
b) Qualifications by sex and urban‐rural areasin 2009 ‐ Viet Nam (percentage)do es a a d a a d 009 et a (pe ce tage)
Source: OECD PISA 2009 database.
20 Source: OECD and CEIC
Infrastructure development needs to be strengthenedInfrastructure development needs to be strengthened (Country notes from Indonesia and Philippines)
Infrastructure competitiveness (ranking)Infrastructure competitiveness (ranking)
Source: Global Competitiveness Report World Economic Forum
21
Source: Global Competitiveness Report, World Economic Forum.
Strengthening SME development is critical in the regionStrengthening SME development is critical in the region
(Country notes from Malaysia and Singapore)
a) Number of business establishments by size – Malaysia
b) Contribution of SMEs to GDP(percentage)‐Malaysia
Source: SME Annual Report 2009/10, National SME Development Council.
22
Key messages (2) ‐ from country notes
Indonesia
Speed up transport infrastructure development by improving regulatory environments
Improve the outcome of higher education and reduce urban‐rural Indonesia p gdisparity 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 toMalaysia
Strengthen the link between industries and academic institutions to 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
Philippines Improve the access to and the quality of basic education and strengthen TEVTReform the tax system by enhancing tax collection and widening the tax
23
y y g gbase
Source: OECD Development Centre.
Strengthen life‐long learning by enhancing pre‐school education
Singapore Raise efficiency of innovation policy through well‐ coordinated policy evaluation system
Enhance SME development by improving assistance programmes
Reform healthcare schemes to provide higher quality of and equal i
Thailand
access to services
Improve the outcome of education and reduce urban‐rural disparitydisparity
Enhance agricultural productivity and raise the attractiveness of the farm sector to workers
Vi N
Speed up the reform of state‐owned enterprises (SOEs), in particular improve the governance and management system of SOEs
Viet NamEstablish an adequate monetary framework to control inflation
Increase skilled labour by education reform
24
Increase skilled labour by education reform
Source: OECD Development Centre.
Regional economic outlook in 2011‐201611
22 Structural Policy Country Note
Regional economic outlook in 2011 2016
22 Structural Policy Country Note
33 Thematic Focus: Green Growth
25
Green Growth and Southeast AsiaG ee G o t a d Sout east s a
Shift in mindset on development
National characteristics
E
p characteristics
Export‐led growth
“Grow First Clean
Encourage more balanced,
inclusive and
New sources of growth and jobs
Grow First, Clean Later” sustainable
growth
Social issues and equity concerns
OECD GGS Regional Dimension
26
g
Low Carbon Green Growth
KoreanIT Ventures R&D
Korean Development
Semi conductorsSemi‐conductors Autos
Heavy Industry Light industry
S K (2011)
27
Source: Kang (2011)
Carbon emissions under the Kyoto Protocol
Global CO2 emissions have risen mostly in Developing Asia since 1990Developing Asia since 1990
MT CO2
35,000
25,000
30,000
ROW
15,000
20,000 Other AsiaASEAN (6)India
10,000
, d aChinaOECD
0
5,000
1990 1995 2000 2005 2010
28
1990 1995 2000 2005 2010
Carbon emissions under the Kyoto Protocol
Developing Asia’s emission share jumped from 17 % in 1990 to 37 % in 2010from 17 % in 1990 to 37 % in 2010
%60
40
50
20
30
10
20
01990 1995 2000 2005 2010
OECD Developing Asia ROW
29
Carbon emissions under the Kyoto Protocol
Per capita carbon emissions vary across A i iAsian economies
20T CO2
1012141618
2468
10
02
2008
30
Carbon emissions and footprints
Carbon footprint: an input‐output analysis
Coal & Mineral Ore Extraction Steel Production & Processing
Engine ChassisEngine, Chassis, and Parts
Assembly Sales
31Source: Adopted from Ahmad Wyckoff (2003)
Carbon emissions under the Kyoto Protocol
CO2 emissions may differ significantlydepending on which accounting methods are useddepending on which accounting methods are used
MT CO22008p
16,000
10,000
12,000
14,000
4 000
6,000
8,000
0
2,000
4,000
-4,000
-2,000 OECD (30) DEV ASIA (11)
PBE CBE Net Transfer
32
PBE CBE Net Transfer
Carbon emissions under the Kyoto Protocol
World carbon exports increased nearly twice faster thanworld carbon emissions in 1995‐2005world carbon emissions in 1995‐2005
MT CO2 CO2 emissions embodied in exports, 2005
1 600 1,468
1 000
1,200
1,400
1,600
485364
600
800
1,000
364
210 188 178 150 128 125 95 93 87 86 85 85 76 75 71 70 69 69 52 48 47 43 42 33 31 28 230
200
400
33
Large carbon exporters are also large carbon importers
MT CO2CO2 emissions embodied in imports, 2005
1 0661,200
1,066
800
1,000
433400
600
271 270 248209
163 155 144 130 110 105 103 94 84 65 65 61 60 51 50 42 40 38 37 37 36 36 33 310
200
0
34
Carbon emissions under the Kyoto Protocol
CO2 trade surplus grew large in several Asian economiesCO2 trade balance as % of national emissions
30%
152025
05
10
-15-10-5 OECD (30) DEV ASIA (11) ASEAN (8) China India
-20-15
1995 2000 2005 2008P
35
Strategy, Policy and Institution: ASEAN Perspectivesgy, y p
• Natural capital and stage of development• Environmental concern vs. other development concerns (e.g. poverty reduction)
Development Strategy
• Emission reduction targets (from BAU levels)N ti ll i t iti ti ti (NAMA )Green Growth Policy • Nationally appropriate mitigation actions (NAMAs)
• Fiscal policy spaceGreen Growth Policy
• Public sector capacity• Monitoring, verification and reporting (MVR)Institutional Support Monitoring, verification and reporting (MVR)• Private‐sector participation (e.g. green products)
Institutional Support
36
Challenges Ahead for ASEAN CountriesC a e ges ead o S Cou t es• Policy Goals R d GHG i i l t il 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
• Implementationp Legal authority
Financial resources
37
Types of Environmental Tax Instruments• Direct taxes/fees on a pollutant (e.g. carbon tax)
• Taxes/fees on an input or output (‘proxy’) that• Taxes/fees on an input or output ( proxy ) that generates pollution (e.g. motor fuel)
T d bl it t ( ‘ d t d ’)• Tradable permit systems (e.g. ‘cap and trade’)
• Deposit refund schemes
• Subsidies to use less polluting products
• Subsidies and other government assistance for to gdevelop and disseminate greener technologies
38
Factors affecting ETI use in ASEANFactors affecting ETI use in ASEAN
• High degree of economic openness and linkages in global supply chains > Spillover of taxes & effects on competitivenessp p
• High priority on poverty reduction and support for lowest income groupsincome groups
• Potential conflict between ETIs and development objectives (ex development of the auto sector)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
39
Priority Areas for Southeast Asia
• Motor vehicles– pollution and road congestion
• Water quality
• Waste managementWaste management
• Management of forests and fisheries
C b d th GHG i i• Carbon and other GHG emissions> Meet international commitments (voluntary)
40
Key messages (3)
• Greater use could be made of ETIs and bring significant benefits to the society as a whole:benefits to the society as a whole: Especially taxes/fees, since they usually can be more precisely targeted and raise revenuestargeted and raise revenues
Care should be taken of the social/equity aspect
C ti ASEAN t t i i tit ti ETI• 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
41
Southeast Asian Economic Outlook:Southeast Asian Economic Outlook:A Tool for Policy Dialogue
Thank you!Thank you!
Contact: [email protected]
4242
Some lessons from the OECDSome lessons from the OECD
• Keep it simple
• Use compensation rather than mitigation to help most burdened groups where possibleburdened groups where possible
• Careful planning and coordination of instruments is critical for cost‐effective resultscritical for cost‐effective results
• Financial burdens, distribution and competitiveness ff t k it diffi lt t hi f ll ti leffects make it very difficult to achieve fully optimal use of ETIs
d d i i i h h bli d> Transparency and good communication with the public and those most affected is crucial
44
Criteria for evaluating ETIsCriteria for evaluating ETIs
• Efficiency: y‐ Pollution reduction at lowest economic cost (‘static’)‐Maximum incentives to innovate (‘dynamic’)Maximum incentives to innovate ( dynamic )
• Flexibility and robustness to uncertainty• Administrative costs• Administrative costs• Budget impactI t d l t bj ti• Impact on development objectives‐ Growth ‐ Income distribution; poverty reduction‐ competitiveness
45
Best uses of ETIs
ETI Most appropriate when: Common Examples
pp pExamples
Direct Pollutant is easily measured; sources are small and diverse; flat Water pollution;
taxes/feessources are small and diverse; flat marginal damage curve
Water pollution;
Pollutant proxy relation is stable; Fuels [and coal];Proxy
Taxes/fees
Pollutant‐proxy relation is stable; proxy contains several pollutants; flat marginal damage curve
Fuels [and coal]; motor vehicles; fertilizersg g
Tradable Exact control of pollution is very important (steep damage curve);
Greenhouse Gases; Air
Permits markets are well‐developed; [cross‐border spillovers]
pollution; fisheries
46
Best uses of ETIs (Cont.)Best uses of ETIs (Cont.)
ETIs Most appropriate when: Examples
Subsidies to d
Taxes are politically unacceptable; b idi d ti it i d
Forest management;
reduce pollution
subsidized activity is good substitute for polluting activity
g ;purchase of home appliances
M k i li i
R&D subsidies for green
h l iSubsidies for Innovation
Market size, externalities to innovation, or network considerations are important
technologies; subsidies for renewableconsiderations are important renewable energy in electricity
47