PROMOTING HIGH, INCLUSIVE AND SUSTAINABLE DEVELOPMENT DURING THE “NEW NORMAL”

RONALD U. MENDOZA, PHDASIAN INSTIUTE OF MANAGEMENT

2

Asia

Europe

Middle East and North Africa

Sub-Saharan Africa

Latin America and Caribbean

0 10 20 30 40 50 60 70 80 90 100

22

52

33

54

52

55

71

74

93

Countries in lower middle income trap (2010)Countries that graduated from lower middle income trap

Total Number of Years to Graduate from Lower Middle Income to Upper Middle Income Group

If the era of high global growth is over, then are more countries going to be “trapped” in slow growth?

3

Asia

Middle East and North Africa

Latin America and Caribbean

0 10 20 30 40 50 60 70 80 90

8

17

26.5

32

61

77

Countries in upper middle income trap (2010)Countries that graduated from upper middle income trap

Total Number of Years to Graduate from Upper Middle Income to High Income Group

If the era of high global growth is over, then are more countries going to be “trapped” in slow growth?

4

Real GDP Growth Rate (Average) and Percent Change in Gini Coefficient (Average)

-0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6

-2

0

2

4

6

8

10

12

Average Percentage Change in Gini Coefficient (1986-2012)

Ave

rage

Rea

l GD

P G

row

th R

ate

Growth produced higher or lower inequality?

Flip a coin…

5

Moving the goal post?

From simply “rapid growth”

To….High, Sustainable and Inclusive Growth

6Source: WEF (2013:11).

Structural Transformation from Resource-Based, to Efficiency-Based to Innovation-Based Economies

Source: World Bank, Knowledge Assessment Methodology (2012)

Category VariableLow

IncomeLower Middle

IncomeUpper Middle

Income High Income

Economic Regime

Soundness of Banks 2.98 4.31 4.81 6.23Intensity of Local

Competition 2.94 3.38 4.05 8.02Domestic Credit to Private

Sector as % of GDP 3.09 4.45 7.06 9.15Cost to Register a Business

as % of GNI Per Capita 1.1 2.16 4.93 6.81Cost to Enforce a Contract

(% of Debt) 0.74 2.87 5.21 7.3

Governance

Regulatory Quality 1.61 3.25 4.91 8.39Rule of Law 1.61 3.39 5.45 8.39

Government Effectiveness 1.61 3.32 5.51 8.46Voice and Accountability 2.91 3.39 5.03 7.43

Political Stability 1.88 3.32 4.83 7.69Control of Corruption, 2.02 3.25 5.45 8.46

Press Freedom 3.19 3.75 4.62 7.19

Innovation System Intellectual Property Protection 3.28 3.36 4.89 8.28

SCORES ON SELECTED ECONOMIC REGIME, GOVERNANCE AND INNOVATION SYSTEM INDICATORS PER INCOME CATEGORY

Institutions underpin the catch-up on the final stage…

Continuing economic integration will be critical but challenging…

Investment Regimes

--Weak progress: So far, progress focused on sharing and disseminating information on investment policies and opportunities; over-all liberalization of investments not in pace with the liberalization of goods trade; absence of transparent dispute settlement mechanisms

Source: CIMB ASEAN Research Institute (http://www.cariasean.org/)

“ASEAN Economic Community: Status of Implementation, Challenges and Bottlenecks” (CARI, 2013)

ASEAN 2015: Are we ready?

Competition Policy Regulator is like a Referee in a Market Economy – the game has begun even without a clear referee…

Source: CIMB ASEAN Research Institute (http://www.cariasean.org/)

COUNTRIES WITH NO GENERIC COMPETITION LAWS: Brunei (Monopolies Act 1932; but no generic competition laws); Cambodia; Laos; Myanmar; Philippines (no generic competition laws with scattered industry-based laws with own enforcement agencies);

COUNTRIES WITH COMPETITION POLICY LAWS:Indonesia (Competition Act of 1999); Malaysia (Competition Act of 2010); Singapore (Singapore Competition Act of 2004); Thailand (Trade Competition Act of 1999); Vietnam (Law of Competition 2005)

ASEAN 2015: Are we ready?

Competition Policy

--Some (but uneven) progress: development of the ASEAN Regional Guidelines on Competition Policy; ASEAN is far from creating a level playing field for companies in the form of a harmonized regional competition regime.

Source: CIMB ASEAN Research Institute (http://www.cariasean.org/)

PERCENTAGE OF POPULATION BY REGION LIVING ABOVE $2 PER DAY (2005 PPP$), 1990, 2009, 2030 (PROJECTED)

1990

2009

2030

1990

2009

2030

1990

2009

2030

1990

2009

2030

1990

2009

2030

1990

2009

2030

DEVELOP-ING ASIA

DEVELOP-ING EUROPE

LATIN AMERICA & CARIBBEAN

MIDDLE EAST & NORTH AFRICA

OECD SUB-SAHA-RAN AFRICA

0

20

40

60

80

100

$2-4 $4-10 $10-20 $20+

Internal markets gaining ground?

12

Domestic consumption could be strengthened by better management of risk…

Key challenges to help mitigate the risk of a MIT…

Boost human capital investments and enlarge the middle class

Strengthen public-private partnerships and build stronger inclusiveness, notably for SMEs

Strengthen domestic institutions to promote fair competition

Promote crisis resilience and invest in R&D