Overview of Trends, Key Issues and Opportunities RAMESH SUBRAMANIAM - - PowerPoint PPT Presentation

SOUTHEAST ASIA: Overview of Trends, Key Issues and Opportunities

RAMESH SUBRAMANIAM DIRECTOR GENERAL | SOUTHEAST ASIA DEPARTMENT ASIAN DEVELOPMENT BANK

Summary of Points

2

• 1. ASEAN has demonstrated solid and sustained growth. Huge progress since 1997 Asian

Financial Crisis.

• 2. Meeting large infrastructure needs, addressing climate change, and supporting green

growth and livable cities are top priorities, along with a range of human development/infrastructure needs

• 3. Regional Cooperation and Integration (RCI) is more important and relevant now than

ever.

• 4. Disruptive technologies can be game changers and region needs leapfrogging support.
• 5. Small and fragile countries need a lot of support.
• 6. As ADB continues to expand its support, it stands ready to partner with a wide range of

stakeholders including private sector and civil society.

Point 1: Solid Macroeconomic Picture

3

3G Phenomenon (Growing, Greening & to some extent Greying) Growth:

• Sustained solid economic growth
• Rapidly changing financial landscape
• Powerhouse for trade and FDI
• Yet, significant gaps in human development and infrastructure

sectors

• Hence, huge opportunities for the rest of the world to engage

more with Southeast Asia

South East Asia: Economic Powerhouse

• Over the past 5 decades, South East

Asia’s real GDP has grown at an average of 5% per year, higher than the global average of 3%.

• Combined gross domestic product

(GDP) totaled roughly US$ 2.77 trillion in current prices in 2017.

• These gains have been

accompanied by improved welfare

• utcomes.
• 10.0
• 8.0
• 6.0
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 500 1000 1500 2000 2500 3000 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

South East Asia's Real GDP, 1970-2017 (US$ billions at constant 2010 prices)

US$ at constant prices (2010) in billions % growth (SEA) % growth (Worid)

Source: UNCTAD Stat Database, data downloaded 26 March 2019

Trends in the Human Development Index

HDI Rank Country 1990 1995 2000 2005 2010 2015 2017 39 Brunei Darussalam 0.782 0.805 0.819 0.838 0.842 0.852 0.853 146 Cambodia 0.364 0.387 0.42 0.49 0.537 0.571 0.582 116 Indonesia 0.528 0.564 0.606 0.632 0.661 0.686 0.694 139 Lao PDR 0.4 0.428 0.466 0.506 0.546 0.593 0.601 57 Malaysia 0.643 0.683 0.725 0.731 0.772 0.795 0.802 148 Myanmar 0.359 0.398 0.431 0.477 0.53 0.569 0.578 113 Philippines 0.586 0.598 0.624 0.65 0.665 0.693 0.699 9 Singapore 0.718 0.773 0.819 0.868 0.909 0.929 0.932 83 Thailand 0.574 0.611 0.649 0.693 0.724 0.741 0.755 116 Viet Nam 0.475 0.529 0.579 0.616 0.654 0.684 0.694

Source: UNDP Human Development Data, data downloaded 28 March 2019.

South East Asia Trade and FDI

Although SEA accounted for only 3.4% of world GDP in 2017, it accounted for 7.4% of world exports; 7% of world imports; and 6.9%

• f global FDI stock that year.

A key driver of trade and FDI performance has been the rise in product fragmentation trade. Many countries in SEA are plugged into global value chains.

6

Growth in Trade and FDI

7

1 2 3 4 5 6 7 8 200000 400000 600000 800000 1000000 1200000 1400000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

South East Asia’s Trade, 1970-2017

(US$ at current prices in millions and share of global trade)

Exports (US$ mil) Imports (US$ mil) Share of Global Exports Share of Global Imports 1 2 3 4 5 6 7 8 500000 1000000 1500000 2000000 2500000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

South East Asia's Inward FDI Stock, 1980-2017

(US$ million at current prices and share of global FDI stock)

US$ at current prices in millions Percentage of global FDI stock

Source: UNCTADStat Database, data downloaded 26 March 2019 Source: UNCTADStat Database, data downloaded 26 March 2019

Income Trends (GNI per capita, US$)

2015 2020 2025 2030 Cambodia 1,070 1,383 1,734 2,193 Indonesia 3,440 4,014 5,013 6,309 Lao PDR 2,000 2,609 3,319 4,267 Myanmar 1,190 1,586 2,045 2,651 Philippines 3,520 4,302 5,375 6,761 Viet Nam 1,990 2,514 3,219 4,160 Malaysia 10,440 11,263 13,555 16,450 Thailand 5,690 6,562 8,171 10,240 Brunei 38,520 38,907 43,700 48,820 Singapore 52,740 54,554 61,027 67,611

2015 in current US$. 2020, 2025 and 2030 in constant 2010 US$. Source: ADB ERCD estimates

Point 2: Addressing large infrastructure needs, climate change, and more greening are becoming top priorities

9

Several Dimensions:

• Urbanization & Demographic Growth
• Increasing pollution, including in the oceans
• Frequent and catastrophic natural disasters
• Major issues to grapple with, which also present lots of
• pportunities for Rest of the World to engage in ASEAN more
• All SE Asian countries are taking steps, in varying degrees

Urbanization Trends

(percentage of population living in urban areas)

2015 2020 2025 2030 Brunei 77.2 78.6 79.7 80.7 Cambodia 20.7 22.0 23.6 25.6 Indonesia 53.7 57.2 60.3 63.0 Lao PDR 38.6 43.5 47.7 50.9 Malaysia 74.7 77.7 80.1 81.9 Myanmar 34.1 36.9 39.8 42.8 Philippines 44.4 44.3 44.9 46.3 Singapore 100.0 100.0 100.0 100.0 Thailand 50.4 55.8 60.4 63.9 Viet Nam 33.6 36.8 39.9 43.0

Source: United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, custom data acquired via website.

Source: ADB. 2016. Southeast Asia and the Economics of Global Climate Stabilization Infographic. https://www.adb.org/news/infographics/southeast-asia-and-economics-global- climate-stabilization

Source: ADB. 2016. Southeast Asia and the Economics of Global Climate Stabilization Infographic. https://www.adb.org/news/infographics/southeast-asia-and-economics-global- climate-stabilization

Mitigation Measures

• Reduce land-use

emissions

• Avoid deforestation

(lowest cost major mitigation opportunity)

• Transform energy systems

to increase energy efficiency

• Replace carbon-intensive

fuels with cleaner alternatives

In Infrastructure in investment needs, , 2016–2030 ($ billi illion in in 2015 pric ices)

Sources: 2030 population projections from UN Population Division; others are ADB estimates.

Baseline Climate adjusted Total % of GDP Total % of GDP Central Asia 492 6.8 565 7.8 East Asia 13,781 4.5 16,062 5.2 South Asia 5,477 7.6 6,347 8.8 Southeast Asia 2,759 5 3,147 5.7

• Indonesia

1,108 5.5 1,229 6.0 The Pacific 42 8.2 46 9.1 Asia and the Pacific 22,551 5.1 26,166 5.9 Annual Average 1,503 1,744

13

How big are infrastructure investment gaps?

14

Note: Gap = Investment Needs – Current Investment

Infrastructure investments and gaps, 2016–2020 ($ billion in 2015 prices)

Estimated current investment (2015) Climate adjusted Annual needs Gap Gap as % of GDP Total 881 1,340 459 2.4 Total without PRC 195 503 308 5.0 Indonesia 23 74 51 5.1

100 200 300 400 500 600

Current Investment Additional Public Additional Private Investment Needs

Investments ($ billion in 2015 prices)

Equity $47

$195 $121 $187 $503

Debt $140 Private $62.5 Public $132.6

Bridging the infrastructure gap

15

* 25 countries minus the PRC Note: Numbers may not add up to total due to rounding. Source: ADB estimates based on data from country budget documents, NAS data from national statistic offices, IMF Investment and Capital Stock Dataset, Asian Development Bank Key Indicators 2016, World Bank World Development Indicators, World Bank Private Participation in Infrastructure Database.

Infrastructure investment by financing source, excluding PRC,* 2016– 2020, (annual average, $ billion in 2015 prices)

10 20 30 40 50 60 70 80 Current Investment Future Public Future Private Future Investment Need Investments ($ billion in 2015 prices)

Equity $16.8

$23 $29 $22

Debt $5.6 Private $2.6 Public $20.1

$74

Bridging the gap

16

Source: ADB estimates based on data from country budget documents, Asian Development Bank Key Indicators 2016, World Bank World Development Indicators, World Bank Private Participation in Infrastructure Database.

Infrastructure investment by financing source, Indonesia, 2016– 2020, (annual average, $ billion in 2015 prices)

Point 3: Regional Cooperation and Integration (RCI) is even more relevant now

17

Several Issues and Opportunities:

• ASEAN is perhaps the most dynamic sub-region for RCI
• ASEAN Economic Community is making progress – ambitious agenda
• Greater Mekong Subregion has grown exponentially, and presents a

wide scope for greater ROW (particularly private sector) engagement

• More vibrancy emerging in sub-regional programs (e.g. Indonesia-

Malaysia-Thailand Growth Triangle; Brunei-Indonesia-Malaysia- Philippines East ASEAN Growth Area)

• Clear view that countries need to cooperate a lot more

GREATER MEKONG SUBREGION ECONOMIC COOPERATION PROGRAM: Progress and Achievements

Over 11,000 km

• f roads constructed,

upgraded, or improved 3,000 km Of power transmission and distribution lines built/added Tourist arrivals increased from 10 million in 1995 to 78.8 million (with tourism receipts amounting to $90 billion) in 2018 Trade between GMS countries grew from $5 billion to $555 billion in 2018 1,570 megawatts

• f power generation capacity installed

500 km

• f railways constructed, upgraded, or improved

https://www.greatermekong.org/

 Cambodia * People’s Republic of China * Lao PDR * Myanmar * Thailand * Viet Nam

(Yunnan Province & Guangxi Zhuang Autonomous Region)

GMS Sector Strategies and Operational Focus (2018−2022)

https://www.greatermekong.org/

BIMP-EAGA

Subnational in Scope Target Less Developed Areas

Private sector engine of growth 2003 ADB designated Regional Development Advisor 2001-2002 ADB assists Institutional Development 1996 ADB supports Strategy Development

BIMP-EAGA Priority Infrastructure Projects (PIPs) Number of Projects Amount in USD

Roads, Railways and Bridges 16 12.6 B Inland Transport Services 3 0.023 Airports 16 1.9 B Seaports 16 3.8 B Power and Energy Infrastructure 7 2.2 B Trade Facilitation 9 1.5 B ICT 1 0.15 B Urban Development 1 0.40 B TOTAL 69 22.673 B

BIMP-EAGA PIPs

21

Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) Indonesia Aceh Bangka-Belitung Bengkulu Jambi Lampung North Sumatra Riau Riau Islands South Sumatra West Sumatra Malsysia Kedah Kelantan Melaka Negeri Sembilan Penang Perak Perlis Selangor Thailand Krabi Nakhon Si Thammarat Narathiwat Pattani Phattalung Satun Songkhla Trang Yala Chumphon Ranong Surat Thani Phang Nga Phuket

IMT-GT: Stages of Development

1993-1994 1995-2000 2001-2006 2007-2011 2012-2016 Establishment Take-off and Growth Repositioning Roadmap to Development Implementation Blueprint 2017-2036 IMT-GT Vision 2036 (Blueprints every 5 years) Subnational in Scope Promote economic complementarities

Private sector engine of growth

IMT-GT: Unique Features

2006 & 2011 ADB assisted in Strategy Development 2006 ADB designated Regional Development Partner 2017- 2021 2022- 2026 2027- 2031 2032- 2036 2013 CIMT established

IMT-GT VISION 2036

An integrated, innovative, inclusive & sustainable subregion Vision Goals Objectives Approaches Strategic Pillars Economic Corridor Programs & Projects Results-Based Monitoring & Evaluation

Private Sector Local Governments Transport & ICT Connectivity Trade & Investment Facilitation Tourism Agriculture & Agro-based industry Halal Products & Services Environment HRD, Education & Culture

TRANSPORT, ENVIRONMENT and URBAN DEVELOPMENT

• Green Cities Initiative
• Urban transport (Phuket,

Krabi, Penang, Langkawi, Selangor, and Sabang)

• Water supply (Kedah)

TRADE FACILITATION

• Support to TRS and

AEO implementation ECONOMIC CORRIDOR DEVELOPMENT & SBEZ

• Studies in economic

corridors and SBEZs TOURISM

• Tourism Strategic

Framework and Action Plan

PCPs Number of Projects Amount in USD Roads, railways and bridges 17 43.4 B Inland transport (inland container depots, distribution centers) 2 45.9 M Airports 4 465.8 M Seaports 6 1.0 B Customs, Immigration and Quarantine (CIQ) facilities 5 43.4 B Environment and Urban Development 1 250 M Other (Industrial Park, Rubber City, Science Park, Halal Park) 6 1.6 B TOTAL 41 46.9

IMT-GT Physical Connectivity Projects (PCPs)

Point 4: Disruptive Technologies can be Game Changers

26

Several Opportunities:

• Singapore, Malaysia, and Thailand are the leaders on the

technology front

• Indonesia, Philippines and Viet Nam recognize the need to invest

more in skills

• Even the smaller countries (Cambodia, Lao PDR, Myanmar) have

clear aims to look at 4IR prospects

• Support for Innovation and leapfrogging will be quite important in

coming years

Impact of 4IR: Critical dimensions are growth and employment

Source: Schwab, K. 2016. The Fourth Industrial Revolution, World Economic Forum, Crown Publishing Group, Penguin Random House, New York.

Impact Dimensions Economy Growth Employment The nature of work Business Consumer expectations Data-enhanced products Collaborative innovation New operating models National and Global Governments Countries, regions and cities International security Society Inequality and the middle class Community Individual Identity, morality and ethics Human connection Managing public and private information

High-skilled workers benefit the most from rapidly changing labour markets

SHARE OF NEW JOB TITLES BY SKILL LEVEL

Source: Khatiwada and Veloso (2019).

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% India (1968 - 2004) Viet Nam (1998 - 2008) Malaysia (1998 – 2008) India (2004 - 2015) Philippines (1990 - 2012) Low Middle High

Indonesia’s readiness to leverage 4IR for higher and inclusive growth needs to be enhanced

Point 5: Smaller and fragile countries need sustained development support

30

Several Issues and Opportunities:

• While growth is solid, a wide range of vulnerabilities remain

across the region

• Along with Middle Income and Upper Middle Income Countries,
• thers such as Myanmar and Timor Leste need strong support
• Conflicts or climate change related fragilities remain in some

countries

Point 6: ADB stands ready to provide expanded support to ASEAN, and work with all partners including private sector and civil society

31

Key highlights:

• Annual commitments expanding to $6 billion per year now, up

from around $3.5 billion a few years back

• Philippines and Indonesia are the largest in terms of annual

commitments (e.g. Philippines Build-Build-Build Program)

• Strategy 2030 provides the key drivers for change on a thematic

basis (e.g. Livable Cities; Addressing Remaining Poverty)

• Support for Innovation (e.g. Innovation Hub; ASEAN Policy

Network; ASEAN Catalytic Green Facility)

• Sustained support for RCI

32

Notes:

• 1. A detailed information pack with 5 separate sets of presentation

materials is available. Kindly contact ADB North America Representative Office (Mr. Bart Edes, Resident Representative, bedes@adb.org; Ms. Fei Yu, Deputy Res Rep, feiyu@adb.org; or Mr. Jeff Gelman, External Relations Officer, jgelman@adb.org)

• 2. For any additional information on ADB’s role in Southeast Asia,

kindly contact Mr. Ramesh Subramaniam, Director General, Southeast Asia Department, rsubramaniam@adb.org)

THANK YOU!