OECD Tokyo Centre presentation SAEO2011 12 (3) · Philippines 2011‐2016 In pursuit of inclusive growth ... (Country notes from Indonesia and Philippines) Infrastructure ... Global

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



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






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


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







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


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


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)


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


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


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

ANNEX

43

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

Documents

OECD Tokyo Centre presentation SAEO2011 12 (3) · Philippines 2011‐2016 In pursuit of inclusive growth ... (Country notes from Indonesia and Philippines) Infrastructure ... Global