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 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. 2

Point 1: Solid Macroeconomic Picture 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 3

South East Asia: Economic Powerhouse • Over the past 5 decades, South East South East Asia's Real GDP, 1970-2017 (US$ billions at constant 2010 prices) Asia’s real GDP has grown at an average of 5% per year, higher than 3000 12.0 the global average of 3%. 10.0 2500 8.0 • Combined gross domestic product 6.0 (GDP) totaled roughly US$ 2.77 2000 4.0 trillion in current prices in 2017. 2.0 1500 • These gains have been 0.0 -2.0 accompanied by improved welfare 1000 -4.0 outcomes. -6.0 500 -8.0 0 -10.0 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 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% of 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 South East Asia’s Trade, 1970 -2017 South East Asia's Inward FDI Stock, 1980-2017 (US$ at current prices in millions (US$ million at current prices and share of global FDI stock) and share of global trade) 2500000 8 1400000 8 7 7 2000000 1200000 6 6 1000000 5 1500000 5 800000 4 4 1000000 600000 3 3 2 400000 2 500000 1 200000 1 0 0 0 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 US$ at current prices in millions Percentage of global FDI stock Exports (US$ mil) Imports (US$ mil) Share of Global Exports Share of Global Imports Source: UNCTADStat Database, data downloaded 26 March 2019 Source: UNCTADStat Database, data downloaded 26 March 2019 7

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 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 opportunities for Rest of the World to engage in ASEAN more ◦ All SE Asian countries are taking steps, in varying degrees 9

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

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 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

Infrastructure in In investment needs, , 2016 – 2030 ($ billi illion in in 2015 pric ices) 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 26,166 5.1 5.9 Annual Average 1,503 1,744 Sources: 2030 population projections from UN Population Division; others are ADB estimates. 13

How big are infrastructure investment gaps? Infrastructure investments and gaps, 2016 – 2020 ($ billion in 2015 prices) Climate adjusted Estimated current Annual Gap as investment Gap needs % of GDP (2015) Total 881 1,340 459 2.4 Total without PRC 195 503 308 5.0 Indonesia 23 74 51 5.1 14 Note: Gap = Investment Needs – Current Investment

Bridging the infrastructure gap Infrastructure investment by financing source, excluding PRC ,* 2016 – 2020, (annual average, $ billion in 2015 prices) 600 $503 $187 500 Equity ($ billion in 2015 prices) $47 400 Debt Investments $140 $121 300 $195 200 Private $62.5 100 Public $132.6 0 Current Additional Public Additional Investment Investment Private Needs * 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 15 Indicators, World Bank Private Participation in Infrastructure Database.

Bridging the gap Infrastructure investment by financing source, Indonesia, 2016 – 2020, (annual average, $ billion in 2015 prices) 80 $22 $74 Equity 70 $16.8 Debt ($ billion in 2015 prices) 60 $5.6 $29 50 Investments 40 30 $23 Private 20 $2.6 Public 10 $20.1 0 Current Investment Future Public Future Private Future Investment Need 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. 16

Point 3: Regional Cooperation and Integration (RCI) is even more relevant now 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 17