First International Economic Forum on Asia: “Enhancing Regional Integration and Development through Quality Infrastructure and Resilience"
Opening Remarks by Angel Gurría
Tokyo, Japan, 14 April 2017
(As prepared for delivery)
Distinguished Guests, Ladies and Gentlemen:
I am delighted to welcome you to the first International Economic Forum on Asia. Let me begin by thanking our partners: the Government of Japan, and in particular Mr. Nobuo Kishi, State Minister from the Ministry of Foreign Affairs of Japan, and Mr. Hidetoshi Nishimura, President of the Economic Research Institute for ASEAN and East Asia (ERIA) for co-hosting this Forum. And thanks also to Mr. Toshihiro Nikai, for his great help in making today’s Forum a reality.
Following Japan’s historic decision to re-join the OECD’s Development Centre, this Forum is an important opportunity to reaffirm the OECD’s commitment to enhancing our activities with Asia. As partners, we can promote growth and development and advance the OECD’s Southeast Asia Regional Programme, which I launched with Prime Minister Abe three years ago. Together, we can now enhance Asia-wide regional integration and development through quality infrastructure and resilience. This will be critical in delivering the inclusive and sustainable growth Asia needs.
In many parts of the region, significant progress is already well underway.
Emerging Asia is a bright spot in the world economy
What we call “Emerging Asia” – the ten ASEAN member countries plus China and India – has benefited from open markets and global value chains. This has helped lift hundreds of millions of people out of extreme poverty since the 1990s.
The OECD’s Economic Outlook for Southeast Asia, China and India 2017 forecasts GDP growth in Emerging Asia to remain robust from now until 2021 at an average of 6.2% per year. Medium-term GDP growth is expected to average 5.1% per year among ASEAN member countries. GDP growth will reach 7.3% in India. And despite adapting to the “new normal” levels of growth, China’s GDP per capita remains nevertheless on course to almost double between 2010 and 2020.
This is a very different story from much of the OECD, where growth rates of 2% or less have been the norm on average during post-crisis years. And it is a very different story from Japan, which is gradually overcoming two decades of sluggish growth through Abenomics.
Intra-ASEAN trade has also become more intense over the years. Intra-regional trade intensity has averaged at 3.5 in ASEAN during the last 15 years. This is higher compared with other regions, including the European Union whose intensity ratio stands at 2.5.
Whatever their particular circumstances, all countries and sectors in Asia stand to gain from faster regional economic integration and stronger intra-regional trade to cushion against the current global crisis. The surest way of achieving this is by investing in quality infrastructure. You can have all the free trade agreements you want, but if the infrastructure is not there and if the connectivity is not there, then trade will not flow, the fruits of market openness will be fewer, and many people and firms will be left behind.
But Asia is on track.
Bridging the infrastructure gap requires massive investment
Regional integration in Southeast Asia is ongoing under the ASEAN Economic Community Blueprint 2025. The development of regional transport, ICT and energy infrastructure, as outlined in the Master Plan on ASEAN Connectivity 2025, is fundamental to integration efforts.
The past decade has seen important progress on regional infrastructure projects, such as the ASEAN Highway Network, power and gas connectivity, and the ASEAN Broadband Corridor. The Chinese Belt and Road initiative is improving regional integration through better connectivity far beyond China’s immediate neighbours, covering over 100 countries. In Japan, infrastructure projects like the new super-high-speed maglev rail line will link Tokyo, Osaka and Nagoya into a single urban mega-region.
These are all important initiatives, offering great opportunities to increase regional integration. But more can be done. This is particularly the case for developing Asia, where an estimated investment of 26 trillion US dollars is needed by 2030 to maintain growth, reduce poverty and respond to climate change.
This is why today’s discussion is so timely! The infrastructure investment challenge is huge. Compounding this challenge is the need to reduce the environmental impacts of infrastructure. Nowhere is this truer than in the development of power infrastructure that requires a total investment of some 14.7 trillion US dollars, and the potential for renewable energy is tremendous.
Here the region is already making great strides. ASEAN members collectively agreed to an aspirational target to increase their share of renewables to 23% by 2025. China and India are already major drivers for the development of renewable energy on a global scale. China has surpassed Germany to become the top country for solar capacity, with approximately 19% of the world’s capacity. India ranked fifth globally for additions of solar and wind power in 2015. The massive deployment of renewable energy in these two countries has driven down costs for renewables, reduced greenhouse gas emissions and created green jobs.
So, what more can be done to promote investment in high quality, green infrastructure? Let me mention some areas that you will be discussing today and where the OECD can help.
The OECD’s contribution
First, we need reliable risk mitigation instruments to address political, commercial and environmental risks to reassure private investors. The OECD’s Southeast Asia Regional Programme helped support the drafting of the ASEAN Principles for Public-Private Partnership (PPP) Frameworks and the establishment of the ASEAN PPP Network.
Second, we need to diversify the types of financial stakeholders and sources of finance. The G20/OECD Guidance Note on Diversification of Financial Instruments for Infrastructure and SMEs, which was endorsed at the Hangzhou Summit, provides pragmatic principles and recommendations. New funding structures and innovative financial tools can help align public and private sector interest, mobilising institutional investors and tapping bond markets. This morning, you will be discussing how global standards can promote quality infrastructure investment and new finance. This afternoon you will turn to the circular economy and sustainable cities.
This is key, because, let us also not forget that simply delivering more infrastructure is not enough. It has to be high quality and it has to be green. This is the third point I want to emphasise.
Tools like the OECD’s Getting Infrastructure Right provide policy makers with effective infrastructure management frameworks, from planning and delivery modes, to regulations and cost-benefit assessments. The region will also be able to draw on a major OECD study being undertaken through the German G20 Presidency, building on last year’s summit and exploring how G20 countries can integrate climate action with pro-growth structural reforms and scaled-up investment in low-carbon, climate-resilient infrastructure.
And let’s keep in mind that infrastructure can sometimes serve special interests rather than the wider public interest. This can result from policy ‘capture’ or systemic biases in the way evidence is considered and decisions are taken. We need to pay close attention to the governance frameworks, standards and instruments that we use to ensure that investment is guided by the right motivations so that infrastructure is inclusive. This means genuine consultation – not just asking citizens once the decision has been made – and more disclosure of data about PPPs and other public contracts. On this point, we are working closely with the World Bank to support ‘open contracting’ as a key element of open government.
Ladies and Gentlemen,
Thanks to the impressive work and ambition of the Japanese G7 Presidency last year, G7 countries have endorsed the Ise-Shima Principles for Promoting Quality Infrastructure Investment. These show how countries can deliver quality infrastructure that drives an inclusive agenda – that creates jobs, that promotes the transfer of expertise, that reduces climate impacts, and that aligns with development goals.
I am confident that today’s rich discussions will help us tap into this ambition, and help build quality infrastructure for better lives in Asia. Thank you.