Fostering Regional Competitiveness and Sharing the Benefits of Sustained Growth
Remarks by Angel Gurría, OECD Secretary-General, delivered at the OECD Southeast Asia Regional Forum
Bali, 26 March 2014
(As prepared for delivery)
Ladies and Gentlemen,
It is a real pleasure to welcome you to the OECD Southeast Asia Regional Forum on Fostering Regional Competitiveness and Sharing the Benefits of Sustained Growth. I would like to thank Minister Basri for joining us today and for hosting the Forum here in Bali.
This Forum brings together policy makers from Southeast Asia and OECD countries to discuss strategies to support the region’s social and economic development, and to ensure the region is on a solid path to integration and sustainable growth.
This year’s Forum is particularly important as discussions will contribute to shaping the OECD’s new Southeast Asia Regional Programme, a major initiative aimed at reinforcing our collaboration with the region.
Southeast Asia: A Region at a Crossroads
These discussions come at a crucial time for Southeast Asia. The region has been one of the most dynamic and fastest-growing areas in the world. GDP is projected to grow by 5.4% per year on average during 2014-18, and significant gains have been made in terms of poverty eradication and human development.
The region also benefits from large endowments of natural resources and biodiversity, a wide range of productive capabilities, diversified exports, an expanding middle class, and a young and dynamic population.
Yet, at the same time, today, this diverse and dynamic region is at a crossroads. Strong macroeconomic fundamentals have protected most countries from the external headwinds coming from a still hesitant global recovery. But this might not be enough to ensure sustained growth and continued convergence in living standards towards the mature economies.
To build on its past achievements and impressive economic track record, the region needs to move up global value chains and find new sources of growth. This entails a shift toward higher productivity sectors, including manufacturing, which are driven by innovation and highly skilled workers. And services sectors, particularly those of a technological bent, will become increasingly important as a source of employment.
Countries in the region also need to tackle poverty and rising income disparities. The ASEAN countries are still home to more than 200 million people living on less than USD2.00 a day ! According to the Narrowing Development Gap Indicators (NDGIs) that we have developed with the ASEAN Secretariat since 2013, significant efforts are still needed to narrow the disparities in socio-economic development between the richest and poorest countries in the region.
But, this is not simply a question of differences between countries! Crucially, disparities also persist within countries that have experienced strong growth. In Indonesia, for example, the next 4 years will bring a phenomenal pace of GDP growth, averaging around 6% per annum. And, while such robust growth is commendable, it needs to be accompanied by efforts to reduce inequality and share the proceeds of economic success more equitably, in a country where the Gini coefficient which is the internationally accepted measure of inequality, rose by 20% from 0.35 in 2008 to 0.41 in 2011.
Laying the Foundations for Sustained Growth
The 2014 Economic Outlook for Southeast Asia, China and India report, which the OECD has produced in collaboration with ASEAN, explores key policy areas where the region could focus upon for improving growth outcomes, fostering competitiveness, and better sharing the benefits of growth. Let me highlight five of these areas.
The first is stronger productivity growth. Structural reforms in policy areas such as investment, education, infrastructure and green growth will foster competitiveness, productivity and job creation. So will policies to promote innovation and entrepreneurship. These will also help ensure that a larger proportion of the population can take an active part in economic life and share in the benefits of growth.
The second is growth in the modern services sector. This service sector has great, unexploited potential to help broaden and strengthen growth and employment creation. Services also have an important role in providing better education, health and social protection to the population at the bottom of the income distribution. Despite progress, efforts are still needed to improve regulation and reduce barriers that stifle competition and inhibit investment in modern finance, business services and ICT.
The third is stronger financial systems. One of the most serious downside risks facing Emerging Asia is volatility in the financial markets. Managing international capital flows while ensuring sustainable economic growth will continue to be a key medium-term macroeconomic policy challenge, especially now that advanced economies “tap the breaks” on their quantitative easing strategies.
The fourth is smarter trade. Southeast Asian countries are highly integrated in global value chains. However, the ongoing re-organisation of production at the global level is calling for new policies to build production capacities, promote upgrading, sustaining trade integration and supporting the creation of domestic entrepreneurial capacities.
The fifth area is the regional economic integration scheduled by 2015. The ASEAN Economic Community constitutes one of the most ambitious programmes of economic co-operation in the developing world, with huge potential gains. Creating a “single market and production base” will have positive effects on economic growth and employment. It will also help insulate the region from volatile capital inflows.
Making Reforms Happen
Advancing on these priorities requires vision, political leadership and strong institutional capacity. Several countries in the region have launched development plans. But the challenges of implementation should not be underestimated. This is a lesson we have learned the hard way: making reform happen is hard! Beautifully designed structural reforms and development strategies are of little use if the right institutional capacities are not in place.
Emerging Southeast Asia will need to strengthen institutional capacities. Strong and effective “institutions” — from the rule of law to government regulation, administration and implementation, together with appropriate medium-term development plans — are needed to realise the region’s long-term potential. In this context, the fight against corruption will be instrumental. OECD works closely with many countries to build and implement anti-corruption frameworks and rules, with an arsenal of ‘soft laws’, benchmarks, studies and peer pressure Mechanisms. We stand ready to collaborate with all countries in the region on that front. The “CEO Vanguard” launched recently by the World Economic Forum to support the OECD Anti-Bribery Convention will bring the voice of business."
Governments in the region will also need to adjust their ways of providing public goods, from education and human capital development, to infrastructure and innovation, in order to support the transformation of their economies and to ensure that the benefits of growth are better shared.
The Southeast Asia Programme: A Mutually Beneficial Partnership
The OECD can help the region achieve these ambitious goals through its Southeast Asia Regional Programme, which was launched to support the region’s integration and enhance growth. The programme aims to bring participating countries closer to global standards and practices, provide access to OECD expertise and the experience of its members and partners, and foster engagement with OECD instruments.
We are all in this together!
Ladies and Gentlemen,
The OECD is looking forward to increasing its engagement with Southeast Asia, after working together so productively for many years. Indeed many countries in the region already have a history of participation in OECD bodies and committees. However, the OECD-Southeast Asia partnership today is more important than ever.
We all share a vital interest in achieving successful multilateral collaboration to strengthen growth and development prospects, as well as address global challenges such as climate change, food, energy and water security, and international financial stability.
We are engaged, encouraged and excited about the great potential and the promise of the Southeast Asia Regional Programme. In less than two months — on the 6th of May in Paris at the OECD Ministerial Meeting — Japanese Prime Minister Abe and I, along with Minister Basri, the ASEAN Secretary-General and Ministers from the region, will officially launch the Southeast Asia Regional Programme.
We warmly welcome your contributions and ideas during this Forum. This Programme is designed to respond to your policy needs and is essential to us that you “own” it and help us shape it every step of the way.