Indonesia

2nd Southeast Asia Regional Forum: Opening Remarks

 

Opening remarks by Angel Gurría

Secretary-General, OECD

Jakarta, Indonesia

25 March 2015

(As prepared for delivery)

 

Your excellency the Minister of Finance of Indonesia, Ladies and Gentlemen,

 

I want to warmly welcome all of you to the 2nd OECD Southeast Asia Regional Forum. Our particular gratitude goes out to the Indonesian Ministry of Finance for co-hosting this event and putting together what promises to be a stimulating programme.

 

The aim of this year’s Forum is to bring together OECD experts and Southeast Asian policymakers to discuss regional integration and openness. This theme couldn’t be more timely given the impending launch of the ASEAN Economic Community (AEC), and the substantial progress with other regional integration initiatives such as the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP), and the Asia-Pacific Economic Co-operation (APEC).

 

The OECD also continues to tighten its links with the region. Since I launched the Southeast Asia Regional Programme together with Japanese Prime Minister Shinzo Abe in May 2014, we have launched  six Regional Policy Networks and three thematic initiatives while further strengthening our key partnership with Indonesia. At tomorrow’s Steering Group, we will take stock of this progress and strategise for the next steps.

 

The importance of regional integration and openness

 

The Southeast Asia region has made remarkable progress in raising income, reducing poverty, and integrating with the world economy. Growth looks set to  average 5.6% in the second half of this decade. Indonesia, the Philippines, Thailand, and Viet Nam have already reached middle-income status, Malaysia is fast approaching developed country status, and Cambodia, Laos, and Myanmar are expected to enjoy robust catch-up growth.

 

Whether in Asia, Europe, Africa or the Americas, regional integration efforts have helped foster trade links and political cooperation towards common goals. As we meet here in 2015, Southeast Asia is on the verge of taking important steps on its own journey towards greater integration.

 

The theme of this year’s Forum, "Regional Integration and Openness", has two aspects:

 

  • Regional integration in Southeast Asia. Remarkable progress has been made in recent decades, but there remains scope to reap further gains: only around 20% of trade and investment flows in the region are between ASEAN countries themselves, the remainder being with the rest of the world. Moreover, the substantial divergence in the level of development between Southeast Asian countries remains a major obstacle to both regional integration and to the development of the region overall.

  • Openness towards the rest of the world. Southeast Asian countries are, on average, very open to the rest of the world – but divergences remain. The sum of exports and imports in Singapore is approaching three times GDP. In Thailand and Malaysia it is close to one and a half times GDP, whereas in Indonesia, the Philippines, and Myanmar it lags behind at around half of GDP. Boosting the export capacity of these latter countries can help accelerate their development.

 

While further regional integration and openness carries enormous promise in securing sustainable, long-term growth, several structural challenges remain.

 

For instance, many countries with recent strong growth could end up in the "middle-income trap", failing to progress towards developed country status as factor endowments, institutions, the regulatory framework and infrastructure fail to meet the requirements necessary for productivity-driven growth and structural change towards higher value-added activities.

 

Developing the service sector is a particular challenge. With services comprising more than two thirds of GDP in most developed countries, countries need to move quickly to build competitive, productive service sectors. Logistics, telecommunications and financial services are critical to entering and upgrading in Global Value Chains. Competitive service sectors can also drive exports in their own right. A shining example is the exponential growth in the Philippines’ Business Process Outsourcing sector over the past decade.

 

Obsolete and insufficient infrastructure also holds back growth in many ASEAN countries, imposing inordinate transaction costs on companies and consumers and decreasing their competitiveness in the regional and global economy.

 

Contributions of OECD, including through SEARP

 

In each of these areas, the OECD can play a role by sharing the experience and lessons learned by our member and partner countries. We bring to the table support for national reforms to implement regional integration commitments, such as those in the AEC blueprint – which are to be discussed during sessions 2 and 3 of the Forum:

 

  • Through the six Regional Policy Networks and the three initiatives of the Regional Programme, the OECD is developing the substance of our co-operation. The Network on investment policies, for example, analyses, reviews, and recommends changes to investment policy frameworks. We have already completed or are carrying out OECD Investment Policy Reviews in 8 of the 10 ASEAN member countries.

 

  • The Trade initiative also plays an important role in shaping integration policies, analysing global value chains and emerging trade policy issues. Anchored around the ASEAN Working Group for SME policies and the ASEAN SME Policy Index, the Network on SME policies helps improve, complement, and streamline different SME support and promotion policies. This helps countries boost productivity, find the ‘missing middle’ of productive medium-sized enterprises able to compete regionally and globally, and to diversify and move to higher value-added activities.

 

  • The Network on connectivity and PPPs will help SEA countries meet the tremendous infrastructure needs the region faces by bringing relevant policy and expertise to help attract sustainable investment in these sectors. A key step was the ASEAN PPP Principles, which OECD helped develop and which ASEAN Ministers endorsed in November, 2014.

 

  • Finally, yesterday I had the pleasure to attend a high-level lunch on gender, a first step in the Gender initiative, where we discussed ways in which the region can further benefit from the entire potential work force.

 

Going forward, new work on productivity enhancing policies will also be presented in the fourth and final session of this Forum, looking at institutions and processes necessary to ensure productive policies and outcomes.

 

Of course, making a success of our Regional Programme, and of the regional integration process it supports, requires careful consultation with key stakeholders like the business and investor community. In this vein, we organised yesterday, in co-operation with BIAC and ASEAN BAC, a business network meeting that brought together 70 executives from SEA and OECD countries. They issued a business statement that highlights reform priorities over the next years designed to ensure that regional integration and openness be beneficial for all of society.

 

Ladies and gentlemen,

 

I would like to thank participants for their strong engagement and reiterate our intention to further strengthen OECD-SEA co-operation, through the Regional Programme and key partnerships. We strongly encourage lively participation to help shape not only the future of OECD-Southeast Asia co-operation, but to do so with a single overarching goal: ‘better policies for better lives’ across the region.

 

Thank you!