Fostering Sustainable, Innovative and Inclusive Growthmddb.apec.org/Documents/2016/SOM/ISOM-SYM/16_isom_sym_009… · Export and import merchandise trade values contract in January

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2016/ISOM/SYM/009 Session II

Fostering Sustainable, Innovative and Inclusive Growth

Submitted by: Policy Support Unit, APEC Secretariat

Symposium on Priorities for APEC 2017Ha Noi, Viet Nam8 December 2016

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Presented byDenis Hew, DirectorAPEC Policy Support Unit

Copyright © 2015 APEC Secretariat

FosteringSustainable,Innovative,andInclusiveGrowth

Symposium on APEC 2017 Priorities8 December 2016Ha Noi, Viet Nam

Where APEC is now:Growth in APEC mirrors weakness in global economy

• TheAPECregioncontinuedtogrowduringQ22016at2.4percent,slightlyhigherthanthepreviousquarter’slevelof2.3percent,butlowerthanthe2.8percentGDPgrowthpostedinQ22015.

Note: Data not available for Brunei Darussalam and Papua NewGuinea.Sources : As ian Development Bank (ADB), International Financial Statis tics (IFS), the World Bank (WB), The Economist Economic and Financial Indicators , various economy sources , and APEC PSUs taff calculations .

GDP Growth Rates, year-on-year (y-o-y), Q2 2015 and Q2 2016

-6

-4

-2

0

2

4

6

8

Aust

ralia

Cana

da

Chile

China

Hong

Kon

g, C

hina

Indo

nesia

Japa

n

Kore

a

Mala

ysia

Mex

ico

New

Zeala

nd

Peru

The

Philip

pines

Russ

ia

Sing

apor

e

Chine

se T

aipei

Thail

and

Unite

d St

ates

Viet

Nam

Q2 2015 Q2 2016 APEC Q2 2015 average APEC Q2 2016 average

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• Thecontributionsof privateandpublicconsumptiontoGDPgrowthremainedcrucial,particularlyinviewofpersistentlyweakglobaldemandwhichadverselyaffectedtradegrowth.

Note: Data on quarterly contributions to GDP (expenditure side) are not available for Brunei Darussalam, Papua New Guinea; Russia; and Viet Nam. Missing bar per economy denotes either unavailability of data or zero percent.Source: Statistics Offices and Central Banks of APEC member-economies

GDP by Expenditure (y-o-y, in percent), Q2 2016

Where APEC is now:Domestic consumption buoys economic growth as trade remains low

-20-10

0102030405060

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ralia

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Private Consumption Government ConsumptionGross Fixed Capital Formation Exports

Note: Datanotavailable forPapuaNewGuineaSource:WorldTrade Organization(WTO), BruneiDarussalamEconomicPlanningandDevelopmentOff iceandAPECPSUstaff calculations.

Where APEC is now:Export and import merchandise trade values contract in January-August 2016

• On average, the APEC region’s merchandise trade values contracted by 6.4% for exports and 6.6% for imports

Growth in Merchandise Trade Values (y-o-y, in percent), January-August 2016

-30-25-20-15-10-505

101520

Aust

ralia

Brun

ei Da

russ

alam

Cana

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Chile

China

Hong

Kon

g, C

hina

Indo

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Japa

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Peru

The

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aipei

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Exports ImportsAPEC average exports APEC average imports

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• In2015,theAPECregionattractedUSD953billionworthofFDI,equivalenttoaaround54.1percentofworldFDIandagrowthof42.3%fromthe2014level.

Source: UNCTADWorldInvestmentReport2016

Where APEC is now:APEC is the largest recipient of world FDI in 2015

FDI Flows (in billion US dollars) and APEC Share of World FDI (rhs, in %), 2000-2015

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APEC FDI outflows APEC Share of the world (rhs)

Where APEC is now:Trade-restrictive measures are increasing along with investment-friendly measures

• Trade-restrictivemeasureshaveincreasedwhiletrade-facilitatingmeasureshavedeclinedinAPEC.• Investment-friendlymeasuresalsowentup,evenasinvestment-restrictivemeasureswerealsoslightly

higher

01020304050607080

Trad

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Trad

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Inve

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mid-May 2015 to mid-Oct 2015mid-Oct 2015 to mid-May 2016mid-Oct 2015 to mid-Oct 2016

TradeandInvestmentMeasuresinAPEC,mid-May2015tomid-October2016

Note: Onlynineof the21APECmember-economiesbelongtotheG-20,including:Australia;Canada;China;Indonesia;Japan;Korea;Mexico; Russia;andtheUnitedStates.Source:UNCTAD-OECD-WTO Trade andInvestmentMeasures.

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Near-term outlook points to continued growth but downside risks are dominant

RealGDPGrowth,inpercentActualvsForecast

Actual Forecasts2014 2015 2016 2017 2018

Australia 2.69 2.44 2.87 2.67 2.89BruneiDarussalam -2.35 -0.55 0.38 3.95 1.71Canada 2.47 1.08 1.16 1.90 1.91Chile 1.83 2.30 1.70 1.99 2.70China 7.30 6.90 6.59 6.17 6.03HongKong,China 2.68 2.44 1.44 1.85 2.81Indonesia 5.02 4.79 4.94 5.30 5.50Japan -0.03 0.54 0.51 0.56 0.45Korea 3.34 2.61 2.72 3.04 3.06Malaysia 6.01 4.97 4.30 4.60 4.70Mexico 2.25 2.47 2.09 2.33 2.58NewZealand 3.02 3.00 2.77 2.71 2.59PapuaNewGuinea 7.35 6.62 2.54 2.95 2.49Peru 2.39 3.28 3.75 4.12 3.58ThePhilippines 6.22 5.91 6.40 6.70 6.80Russia 0.71 -3.73 -0.76 1.07 1.20Singapore 3.26 2.01 1.70 2.23 2.64ChineseTaipei 3.93 0.65 0.97 1.67 1.94Thailand 0.82 2.82 3.23 3.27 3.10UnitedStates 2.37 2.60 1.58 2.20 2.08VietNam 5.98 6.68 6.10 6.20 6.20

• Inthenear-term,APECeconomiesareexpectedtocontinue togrowbutatvaryingspeeds.

• TradegrowthandFDIflowsareanticipatedtoslowdownin2016beforepickingupin2017-2018.

• UpsidepotentialforAPECgrowthcouldcome fromimprovementsinindustrialproduction andcommoditypricesaswellassustainedFDIinflows.

• DownsideriskscouldemanatefromChina’srebalancing,uncertaintyinUSinterestrates,medium-termimpactofBrexit,andrisingprotectionism.

• Balanceof risksistiltedtothedownside.• Anappropriatepolicymixofshort-term

andmedium-termmeasuressupportshigherandmoresustainablegrowth.

Source:IMFWEO October2016.

What’s next for APEC: Skills development in a Digital Age

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0 100 200 300Mobile cellular subscriptions (per 100 people)

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0 20 40 60Fixed (wired) broadband subscriptions (per 100 people)

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ScatterplotsofrealpercapitaGDPanddigitaltechnologyuse,2000-2014

Note: Fittedcurvesare generated usingnonparametriclocallyweightedscatterplotsmoothing(LOWESS).Source:WorldBank,WorldDevelopment IndicatorsandDirectorate-GeneralforBudget,AccountingandStatistics(ChineseTaipei) .

• Ahigher rateofdigitaltechnologyuseiscorrelatedwithpercapitaGDP.AplausibleexplanationisthatdigitaltechnologyincreasesGDPthroughitsimpactonconsumptionandproduction,whileahigher incomealsoincreasesfirms’andhouseholds’accesstodigitaltechnology.

• Butlinkagesbetweendigitaltechnologyandemploymentareunclear, suggestingopposingimpacts.

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Skillsneededinamoderneconomy

• literacy,numeracy,andcognitiveskills• Problem-solvingability• Verbalability,memory,andmentalspeedCognitive

• Socioemotionalskillsandpersonality• Opennesstoexperience,conscientiousness,extraversion,andemotionalstability

• Self-regulation,mindsetandinterpersonalskills

Socialandbehavioural

• Knowledgeofmethodsandtools• General technicalskillsfromschoolingandtraining• Occupation-specificskills

Technical

What’s next for APEC: Skills development in a Digital Age

• Employment inthedigitalage requiresbasiccognitiveskills,suchasliteracyandnumeracy,whileawell-equippedworkerneedsskillsthatareeasilytransferableacrossjobsandoccupations.

• Aworkerneedstobeadaptiveandflexible,beingquicktolearnnewskillsastheyarerequiredbythe jobmarket.AstheWorldBank(2016)putthem,workersinthedigitalagerequirehigher-ordercognitive,socioemotional,andtechnicalskills.

Source:WorldBank,WorldDevelopmentReport2016

Evolution of APEC Growth Strategy (2009-present)

• In 2009, the APEC Growth Strategy was launched in response to the 2008 Global Financial Crisis.

• In 2010, APEC Leaders endorsed the APEC Growth Strategy, which aimed to achieve balanced, inclusive, sustainable, innovative, and secure growth.

• Consistent with other APEC initiatives, the APEC Growth Strategy (2010-2015) rests on three pillars: 1. trade and investment

liberalization; 2. business facilitation; and 3. economic and technical

cooperation.

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• In 2014, APEC Leaders endorsed the Accord on Innovative Development, Economic Reform and Growth, which aims to promote closer cooperation in five areas:

1. Economic reform;2. New economy;3. Innovative growth;4. Inclusive support; and5. Urbanization.

• In 2015, reaffirming their commitment to the 2010 APEC Growth Strategy, APEC Leaders agreed on an APEC Strategy for Strengthening Quality Growth (2015-2020), by contributing to the achievement of three Key Accountability Areas (KAAs):

1. Institution building;2. Social Cohesion; and3. Environmental Impact

Evolution of APEC Growth Strategy (2009-present)

Recent Studies on Inclusive Growth by the APEC Policy Support Unit (PSU)

SelectedPSU Studies

Key Points

Integrating SMEs into Global Value Chains: Policy Principles and Best Practices(May 2014)

• Policies to integrate SMEs are needed on two levels: 1) on a general/horizontal level, economies should promote awareness and understanding of the benefits of global value chains; and 2) on an industry-specific level, economies should identify strengths, weaknesses, opportunities and threats for domestic SMEs to enter into global value chains and assist SMEs with relevant policy tools/packages.

Innovation, Competitiveness and the Role of Fiscal Policies(November 2014)

• APEC members need to place greater emphasis on promoting research and development (R&D) and encouraging innovation as important pathways to strengthen the region’s competitiveness, raise labor productivity and address the effects of changing demographics.

• The following lists selected APEC- PSU studies, policy briefs, and other papers on inclusive growth from 2014-present:

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SelectedPSU Studies

Key Points

Structural Reform for Resilient and Inclusive Growth(August 2015)

• Household demand—rather than trade or government spending—is the main driver of growth in the APEC region in recent years. Based on this finding, it seems that future APEC growth lies in strengthening household consumption through structural reform. Numerous studies show that structural reforms not only contribute to raising productivity, they also help make growth more inclusive.

The APEC Women and The Economy Dashboard 2015(September 2015)

• APEC economies have been undertaking efforts to improve the conditions for the participation of women in the economy, however, women participation in such areas as financial services; science, technology and engineering; and leadership positions in both public and private sectors remain low.


SelectedPSU Studies

Key Points

Tourist Arrivals and Inclusive Growth(August 2016)

• Enhancing the inclusiveness of tourism requires active policymaking at three levels: destination, economy, and international.

Exploring Quantitative Indicators for Effective Monitoring of APEC-wide Progress on Structural Reform under RAASR 2016-2020(October 2016)

• Proposed 17 indicators associated to the RAASR pillar on “deeper participation by all segments of society including MSMEs, women, youth, older workers, and people with disabilities”, ensuring that indicators contribute towardsevaluating the inclusiveness of structural reform policies.

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2015 APEC Economic Policy Report (AEPR) on Structural Reform and Innovation

“The prospects for the shared prosperity of APEC will depend on innovative development, economic reform, and growth in the region, which are complementary and mutually reinforcing.”

-2014 APEC Leaders’ Declaration11 November 2014, Beijing, China

• In response to the statement by APEC leaders, the 2015 AEPR conducted a study to examine the link between structural policy settings and firm-level innovation across the APEC region.

• The findings of the AEPR study show that:Ø There is significant diversity even between economies at the same levels of

development.Ø Structural policies play a critical role in the development of high performing

national innovation systems.Ø All member-economies face capability challenges in developing policies and

institutions that will improve firm innovation outcomes.

Thank You

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