Presentation at EcoSoc Dialogue with the Regional Commissions Geneva, 8 July 2011 Sustaining the dynamism of Asia-Pacific Role of regional economic cooperation.

Sustaining the dynamism of Asia-PacificRole of regional economic cooperation

Presentation atPresentation at

EcoSoc Dialogue with the Regional CommissionsEcoSoc Dialogue with the Regional Commissions Geneva, 8 July 2011Geneva, 8 July 2011

by

Dr Noeleen HeyzerUndersecretary General, United Nations and

Executive Secretary, UNESCAP

2

Strong recovery in 2010, robust outlook for 2011Strong recovery in 2010, robust outlook for 2011

• Strong recovery in 2010 with 8.8% growth

•

• Outlook for 2011 is robust at 7.3%

• Asia-Pacific region emerges as the fastest growing region and a growth pole of the world economy

• Recovery broad-based across sub-regions

0 2 4 6 8 10

Europe

Latin America and Caribbean

Middle East

Africa

Developing ESCAP economies

Percentage

2011

2010

0 2 4 6 8 10

North and Central Asia

Pacific island developingeconomies

South-East Asia

South and South-West Asia

East and North-East Asia

Percentage

2011

2010

3

Key downside risks and policy challengesKey downside risks and policy challenges 1. Return of food-fuel crisis 1. Return of food-fuel crisis affecting recovery and affecting recovery and hurting the poorhurting the poor• Oil prices could reduce growth up to

1% for some countries in 2011

• High food and oil prices could lead to up to 42 million extra people in poverty in 2011, in addition to 19 million already affected in 2010.

• Need for an urgent response at the national, regional and international levels given the global nature of the challenge

– In particular, regional food banks such as ASEAN+3 Rice Reserve and the SAARC Food Bank are important initiatives

2011 GDP Growth impact of oil prices at USD 130 per barrel

Singapore

Philippines

India

Thailand

Republic of Korea

Indonesia

Developing AP

Malaysia

China

-1.0 -0.8 -0.6 -0.4 -0.2 0.0

Percentage points

0

15

30

45

1/2 x Food pricerise & oil $105

1 x Food price rise& oil $115

2 x Food price rise& oil $130

42.4

20.2

9.8

Additional people in poverty (Millions)

Prevented to get out of poverty

Pushed into poverty

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2. Managing volatile capital flows2. Managing volatile capital flows • Asia-Pacific region has been highly

exposed to volatile capital flows resulting from expansion of global liquidity

– Leading to dramatic asset price rises, in the capital and real estate markets and financial volatility

– Exchange rate appreciation even in countries with current account deficits

• Reserves to counter outflow risk not always sufficient, costly

• Capital controls increasingly used, as advocated by ESCAP, and need to be encouraged where necessary

Equity market performance, 2008-2011

0

20

40

60

80

100

120

140

Ja

n-0

8

Ap

r-0

8

Ju

l-0

8

Oc

t-0

8

Ja

n-0

9

Ap

r-0

9

Ju

l-0

9

Oc

t-0

9

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oc

t-1

0

Ja

n-1

1

Ind

ex

(J

an

ua

ry 2

00

8=

10

0)

China (Shanghai composite) India (BSE30)Philippines (PSEi) Republic of Korea (KOSPI)Russian Federation (RTS) Singapore (SGX Strait Times)Thailand (SETI) Hong Kong, China (Hang Seng)

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3. Boosting regional demand to sustain 3. Boosting regional demand to sustain dynamismdynamism

• Medium-term challenge is to boost demand in the region to complement sluggish demand in developed countries

• Demand can be boosted in some countries by increasing the consumption of the poor, in others by increasing investment

– Increase consumption through better social protection and public service provision, thus reducing precautionary savings

– Increase investment by bridging huge infrastructure gaps, through infrastructure financing mechanism

• Exploiting the potential of regional economic integration

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Large potential for increasing intra-regional tradeLarge potential for increasing intra-regional trade

• Intra-regional trade has grown faster than region’s global trade since 1998

• Estimates suggest that potential of intra-regional trade is much higher and is growing fast

• Intra-regional trade is driven by presence of trade complementarities.

• Considerable complementarities exist within and across AP subregions

• Complementarities are generally higher across subregions than within subregions

• Case for broader cooperation across subregions

44

46

48

50

52

54

56

1993 1997 2001 2005 2009

Share of Asia-Pacific Intra-regional trade in

total trade (percentage)

Actual

Modelled

0

7

Need to create a broader regional framework for cooperationNeed to create a broader regional framework for cooperation

• The sub-regional groupings like ASEAN, SAARC, BIMSTEC, ECO, the Pacific Islands Forum and numerous bilateral preferential trading arrangements provide framework for regional economic integration

• However, they do not lead to a seamless, region-wide market

• Need to deepen integration within subregions but also to build on them a broader regional arrangement

8

Asia-Pacific transport links are unevenly developedAsia-Pacific transport links are unevenly developed

• ESCAP is assisting in development of transport connectivity through intergovernmental agreements on Asian Highway and Trans-Asian Railway

• Also working on a third intergovernmental agreement on Dry Ports

9

““Soft” connectivity also needs to be strengthenedSoft” connectivity also needs to be strengthened

• Costs and time of preparing documents, customs clearance and inland transport regulations can also inhibit trade

• Streamlining trade procedures through national single windows can help – if the electronic data and documents are accepted by authorities in partner economies

• The harmonization across countries of arrangements for cross-border and transit transport is critical to ensure the smooth movement of goods through national borders

• ESCAP is assisting the region through capacity-building in trade facilitation

10

Financial cooperation for closing the infrastructure gapsFinancial cooperation for closing the infrastructure gaps

• Asia-Pacific region is characterized by wide infrastructure gaps

• Huge investments to close them• Region’s foreign exchange reserves

are larger than US$ 5 trillion• Lack a well developed regional

financial architecture does not allow them to be mobilized for region’s development needs

• Important steps in monetary and financial cooperation are the Chiang Mai Initiative Multilateralization and Asian Bond Funds

• Need to develop the financial architecture beyond them to channel region’s savings to infrastructure needs

Infrastructure Composite Scores in Asia-Pacific, 2007

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

SingaporeJapan

New ZealandKorea, Rep.

AustraliaHong Kong,

Macao, ChinaBrunei

MalaysiaRussian

ChinaThailand

TurkeyIran, IslamicAzerbaijan

KazakhstanGeorgiaArmenia

Sri LankaViet Nam

IndiaFiji

Kyrgyz RepublicMaldives

IndonesiaPhilippinesUzbekistan

BangladeshPakistan

TongaTajikistan

SamoaMongoliaVanuatu

BhutanCambodia

Solomon IslandsLao PDR

NepalPapua New

Index score

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Towards an Asia-Pacific centuryTowards an Asia-Pacific century

• The Asia-Pacific region emerged from the global financial crisis as a growth driver and anchor of stability of the global economy

• Enhancing regional connectivity will facilitate the creation of a region-wide market to sustain the region’s dynamism in decades to come and narrow its development gaps

• Many promising opportunities for fruitful regional cooperation in other sectors such as energy and food security

• ESCAP Commission at its 68th Session in 2012 will discuss steps to strengthen regional economic integration in Asia-Pacific

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THANK YOUTHANK YOU

For more details, please refer to

The Economic and Social Survey of Asia and the Pacific 2011.

It can be downloaded from:

www.unescap.org/Survey2011/