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Strong growth – averaging 6.2% per year – is expected in Emerging Asia (Southeast Asia, China and India) over 2017-21, though trends vary across the region. While growth in China is projected to continue slowing, it will still average 6.0% over the medium term, below the 6.7% forecast for 2016. India, on the other hand, will average 7.3% annual growth in the years to 2021. The ten ASEAN member countries together are forecast to average growth of 5.1%, led by the CLM countries (Cambodia, Lao PDR and Myanmar), which will all see annual growth rates above 7%. Amongst the large ASEAN-5 economies, the highest growth rates are projected for Viet Nam (6.2%) and the Philippines (6.1%) over 2017-21. Singapore and Brunei Darussalam are both expected to see growth of 1.8% in the medium term. Private consumption is expected to continue to be an important driver of growth across much of the region, particularly with slow export growth (Figure 1):
Figure 1: Real GDP growth of ASEAN, China and India
Annual percentage change
Note: The cut-off date of data is 28 November 2016. Weighted averages are used for ASEAN and Emerging Asia. The figures for China, India and Indonesia (2016 and 2017 projections) are based on the OECD Economic Outlook 100. India data refer to fiscal years starting in April. Source: OECD Development Centre, MPF-2017 (Medium-term Projection Framework). For more information on the MPF, please see www.oecd.org/dev/asia-pacific/mpf.htm.
Even with such promising economic growth rates, the region is not without its challenges.1
Development disparities (2013 edition of the Outlook) across and within Emerging Asian economies affect well-being and may complicate integration efforts. These disparities are significant; GDP per capita (at PPP) in Singapore is approximately 25 times higher than that in Cambodia, for example. The Narrowing Development Gap Indicators developed jointly with the ASEAN Secretariat show the importance of implementing policies to address the relatively large differences in the level of development between the ASEAN-6 and CLMV countries, which are particularly large in the area of poverty and human resource development.2
As the region continues to grow under the umbrella of ASEAN, strategies to overcome the middle-income trap (2014 edition of the Outlook) became a priority for countries like Malaysia, Indonesia and Thailand. Malaysia and China are the two middle-income Emerging Asian countries that are expected to reach high-income status before 2030. The rest of the countries will need more time, with Viet Nam and India not expected to reach this status until the mid-2050s. It is therefore important for Emerging Asia’s middle-income countries to adopt new strategies to transform from factor accumulation growth models to sustained productivity-led growth. This would require evolving manufacturing, growing the services sector, and recognising the significance of financial system development, the benefits of regional co-operation, and the role of institutions in combating the middle-income trap.
In terms of trade in goods, overall tariff reduction among ASEAN countries and their plus-one partners has been quite successful. However, for further integration to take place, efforts beyond reducing tariffs are needed. The development of a “Global ASEAN” integrated into the global economy and with the ASEAN+3 and ASEAN+6 partner counties and stronger monitoring capacities for regional initiatives would help make integration in Southeast Asia more effective 3 . A look at regional integration (2016 edition of the Outlook) and analyses of regional integration frameworks reveal that the ASEAN Economic Community Blueprint 2015 and national plans are often not closely aligned. Regional integration efforts could therefore benefit from the development of more effective integration targets and efforts to facilitate their implementation.
For national plans to be realised effectively, the countries in the region need to work on strengthening their own institutional capacities (2015 edition of the Outlook). This involves looking at the progress made in implementing national medium-term plans, the drivers of successful public-sector reform and the roles of institutions in addressing informality. This analysis highlighted the importance of factors like context, pacing and commitment in public-sector reform as well as institutional and judicial reforms in discouraging informality.
Additionally, investment in transportation infrastructure (2010 edition of the Outlook) is vital for seamless ASEAN integration. While the expansion of transport networks has spurred both internal and regional trade growth, huge investment needs for infrastructure development mean that new financing methods, such as infrastructure revenue bonds, should be further explored to promote effective public-private partnerships in the region.
Other sectors also remain promising as drivers of growth and development in Emerging Asia. Renewable energy (2017 edition of the Outlook) in the region has great potential, if the challenges of supplying growing demand and further developing renewable sources of energy can be tackled. Fostering the development of alternative energies will require policy solutions to address challenges in grid access, administrative barriers and energy pricing mechanisms.
In line with tapping into greener sources of energy in the region, green growth remains one of the region’s underlying challenges (2011/12 edition of the Outlook). Southeast Asian countries tend to import more emissions-intensive final products in exchange for supplying intermediate products, which suggests they will need to upgrade their export profiles towards the manufacture of greener products for the region’s rapidly-expanding consumer markets. Policy and institutional frameworks are underdeveloped, however. Thus, new strategies are needed at national and regional levels to create an enabling environment for fostering green growth.
Addressing these challenges will be critical in achieving sustainable growth and further integration. This will require new national and regional efforts given the global economic landscape and existing economic disparities. Ultimately, designing and implementing policy solutions for closer regional integration, grounded in dialogue, is important for the way forward. The upcoming 1st International Economic Forum on Asia offers an opportunity for such deeper policy dialogue.
1.↩ Emerging Asia’s challenges are discussed and analysed in the Economic Outlook for Southeast Asia, China and India, which was launched in 2010. The publication was initially proposed by the OECD reflection group on Southeast Asia in 2008 as a follow-up to the Meeting of the OECD Council at Ministerial Level (MCM) in 2007 and accepted by ministers and senior officials from ASEAN countries at the 2nd OECD-Southeast Asia Regional Forum in Bangkok in 2009. The Outlook has been presented each year at the ASEAN Business and Investment Summit in the presence of regional leaders, starting with the 2012 Summit in Cambodia. In 2015, the Outlook officially was included in the OECD Southeast Asia Regional Programme and has now become a bi-annual publication. The Update to the Outlook also was launched for the first time in 2015 to contribute to the regional programme and to ensure that the report’s forecasts, data and analysis remain current. The Outlook has been prepared in collaboration with regional partners and has included, for instance, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the Economic Research Institute for ASEAN and East Asia (ERIA), the Asian Development Bank Institute (ADBI), and the ASEAN Secretariat. Each edition of the Outlook is discussed in a three-phase consultation process with delegations from Asia based in Paris.
2.↩The ASEAN-6 countries include Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand. The CLMV countries include Cambodia, Lao PDR, Myanmar and Viet Nam.
3.↩ ASEAN+3 participants include the ten ASEAN member countries, China, Korea and Japan. ASEAN+6 participants include the thirteen ASEAN+3 countries as well as Australia, India and New Zealand.