CS74: Policy Statement at Opening of the Ministerial Segment

Delivered at the opening of the Ministerial Segment of the 74th Session of the Economic and Social Commission for Asia and the Pacific in Bangkok, Thailand.

Excellencies,
Distinguished Delegates,

Welcome to the Economic and Social Commission for Asia and the Pacific.

This 74th session is held at a pivotal moment. There’s increasing talk of the unravelling of globalization which risks fracturing a shared narrative that has supported prosperity for decades. With the gap between rich and poor widening, the erosion of potential productivity and growing threats from climate change - our region is grappling with considerable challenges. Yet Asia and the Pacific’s growth and trade story have been spectacular. The region now accounts for some 40 per cent of global exports and 35 per cent of global imports. The region has witnessed a dramatic reduction in extreme poverty from 30 per cent in 2000 to around 10 per cent in recent years. Average life expectancy has increased to 80 years.

Today, I would like to set out the region’s

  • near-term prospects and outlook, amidst global uncertainty,
  • medium term challenges along with progress towards a more sustainable future;
  • the region’s emerging policy directions;
  • the dynamics of regional cooperation and integration; and
  • the case for Asia to spur-on multilateralism to overcome global governance challenges.

Now, everyone’s eyes are cast on a few receding trends and shifting sands, and their potential impact on the region. Anti-globalization and protectionism are increasing global uncertainty. As these trends unfold, they are disruptive to our economies at the heart of global supply chains.

As central banks retreat from monetary easing, interest rate hikes will require vigilance. The region’s inflationary and exchange rate pressures are now contained. But private corporate and household debts built up during the low interest rate period could create financial difficulties should reflationary pressures emerge, and require further tightening of macroprudential regimes. Sustainable development demands can be accommodated through long term borrowing as, with the exception on a few countries, sovereign debt to GDP ratios are manageable.

Global oil prices reached $70 per barrel at the beginning of the year, a dramatic rise from $30 per barrel two years previously. Oil exporters have learnt the lessons from the hit their growth and balance sheets took when oil prices dropped – with some oil importers now acting to promote economic diversification, build fiscal buffers and cut energy subsidies.

Stable geopolitical conditions are hard to predict. But there’s room for cautious optimism with the inter Korean summit bringing expectations of peace and prospects for economic integration on the Korean peninsula. A fuller transition to peace would catalyze new development pathways and opportunities to attract investments to deliver optimal connectivity in North East Asia and beyond.

So where are we on our journey to Sustainable Development?

ESCAP’s 2017 Asia and the Pacific SDG Progress Report captures our region’s progress. The region has mainstreamed SDGs in planning and fiscal policy, and established its institutional coordination mechanisms. But overall compliance with the 2030 Agenda is slow and weak. Only one goal focused on achieving quality education and lifelong learning opportunities is on track. Our environmental stewardship falls short: oceans’ health has deteriorated since 2015, as has forest protection. Carbon emissions remain steep. An integrated approach across government is critical.

Stepping up our efforts to deliver more balanced, equitable growth must be a priority. ESCAP’s 2018 Inequality Report points to a rise in the Gini coefficient, across countries home to over 70 per cent of Asia and the Pacific’s population over the last two decades. If income inequality had not increased, over 140 million more people would be out of poverty, and basic service accessibility less unequal. Today, less than forty percent of people have access to healthcare. 420 million have no electricity. Two billion cook with fuels hazardous to their health. 6 per cent of our population remains without access to clean water. A third of the region’s population lacks access to safe sanitation. Action to improve equity and sustainability is vital.

An integrated sustainable development agenda warrants an integrated response.

First, social protection needs to be strengthened. Few countries have acted to improve healthcare. Bhutan and Thailand have established universal basic healthcare schemes. India announced a mega national health protection scheme offering coverage to 500 million beneficiaries with fixed annual grant assistance to families for hospitalization.

Second, financial inclusion is our hope to empower those denied financial services. South Asia is making great inroads. Pakistan’s privatized financial inclusion industry and branchless banking delivers cash transfers through a nationwide ID system. India is aiming to deliver universal financial inclusion and direct transfer of government benefits to over a billion. Financial inclusion is gaining momentum. It is critical we give banking coverage to unbanked citizens.

Third, raising education spending in some areas is critical. Where universal access to primary education has been achieved, the focus must be on quality, reskilling teachers and improving curricula. Secondary education needs to be more accessible and affordable.

Fourth, reducing exposure vulnerability to environmental hazards calls for better urban planning, and legislating to protect the right to a clean, safe and healthy environment.

Fifth, closing the ICT digital divide calls for enhancing broadband infrastructure and the deployment of frontier technologies.

So what lends us confidence for the future of Asia? We, at ESCAP, are optimistic.

First, Asia’s economic dynamism is its asset. Two thirds of the region’s economies, accounting for more than 80 per cent of the region’s GDP, grew faster in 2017 than the previous year. Prospects are bright. Domestic demand will remain strong as incomes and wealth are growing and the middle class is set to reach 3.5 billion.

Second, the readjustment of Asia-Pacific economies is happening. The rebalancing of economies away from export and investment led growth is underway. Asian leaders have endorsed the benefits of open, liberal and competitive regimes. A case in point is Japan’s leadership to conclude the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, and the ongoing negotiations for a Regional Comprehensive Economic Partnership. Let us hope these can facilitate trade flows and overcome a complex web of existing trading agreements.

Third, backed by the region’s cumulative resources estimated at around $56 trillion inclusive of savings and reserves, the region has the potential to further rejuvenate investment. Large-scale climate-friendly infrastructure investment - close to $26 trillion – is needed. Matching domestic finance and an enabling policy environment is critical to leverage private resources and expertise. Work is underway to induce equity through tax policy, tap the region’s tax potential through the rationalization of tax expenditures, tightening of loopholes in regulation, while strengthening tax administrations. A large group of countries are still operating with 10% tax/GDP ratio which is insufficient if we are to achieve the SDGs.

Indonesia, the Philippines and Pakistan have introduced programs to mobilize hidden wealth. Corporate and individual tax rates have been lowered in some countries. India consolidated its Goods and Services Tax, to unleash revenues, rationalize tax policy and enhance its distributive mechanism. Malaysia implemented bold GST in 2015 to offset declining oil revenues. Indonesia rationalized fuel and other subsidies. Russia has embarked on new fiscal rules for resource management of fuel resources.

Fourth, a revolution in technology is forcing structural shifts in manufacturing, raising service sector contributions to value addition and delivering sustainable solutions. New technologies such as data analytics, artificial intelligence, Internet of Things and three D printing have enhanced the demand for digitization, electronic component and robots. China’s ambition is to emerge as a front runner and global innovation center in Artificial Intelligence. Hong Kong has launched a Cyberport development, Social Innovation and Entrepreneurship Development and online ecommerce and lending platforms. Thailand Four Point Zero is integrating R&D and innovation across development.

Yet several billion have no access to ICT. There is a rising concern regarding the implications of frontier technology on the “future of work” and inequalities. Eighteen ESCAP countries have less than 2 per cent subscriptions to fixed-broadband services. There is no doubt that sustainable and Fintech solutions help accelerate progress towards SDGs. However, a case study of a sample of companies has found automation is linked to 50 per cent of job losses. Technology can concentrate wealth and knowledge among the hands of a limited number of owners, and aggravate inequalities between countries. Multilateral frameworks need to be enhanced to ensure fair play as this is a global phenomenon with far reaching consequences.

Regional Integration is a forte of Asia and the Pacific.

Intraregional trade represents over fifty per cent of the total region’s trade. Deepening regional integration would enable us to increase overall trade levels, unleash SME competitiveness, and support growth and jobs. ASEAN has embarked on its 2025 Vision and is aligning it with 2030 Agenda, though other sub regions lag.

China’s Belt and Road Initiative could be a game changer through its transcontinental ambition to link up Asia and connect it to Africa and Europe. India is acting East and developing interconnections with South East Asia. Russia is pursuing Eurasian Integration. The payoffs of these developments will be realized if seamless regional connectivity is established and the missing links of our rail and road networks are built. Regional energy security and sustainability would benefit from enhanced sub regional connectivity and the enhancement of power grids across sub regions to allow for the integration of renewable energies.

Regional market integration could consolidate existing preferential regional trade agreements consistent with multilateral rules. Trade facilitation is fostered by

  1. The operationalization of The Framework Agreement on Facilitation of Cross-border Paperless Trade negotiated on the ESCAP platform.
  2. The regional financial integration process alongside the strengthening of financial surveillance systems to guard against systemic risks.
  3. Catastrophe risk insurances which will depend on how effectively risk modelling can be supported by analytics, frontier technologies and the pooling of sovereign risk.

Asia has a role to shape a fair global governance and multilateralism system.

In the words of President Xi “While recognizing clouds of uncertainty…. we must not let our vision be blocked by clouds but…we should dispel the clouds to see the sun.”

Supported by open and liberal regimes, Asia‐Pacific economies have reaped substantial development gains from globalization. But post‐second world war multilateralism has gradually become discordant with the rising frequency and size of crises that have resulted in large financial and job losses. Leadership and accountability for shaping the global agenda is weak as the world faces:

  1. Rising inequalities of incomes, wealth and opportunities within countries;
  2. Financial globalization and a fragmented global financial regulatory regime – which together could trigger systemic risk;
  3. The multilateral trading regime is not able to deliver its agenda given the complexities of reaching consensus;
  4. The multilateral system is not keeping pace with global advancements and challenges such as frontier technologies
  5. Multilateral institutions are under stress, and environmental and climate change reduction commitments are illusive.

A sense of corroding trust in the multilateral architecture and its institutions threatens the implementation of the 2030 Agenda. But it is an opportunity to enhance multilateral mechanisms by revisiting their mandates and their members accountability. Recognizing regional agreements for investment and trade, could be a first step towards upgrading multilateral frameworks. Strengthening the global financial architecture, including to safeguard against systemic risks, would help deepen global financial capital flows. But to do so requires the political commitment of leaders.

With your support, ESCAP’s Asia Pacific Sustainable Development Platform has operationalized a prioritized Regional Road Map for the implementation of SDGs, supported by a regional rapid response facility. The regional coordination mechanism is being deployed to ensure a coherent response of UN agencies. We’ve launched analytical work on sustainability and resilience, gender, resource efficiency, and disaster risk resilience.

Regional cooperation and integration is based on transboundary goals, ensuring sustainability of connectivity, instituting efficiency through deployment of ICT and exploiting a knowledge base to support regional sustainable solutions. We have stepped up our work with the private sector through the Asia Pacific Business Forum. ESCAP has developed new partnerships, and enhanced the scope of work with ASEAN, the Pacific on Samoa Pathways and special bodies such as the Shanghai Cooperation Organization on regional connectivity.

Collectively we have an opportunity to accelerate the pace of implementation, shape policies to reduce inequality, exploit frontier technologies and strengthen multilateralism for the benefit of all citizens across Asia and the Pacific. That is an opportunity, which together, we should seize.