Shared Prosperity & Social Equity for Asia and the Pacific

Asia-Pacific Economic Cooperation

Keynote Speech by Dr. Noeleen Heyzer,
Under-Secretary-General of the United Nations, Executive Secretary of
the Economic and Social Commission for Asia and the Pacific, and Special Adviser of the United Nations Secretary-General for Timor-Leste

[Delivered on her behalf by Mr. Nagesh Kumar, Chief Economist of ESCAP]

APEC in the 21st Century Asia-Pacific Conference
15 November 2013, Hanoi, Viet Nam

H.E. Mr Bui Thanh Son, Deputy Minister of Foreign Affairs and Chair of the session,

H.E. Mr Vu Khoan, Former Deputy Prime Minister of Viet Nam,

Distinguished panellists, Excellencies, ladies and gentlemen,

I am honoured to address you this morning at this important conference on APEC in the 21st Century Asia and the Pacific, with respectful apologies that I am unable to be here in person.

Since its inception, APEC has been a pioneering initiative in regional economic cooperation here in Asia and the Pacific, and Viet Nam has been an important member since 1998. This year marks the 15th anniversary of Viet Nam’s participation in APEC, during which it has played an important role in the forum’s evolution, including by hosting the 14th Summit in 2006 among its other contributions.

It is also timely to discuss the important trends taking place in the world economy that are shaping this century into the “Century of Asia and the Pacific.” Regional economic integration will be critical for realizing that dream, and in that context, I will also share some recent initiatives that have been taken by member States at ESCAP.

The dynamism of Asia and the Pacific has been well documented. In the 30 years between 1980 and 2010, developing Asia’s real GDP grew at an annual average rate of slightly over 7 per cent, compared to the global average of 2.8 per cent. As a result the per capita income of Asia rose five-fold during this period, while the global per capita income increased by just one-a-half times.

In that same period, Asia’s share of world trade nearly doubled to 24 per cent from 13 per cent. The Asian growth story that began with the take-off of Japan in the 1960s was quickly followed by newly industrialized economies like those in the Republic of Korea, Hong Kong, Singapore and Chinese Taipei in the 1970s, and the South-East Asian countries in 1980s like Malaysia and Thailand. It has been followed by the populous countries like China in the 1990s and India from the turn of this century. Now countries like Viet Nam and Indonesia have joined the ranks of dynamic emerging markets. The global financial crisis that the world economy has faced since 2008 and is not yet fully over, has helped to highlight the resilience and potential of the Asia-Pacific region.

Goldman Sachs, in its 2007 report on BRICs and Beyond, had projected that the Asia-Pacific region would become the centre of gravity of the world economy by the middle of the century, with over 50 per cent of the world’s output. While these projections are widely shared, one should not underestimate the downside risks and policy challenges that the region faces in sustaining its dynamism that is so critical for closing development gaps and catching up with advanced economies.

The most fundamental challenge for the economies of Asia and the Pacific in the medium term will be to find alternative engines for sustaining growth in the aftermath of the financial crisis. Maintaining this dynamism is not only critical for making this century the Asia-Pacific century but also for eliminating the widespread and persistent poverty and hunger we find in the region, which continues to hold us back from realizing our dream of inclusive and sustainable development.

The region’s rapid growth since the 1950s has been supported by a favourable external economic environment and opportunities arising from globalization. Viet Nam is a very good example of a country growing by exploiting the opportunities of globalization over the past two decades. However, the global economic environment has changed dramatically since the onset of the financial crisis in 2008. It is now clear that burdened by huge debt and global imbalances, the advanced economies of the West are no longer able to play the role of engines of growth for the Asia-Pacific region that they played in the past. Sustaining growth in the future will require rebalancing the Asia-Pacific economies in favour of more domestic and regional sources of demand.

ESCAP has argued over the past few years that developmental challenges such as poverty and widespread disparities in social and physical infrastructure can be turned into opportunities for sustaining future growth. Our “bottom billion,” if lifted out of poverty and allowed to join the mainstream of the region’s consumers, could help sustain growth in Asia and the Pacific for decades to come. This will require, however, faster progress towards closing the development gaps through broad-based investments in education, health services, social protection and basic infrastructure. All of these measures will facilitate access to employment and business opportunities for all social groups besides generating new aggregate demand to sustain growth and inclusive development.

Here I must commend the impressive progress made by Viet Nam towards achieving the Millennium Development Goals. According to the latest Asia-Pacific MDG Report produced by ESCAP, the ADB and UNDP, Viet Nam has been an early achiever of goals relating to poverty, hunger, drinking water and sanitation, and is on track to achieve by 2015 most of the goals related to education, health and gender. I applaud Viet Nam for what it has accomplished.

Capabilities and resources vary across countries, giving rise to complementarities and opportunities for mutually beneficial exchanges which could be unlocked by enhancing regional economic integration. Since the 1990s, regional economic integration has become a dominant trend in the world economy with the rise of regional groupings such as the European Union and the North American Free Trade Agreement, among others, that pursue deeper forms of regional economic integration. APEC formed in 1989 as part of this global trend that now combines 21 members in the Pacific Rim. In South-East Asia, ASEAN has led its 10 member countries in the process of economic integration towards the ASEAN Economic Community by 2015. In other subregions, groupings like SAARC, BIMSTEC, the Economic Cooperation Organization and the Pacific Islands Forum, besides numerous bilateral free trade agreements, are promoting regional cooperation and integration.

One lesson that comes out of the experiences of different regions with regionalism, including ASEAN, is its potential in fostering balanced and equitable development with lesser developed economies converging with more developed ones. These lessons were documented in a recent ESCAP study “Growing Together: Economic Integration for an Inclusive and Sustainable Asia-Pacific Century.” This study, which formed the basis of discussion at the 68th ESCAP session in May 2012, looked at the potential of cooperation and integration in the Asia-Pacific region. The ESCAP study went on to propose a four-pronged policy agenda as part of a long-term strategy to build the economic community of Asia and the Pacific to exploit the potential of regional economic integration and achieve a more resilient and sustainable region founded on shared prosperity and social equity.

The first element of this agenda is addressing the question of how we should build a broader, more integrated market in Asia and the Pacific by coalescing and building upon existing subregional groupings like ASEAN, SAARC, ECO and bilateral FTAs in order to connect high- and low-growth countries in economic “corridors of prosperity” to spread the benefits of regional growth to all. One important initiative in the direction of creating a larger integrated market is the Regional Comprehensive Economic Partnership (RCEP) covering ASEAN+6 countries launched in Phnom Penh on 20 November 2012. Bringing together some of largest and most dynamic economies of the world in a single grouping would provide the nucleus of an integrated regional market to which other countries can accede to.

The second component is ensuring seamless regional connectivity. Asia-Pacific countries are still better connected with the advanced countries of the West than they are with most of their own regional neighbours. ESCAP has over the years facilitated connectivity through international agreements on the Asian Highway and the Trans-Asian Railway. A new agreement on dry ports was just opened for signature last week and is part of a vision of an international, integrated, intermodal transport and logistics system. Similarly, considering the uneven distribution of energy resources across the region, “Asian Energy Highways” are needed in the form of regional pipelines to transport gas and oil and power grids to strengthen energy security.

The third element is further developing the regional financial architecture to better deploy the region’s savings – including excess foreign exchange reserves and private savings – for productive purposes and to close the gaps in the region’s infrastructure. In this context there are some important initiatives, namely, the Chiang Mai Initiative, which covers the ASEAN+3 countries with a US$ 240 billion pool to provide member countries short-term liquidity support. This needs to be expanded to the rest of the region to effectively serve as a regional lender of last resort. In the area of infrastructure financing, while subregional funds and bond funds have been set up, there needs to be a large-scale regional lending facility to catalyze investments in infrastructure across the region.

The fourth element is to provide a coordinated regional response to shared vulnerabilities. Beyond the most obvious of these, such as food and energy security, natural disasters, pressures on natural resources, and a shrinking carbon space, Asia will need to invest in joint research to develop new development pathways that are low on carbon but high on prosperity, high on poverty reduction, and high on human security. This could be fostered through new regional centres of excellence set up to discover fresh solutions to persistent problems through research, innovation and technological development and unleash the creativity and entrepreneurship of people.

ESCAP is assisting the region in moving ahead on this policy agenda. Its member States adopted a resolution requesting me as the Executive Secretary of ESCAP to convene a ministerial conference on regional economic integration to consider the proposals made in the study “Growing Together” and to take steps towards implementing them as they address the impact of the financial crisis. Therefore I am pleased to inform you that I will be convening the Ministerial Conference from 17 to 20 December in Bangkok, where I expect Viet Nam to play an active role in driving the agenda of regional economic integration that builds on its initiatives to deepen ASEAN economic integration and those in the APEC framework.
Let me close by reiterating that the Asia-Pacific region emerged from the global financial crisis as a growth driver and anchor of stability of the global economy. It now has the historic opportunity to rebalance its economic structure in favour of itself to sustain its dynamism with strengthened connectivity and balanced regional development and make the 21st century truly an Asian and Pacific century. In this journey, ESCAP, as the region’s only universal forum, will be assisting its member States in moving ahead on this agenda for deepening regional economic integration so the Asia-Pacific region may once again be catapulted into the central place that it had until the beginning of the nineteenth century!

I thank you.