A Summary of South East Asian Summits
Four, no five summits in two weeks, in four cities on two continents, but all eyes are on South East Asia, especially Phnom Penh and Bali.
UPDATE: In the lead-up to next weeks COP27 in Egypt, The 40th ASEAN Summit and 41st East Asian Summits in Phnom Penh, The APEC Summit in Bangkok and the G20 Summit in Bali, The Long Mekong Daily Weekend Edition brings you are series of articles on the transition to renewables, China’s 5th International Import Export Expo, the Asian Development Bank’s report on micro, small and medium sized businesses in Laos, Thailand and Vietnam, the Indian view of the G20 and the role of the BRICS, the East Asian Summit and ASEAN Centrality, and finally, an opinion piece on the APEC Summit and how disinformation is disrupting regional economic growth.
NB: Your Long Mekong Daily editor will be travelling across South East Asia following the whirlwind of summits, stay tuned for daily updates.
How developing economies can capitalize on the green transition
Picture yourself as finance minister of a developing economy. An eager environmentalist tries to convince you of the moral imperative of cutting your country's greenhouse gas emissions. You soon become bored because you’ve heard it all before, and your mind moves to more pressing matters. Your country is full of problems, from economic instability and inflation to challenges funding public services. Reducing emissions is not a priority.
Even if you were to succeed, your impact on the climate would be minuscule. Countries as populous as Pakistan, Nigeria, and Egypt each represent less than 1 percent of the world‘s emissions. Your country’s emissions—even cumulative since the industrial revolution—are infinitesimally small. Eliminating them all would have no material impact on the climate: you would have incurred costs and forgone opportunities to deliver economic prosperity with little to show for it.
Yet it would be a grave mistake not to consider climate change as an important aspect of your job. Change is sweeping across the global economy as countries recognize that the world must slash emissions to prevent a climate catastrophe. Decarbonization will reduce demand for dirty goods and services and increase demand for those that are cleaner and greener. The question is not what you can do to reduce your country’s emissions but how you can supercharge your country’s development by breaking into fast-growing industries that will help the world reduce its emissions and reach net zero.
Your country‘s history has been fundamentally shaped by the development of the few products it is able to make at home and sell abroad. Successful economies in east Asia and eastern Europe have sustained decades of high growth by upgrading their areas of comparative advantage, from garments to electronics to machinery and chemicals. They did not remain stuck in industries bequeathed by the past. If your country is to create jobs that pay higher wages, it will have to find new industries that can grow and export competitively even with higher wages.
Pessimists say that opportunities may have been there in the past for countries like Japan, Korea, or China, but those paths to development are now closed. Decarbonization will, however, create new opportunities—especially for those that move fast. The paths that are opening up have not been trod by many predecessors. Some are still virgin. Decarbonization will require significant greenfield investments, and plants will have to find new places to locate. This could be a great opportunity for your country, but to assess it, you must understand the changing landscape.
We do not know what technologies will power the low-carbon global economy or what materials and manufacturing capabilities they will need—nor what regulatory regimes the world will adopt, let alone what kind of cooperation or conflict will characterize relations between the largest emitters. These uncertainties will be resolved by those countries that play an active role and master the capabilities that will underpin their future comparative advantage. Keep in mind these six themes as you explore and exploit the opportunities and threats.
Read the full IMF article here
Remarks by the IMF Managing Director Kristalina Georgieva at the Opening Ceremony of the 5th China International Import Expo
Good evening! I would like to express my sincere thanks to Minister Wang for inviting me to contribute to this fifth China International Import Expo.
The theme of this year’s Expo—Stimulating Global Opening-up for Shared Opportunities of Cooperation and Development—is exactly what the world needs today.
We know how much the world—and this region in particular—has benefited over the past 3‑4 decades from global economic integration. Simply put, trade has been an engine of shared growth for Asia and the world.
Yet, we are at a critical moment.
For more than two-and-a-half years, the world has been facing extraordinary challenges: a global pandemic, war in Ukraine, climate disasters on all continents. And, with it, we are witnessing record-high inflation, a cost-of-living crisis, and acute food insecurity in too many parts of the world.
And, for the first time in decades, we are seeing poverty on the rise again.
There is much that policymakers around the world can and must do to stabilizetheir economies.
These immediate actions are essential, but they will not be enough to ensure that economic integration—not fragmentation—continues to be the driving force for a more prosperous future for all of us.
That is why the spirit of this Expo is so vital.
We must safeguard and promote trade openness—both at home and by cooperating to build a stronger global trading system centered on the World Trade Organization.
To understand the benefits of more open and stable trade policies, we need look no further than China.
A quarter century ago, China undertook ambitious reforms, opening the economy to greater competition and innovation—which, in turn, saw rapid gains in productivity and tremendous increases in living standards. These reforms also secured China’s membership in the WTO and established China as a leading trading nation.
Today, the global trading system are under severe threat. Trade restrictions and distortionary subsidies are on the rise. A particular priority is rolling back food-related trade restrictions, which drive up global prices and food insecurity.
In other words: rather than being a source of growth and integration, trade policy risks becoming a source of economic fragmentation—which hurts all countries.
Our latest economic outlook for the region, released last week, includes a scenario that illustrates the potential costs. If the world—and our trade—were to divide into two blocs, we estimate permanent annual losses of 1.5 percent of GDP globally, with losses over 3 percent of GDP in Asia and Pacific countries, reflecting the key role trade plays in the region.
Here the global community—led by the major economies—must step upwith practical and concrete actions.
For China, there is room to further open up domestic markets, deepen reforms of state-owned enterprises, ensure competitive neutrality with private firms, and further strengthen the protection of intellectual property rights.
These efforts will be good for China—for the economic wellbeing of the Chinese people—and they are good for the world. For example, reforms that would improve resource allocation between different firms in China could increase productivity by around 6 percent.
Of course, as a global economic powerhouse, China also has a key leadership role in the WTO. Together with other major economies, China can help strengthen the multilateral system. Let me highlight four priorities:
First, we need to clarify trade rules, especially by addressing issues such as agricultural and industrial subsidies.
Second, we need to conclude new market-opening agreements in key areas of the modern economy, such as digital trade and investment facilitation.
Third, we can strengthen the role of trade in fighting climate change, including through liberalizing trade in environmental goods and services.
Finally, restoring effective WTO dispute settlement will provide the policy certainty and stability needed for investment, job creation, and growth. This should be coupled with a renewed commitment to a multilateral approach: rather than acting unilaterally, governments should bring their disputes to the WTO.
Delivering on these priorities will not be easy. And instrumental as China’s leadership can be, no one country can achieve this alone.
That is why we need much stronger international cooperation, not less.And that is why we need this Expo and similar opportunities for interaction and dialogue.
Only by reaching out across borders—and bridging differences on critical trade issues—can we confront fragmentation and together build a more prosperous future for everyone.
Xie xie!
Visit the CIIE website here
Building Better Local Business Environments
Accelerating Pandemic Recovery of Small Firms in Cambodia, the Lao People’s Democratic Republic, Thailand, and Viet Nam. Local business environments throughout most parts of Southeast Asia are dominated by micro, small, and medium-sized enterprises (MSMEs). It is estimated that they account for more than 97% of all enterprises, two-thirds of employment—including many jobs for women, and 40% of gross domestic product (GDP). Collectively, they make a larger contribution to the economy than governments or large firms. They are especially important to the economies of regional, rural, and remote communities, as well as in supporting progress on the United Nation’s Agenda 2030 for Sustainable Development. Before the onset of the coronavirus disease (COVID-19), MSMEs faced many external and structural challenges such as uncertain regulatory environments, high informality, limited policy support, and lack of access to capital. COVID-19 mobility restrictions badly affected the operations of these enterprises, particularly those in retail operations and tourism-related businesses. Supporting the recovery of MSMEs, and encouraging their further growth, is essential to strengthening the long-term viability of local economies.
Local economic growth is an important policy issue for the Greater Mekong Subregion (GMS)—including Cambodia, the Lao People’s Democratic Republic (Lao PDR), Thailand, and Viet Nam. Each country has a large proportion of its population based in regional or rural areas, ranging from a current estimate of 76% in Cambodia, 66% in the Lao PDR, 63% in Viet Nam, through to 49% in Thailand.3 There are almost 10 million MSMEs in the GMS region, with most of these located outside metropolitan areas. For example, in Thailand only 18.2% of MSMEs are in Bangkok, with the remainder based in regional locations.4 A similar pattern can be seen in Viet Nam, with only 19.7% found in the two principal metropolitan regions, Ha Noi and Ho Chi Minh City.
The large share of MSMEs outside major cities pose policy challenges. Their composition is highly heterogeneous, representing informal traders to small partnerships and through to medium-sized corporations, or high-earning boutique firms. They use different legal structures and ownership patterns and are found in every industry and profession. A substantial number exist in the informal economy, where the reach of public policy and business support services are limited.
This Asian Development Bank (ADB) brief considers how to rejuvenate the MSME sector in regional and rural economies within the GMS. To answer this question, the brief spells out some of the key characteristics of MSMEs, discusses the structural challenges they face in their business operations, examines the impact of COVID-19, and puts forward some suggestions for future public policy.
Read the full report here
The moment of the Global South
This year’s G20 has triggered more interest because India will officially take over its presidency for the first time. It is noteworthy that the troika of the G20 for three years will be the developing world — Indonesia this year, India in 2023, and Brazil in 2024. It definitely gives the platform a credible space and voice for setting agendas to tackle the concerns of the Global South and facilitate a North-South dialogue by negotiating diverse national interests. As global commons nudge the world for robust and systemic engagement, the G20 aims to recover together and stronger, focusing on global health architecture, sustainable energy transition, and digital transformation.
Alongside the G20, another important multilateral meeting on climate, the United Nations’ COP 27 will be held in Egypt. While the recently held International Monetary Fund-World Bank annual meetings are crucial to aiding global financial architecture, the COP 27 is an intergovernmental platform where about 100 world leaders participate in effectively tackling the global challenge of climate change and operationalising sustainable and resilience finance planning to enable the transition to clean energy. The latter is a goal for the G20 as well.
The 2022 plan of action
For the November summit, the G20 has several agendas on its list. One, tackle food security. For alleviating global food insecurity, the G20 Foreign Affairs Ministers’ Meeting has adopted the Matera Declaration 2021. This initiative calls for ensuring sustainable food systems, poverty alleviation, agri-diversity, and territorial development by focusing on some key areas. Public development banks (PDBs) could stimulate private investments and mitigate market risks and failures, especially for financing small and medium enterprises. India has welcomed the initiative by declaring that the agenda resonates with its concern for the welfare of small and medium farmers and promoting agri-diversity.
The G20 development ministers have supported the formation of a ‘Finance in Common’ Working Group on Financing Sustainable Food Systems, led by IFAD (International Fund for Agricultural Development), which brings together PDBs to stimulate more private sector investments and create more jobs.
Two, optimise the role of multilateral development banks (MDBs). Earlier this month, Indonesia’s G20 presidency organised a conference on ‘Boosting Multilateral Development Banks’ (MDBs’) Role and Capacity in Development Finance’ in Washington DC. Strongly supported by Indonesian President Joko Widodo, the conference adopted the objectives to provide credible and transparent benchmarks for evaluating Capital Adequacy Frameworks for resilient global banking.
The focus on the MDBs is timely as this year, four of them — the Asian Infrastructure Investment Bank (AIIB), African Development Bank (AfDB), European Investment Bank (EIB), and European Bank for Reconstruction and Development (EBRD) — are updating their energy policies with an unambiguous focus on renewables.
But despite having grand suggestions and plans of action, the G20 remains befuddled with its share of impasses when it comes to implementation.
Read the full article here
The centrality of the East Asia summit is under challenge
ASEAN was scrambling to maintain EAS to ensure its centrality. EAS partners were wary of China leading to the acceptance of Indo-Pacific policies by Japan, India, and Australia and the re-emergence of the Quad under Biden in 2021. This was a move to outmanoeuvre ASEAN assuaging China.
In 2012, as China grabbed parts of the SCS, efforts to have EAS enunciate an Indo-Pacific policy faltered. Indonesia, India, and Russia presented draft papers to an EAS group but it came to nought, as strategic initiatives in EAS did. In 2019, ASEAN finally came up with the ASEAN Outlook for the Indo-Pacific (AOIP). It was drafted to assuage China and tell EAS partners about their serious intent. China did not object to the AoIP since it uses the term ‘Indo-Pacific’ only in the title and not in the document. The tenets of the AOIP have become the mainstay of ASEAN collaboration with partners and it seeks to bring them to the EAS for wider dissemination and acceptance and to consequently maintain its centrality.
Indonesia, India, and Russia presented draft papers to an EAS group but it came to nought, as strategic initiatives in EAS did.
EAS partners have no problem with ASEAN centrality. They are worried about ASEAN’s responsibility towards that centrality and whether it can maintain unity despite all odds. The Quad is more vocal, making ASEAN anxious about China’s reaction. ASEAN did not visualise that the Quad members were all part of the EAS and the emergence of the Quad was a reflection of the lack of efficacy of the EAS.
This is where the EAS stands in 2022, at the crossroads of the Indo-Pacific. It is the largest of the ASEAN-centric bodies where world leaders congregate, but since it’s not doing very much, the value has diminished, since, over the years, EAS has been looking more at non-traditional threats including illegal fishing, humanitarian assistance, disaster relief, (HADR) migration, etc. The EAS sees rampant competition between China’s view of the region as its backyard and the US, India, Japan Australia and others wanting to promote the FOIP. This strategic rivalry becomes more severe as the BRI is sought to be challenged by nascent initiatives amongst Quad partners. Moreover, China’s vaccine diplomacy is also being challenged by the Quad’s vaccine initiative.
Even though an attempt to reform EAS was made in 2015, no programmes were implemented. Such efforts had little impact in lifting the EAS out of its set summit talk mode. No deliberate effort was made to mobilise the EAS by adding efficacy to its ‘leaders-led’ intent and managing commonalities with other ASEAN-led functional mechanisms, including the APT, ARF, ADMM-Plus and AMF. A non-ASEAN co-chair could assist in this but ASEAN remains reluctant.
Read the full article here
In November 2020, the APEC Policy Support Unit published a report headlined, “new virus, old challenges.” That is, the strain of coronavirus may be novel, but it has exposed and amplified old issues that have been, while adequately predicted, inadequately addressed by policymakers up and until they converged into the perfect storm that was the last three years.
The virus called our attention to gaps in environmental protection, for example, and to faltering cooperation between governments which would have helped stymie the virus before it swelled to pandemic proportions. The crisis has shown the fragility of some supply chains among economies and exposed the dangers of growing economic and social inequalities within them.
And, for better or worse, it has amplified the already speedy trend of digitalization, seeing as in-person interaction and travel were halted for months at a time. Failure to go online was basically a death sentence for most businesses—especially micro, small and medium enterprises—and almost every office had to mutate into a hybrid online-offline version of itself to keep operations going. This evolution cannot be reversed, and so society will have to live with and adapt to both the advantages and pitfalls of the accelerated digitalization of everything, including an explosion in and, daresay, normalization of information disorder.
Information disorder is a catch-all phrase for the spread of false information which may cause negative societal and even economic harm—whether or not the harm was the intent of the creators and spreaders. It can be divvied into three categories: misinformation, or the sharing of falsities but with no intent to harm anyone; disinformation, or the sharing of false information with intent to do harm; and malinformation, or the repurposing or recontextualization of facts, also with harmful intent. All three are reliant on how fast stories can be spread online to dangerous effect.
Read the full article here