SOUTHEAST ASIA:Overview of Trends, Key Issues and OpportunitiesRAMESH SUBRAMANIAMDIRECTOR GENERAL | SOUTHEAST ASIA DEPARTMENTASIAN DEVELOPMENT BANK

Summary of Points

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1. ASEAN has demonstrated solid and sustained growth. Huge progress since 1997 Asian Financial Crisis.

2. Meeting large infrastructure needs, addressing climate change, and supporting green growth and livable cities are top priorities, along with a range of human development/infrastructure needs

3. Regional Cooperation and Integration (RCI) is more important and relevant now than ever.

4. Disruptive technologies can be game changers and region needs leapfrogging support.

5. Small and fragile countries need a lot of support.

6. As ADB continues to expand its support, it stands ready to partner with a wide range of stakeholders including private sector and civil society.

Point 1: Solid Macroeconomic Picture

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3G Phenomenon (Growing, Greening & to some extent Greying)

Growth:◦ Sustained solid economic growth◦ Rapidly changing financial landscape ◦ Powerhouse for trade and FDI◦ Yet, significant gaps in human development and infrastructure

sectors ◦ Hence, huge opportunities for the rest of the world to engage

more with Southeast Asia

South East Asia: Economic Powerhouse • Over the past 5 decades, South East

Asia’s real GDP has grown at an average of 5% per year, higher than the global average of 3%.

• Combined gross domestic product (GDP) totaled roughly US$ 2.77 trillion in current prices in 2017.

• These gains have been accompanied by improved welfare outcomes.

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South East Asia's Real GDP, 1970-2017(US$ billions at constant 2010 prices)

US$ at constant prices (2010) in billions % growth (SEA) % growth (Worid)

Source: UNCTAD Stat Database, data downloaded 26 March 2019

Trends in the Human Development IndexHDI Rank Country 1990 1995 2000 2005 2010 2015 2017

39 Brunei Darussalam 0.782 0.805 0.819 0.838 0.842 0.852 0.853

146 Cambodia 0.364 0.387 0.42 0.49 0.537 0.571 0.582

116 Indonesia 0.528 0.564 0.606 0.632 0.661 0.686 0.694

139 Lao PDR 0.4 0.428 0.466 0.506 0.546 0.593 0.601

57 Malaysia 0.643 0.683 0.725 0.731 0.772 0.795 0.802

148 Myanmar 0.359 0.398 0.431 0.477 0.53 0.569 0.578

113 Philippines 0.586 0.598 0.624 0.65 0.665 0.693 0.699

9 Singapore 0.718 0.773 0.819 0.868 0.909 0.929 0.932

83 Thailand 0.574 0.611 0.649 0.693 0.724 0.741 0.755

116 Viet Nam 0.475 0.529 0.579 0.616 0.654 0.684 0.694

Source: UNDP Human Development Data, data downloaded 28 March 2019.

South East Asia Trade and FDIAlthough SEA accounted for only 3.4% of world GDP in 2017, it accounted for 7.4% of world exports; 7% of world imports; and 6.9% of global FDI stock that year.

A key driver of trade and FDI performance has been the rise in product fragmentation trade. Many countries in SEA are plugged into global value chains.

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Growth in Trade and FDI

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South East Asia’s Trade, 1970-2017 (US$ at current prices in millions

and share of global trade)

Exports (US$ mil) Imports (US$ mil)

Share of Global Exports Share of Global Imports

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South East Asia's Inward FDI Stock, 1980-2017 (US$ million at current prices and share of global FDI stock)

US$ at current prices in millions Percentage of global FDI stock

Source: UNCTADStat Database, data downloaded 26 March 2019

Source: UNCTADStat Database, data downloaded 26 March 2019

Income Trends (GNI per capita, US$)2015 2020 2025 2030

Cambodia 1,070 1,383 1,734 2,193

Indonesia 3,440 4,014 5,013 6,309

Lao PDR 2,000 2,609 3,319 4,267

Myanmar 1,190 1,586 2,045 2,651

Philippines 3,520 4,302 5,375 6,761

Viet Nam 1,990 2,514 3,219 4,160

Malaysia 10,440 11,263 13,555 16,450

Thailand 5,690 6,562 8,171 10,240

Brunei 38,520 38,907 43,700 48,820

Singapore 52,740 54,554 61,027 67,611

2015 in current US$. 2020, 2025 and 2030 in constant 2010 US$.Source: ADB ERCD estimates

Point 2: Addressing large infrastructure needs, climate change, and more greening are becoming top priorities

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Several Dimensions:◦ Urbanization & Demographic Growth

◦ Increasing pollution, including in the oceans

◦ Frequent and catastrophic natural disasters

◦ Major issues to grapple with, which also present lots of opportunities for Rest of the World to engage in ASEAN more

◦ All SE Asian countries are taking steps, in varying degrees

Urbanization Trends (percentage of population living in urban areas)

2015 2020 2025 2030

Brunei 77.2 78.6 79.7 80.7

Cambodia 20.7 22.0 23.6 25.6

Indonesia 53.7 57.2 60.3 63.0

Lao PDR 38.6 43.5 47.7 50.9

Malaysia 74.7 77.7 80.1 81.9

Myanmar 34.1 36.9 39.8 42.8

Philippines 44.4 44.3 44.9 46.3

Singapore 100.0 100.0 100.0 100.0

Thailand 50.4 55.8 60.4 63.9

Viet Nam 33.6 36.8 39.9 43.0

Source: United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, custom data acquired via website.

Source: ADB. 2016. Southeast Asia and the Economics of Global Climate Stabilization Infographic. https://www.adb.org/news/infographics/southeast-asia-and-economics-global-climate-stabilization

Source: ADB. 2016. Southeast Asia and the Economics of Global Climate Stabilization Infographic. https://www.adb.org/news/infographics/southeast-asia-and-economics-global-climate-stabilization

Mitigation Measures• Reduce land-use

emissions

• Avoid deforestation (lowest cost major mitigation opportunity)

• Transform energy systemsto increase energyefficiency

• Replace carbon-intensive fuels with cleaner alternatives

Infrastructure investment needs, 2016–2030($ billion in 2015 prices)

Sources: 2030 population projections from UN Population Division; others are ADB estimates.

Baseline Climate adjusted

Total % of GDP Total % of GDP

Central Asia 492 6.8 565 7.8

East Asia 13,781 4.5 16,062 5.2

South Asia 5,477 7.6 6,347 8.8

Southeast Asia 2,759 5 3,147 5.7

- Indonesia 1,108 5.5 1,229 6.0

The Pacific 42 8.2 46 9.1

Asia and the Pacific 22,5515.1

26,1665.9

Annual Average 1,503 1,744

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How big are infrastructure investment gaps?

14Note: Gap = Investment Needs – Current Investment

Infrastructure investments and gaps, 2016–2020 ($ billion in 2015 prices)

Estimated

current

investment

(2015)

Climate adjusted

Annual

needsGap

Gap as

% of GDP

Total 881 1,340 459 2.4

Total without PRC 195 503 308 5.0

Indonesia 23 74 51 5.1

0

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CurrentInvestment

Additional Public AdditionalPrivate

InvestmentNeeds

Inve

stm

en

ts($

bill

ion

in 2

01

5 p

rice

s) Equity$47

$195

$121

$187 $503

Debt$140

Private$62.5

Public$132.6

Bridging the infrastructure gap

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* 25 countries minus the PRCNote: Numbers may not add up to total due to rounding.Source: ADB estimates based on data from country budget documents, NAS data from national statistic offices, IMFInvestment and Capital Stock Dataset, Asian Development Bank Key Indicators 2016, World Bank World DevelopmentIndicators, World Bank Private Participation in Infrastructure Database.

Infrastructure investment by financing source, excluding PRC,* 2016–2020, (annual average, $ billion in 2015 prices)

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Equity$16.8

$23

$29

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Private$2.6

Public$20.1

$74

Bridging the gap

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Source: ADB estimates based on data from country budget documents, Asian Development Bank Key Indicators 2016,World Bank World Development Indicators, World Bank Private Participation in Infrastructure Database.

Infrastructure investment by financing source, Indonesia, 2016–2020, (annual average, $ billion in 2015 prices)

Point 3: Regional Cooperation and Integration (RCI) is even more relevant now

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Several Issues and Opportunities:◦ ASEAN is perhaps the most dynamic sub-region for RCI

◦ ASEAN Economic Community is making progress – ambitious agenda

◦ Greater Mekong Subregion has grown exponentially, and presents a wide scope for greater ROW (particularly private sector) engagement

◦ More vibrancy emerging in sub-regional programs (e.g. Indonesia-Malaysia-Thailand Growth Triangle; Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area)

◦ Clear view that countries need to cooperate a lot more

GREATER MEKONG SUBREGION ECONOMIC COOPERATION PROGRAM: Progress and Achievements

Over 11,000 km

of roads constructed,

upgraded, or

improved

3,000 km

Of power transmission

and distribution lines

built/added

Tourist arrivals increased

from 10 million in 1995 to

78.8 million (with tourism

receipts amounting to $90

billion) in 2018

Trade between GMS

countries grew from

$5 billion to $555

billion in 2018

1,570 megawatts

of power generation capacity installed500 km

of railways constructed, upgraded, or improved

https://www.greatermekong.org/

Cambodia * People’s Republic of China * Lao PDR * Myanmar * Thailand * Viet Nam(Yunnan Province &

Guangxi Zhuang Autonomous Region)

GMS Sector Strategies and Operational Focus (2018−2022)

https://www.greatermekong.org/

BIMP-EAGA

Subnational in Scope

Target Less

Developed Areas

Private sector

engine of growth

2003

ADB designated

Regional Development

Advisor

2001-2002

ADB assists Institutional

Development

1996

ADB supportsStrategy

Development

BIMP-EAGA Priority Infrastructure Projects (PIPs) Number of Projects Amount in USD

Roads, Railways and Bridges 16 12.6 B

Inland Transport Services 3 0.023

Airports 16 1.9 B

Seaports 16 3.8 B

Power and Energy Infrastructure 7 2.2 B

Trade Facilitation 9 1.5 B

ICT 1 0.15 B

Urban Development 1 0.40 B

TOTAL 69 22.673 B

BIM

P-E

AG

A P

IPs

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Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT)

Indonesia

Aceh

Bangka-Belitung

Bengkulu

Jambi

Lampung

North Sumatra

Riau

Riau Islands

South Sumatra

West Sumatra

Malsysia

Kedah

Kelantan

Melaka

Negeri Sembilan

Penang

Perak

Perlis

Selangor

Thailand

Krabi

Nakhon Si

Thammarat

Narathiwat

Pattani

Phattalung

Satun

Songkhla

Trang

Yala

Chumphon

Ranong

Surat Thani

Phang Nga

Phuket

IMT-GT: Stages of Development

1993-1994 1995-2000 2001-2006 2007-2011 2012-2016

EstablishmentTake-off and

GrowthRepositioning

Roadmap to Development

Implementation Blueprint

2017-2036

IMT-GT Vision 2036(Blueprints every 5 years)

Subnational in Scope

Promote economic complementarities

Private sector engine of

growth

IMT-GT: Unique Features

2006 & 2011ADB assisted in Strategy

Development

2006 ADB designated

Regional Development

Partner

2017-2021

2022-2026

2027-2031

2032-2036

2013 CIMT

established

IMT-GT VISION 2036An integrated, innovative, inclusive & sustainable subregion

Vision

Goals

Objectives

Approaches

Strategic Pillars

Economic Corridor Programs & Projects

Results-Based Monitoring & Evaluation

Private Sector Local Governments

Transport &

ICT

Connectivity

Trade &

Investment

Facilitation

Tourism Agriculture &

Agro-based

industry

Halal

Products

& Services

Environment HRD,

Education

& Culture

TRANSPORT, ENVIRONMENT and URBAN DEVELOPMENT

• Green Cities Initiative • Urban transport (Phuket,

Krabi, Penang, Langkawi, Selangor, and Sabang)

• Water supply (Kedah)

TRADE FACILITATION

• Support to TRS and AEO implementation

ECONOMIC CORRIDOR DEVELOPMENT & SBEZ

• Studies in economic corridors and SBEZs

TOURISM

• Tourism Strategic Framework and Action Plan

PCPs Number of Projects

Amount in USD

Roads, railways and bridges 17 43.4 B

Inland transport (inland container depots, distribution centers)

2 45.9 M

Airports 4 465.8 M

Seaports 6 1.0 B

Customs, Immigration and Quarantine (CIQ) facilities

5 43.4 B

Environment and Urban Development 1 250 M

Other (Industrial Park, Rubber City, Science Park, Halal Park)

6 1.6 B

TOTAL 41 46.9

IMT-GT Physical Connectivity Projects (PCPs)

Point 4: Disruptive Technologies can be Game Changers

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Several Opportunities:◦ Singapore, Malaysia, and Thailand are the leaders on the

technology front

◦ Indonesia, Philippines and Viet Nam recognize the need to invest more in skills

◦ Even the smaller countries (Cambodia, Lao PDR, Myanmar) have clear aims to look at 4IR prospects

◦ Support for Innovation and leapfrogging will be quite important in coming years

Impact of 4IR: Critical dimensions are growth and employment

Source: Schwab, K. 2016. The Fourth Industrial Revolution, World Economic Forum, Crown Publishing Group, Penguin Random House, New York.

Impact Dimensions

Economy GrowthEmploymentThe nature of work

Business Consumer expectationsData-enhanced productsCollaborative innovation New operating models

National and Global GovernmentsCountries, regions and citiesInternational security

Society Inequality and the middle classCommunity

Individual Identity, morality and ethicsHuman connection Managing public and private information

High-skilled workers benefit the most from rapidly changing labour markets

SHARE OF NEW JOB TITLES BY SKILL LEVEL

Source: Khatiwada and Veloso (2019).

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

India (1968 - 2004)

Viet Nam (1998 - 2008)

Malaysia (1998 – 2008)

India (2004 - 2015)

Phil ippines (1990 - 2012)

Low Middle High

Indonesia’s readiness to leverage 4IR for higher and inclusive growth needs to be enhanced

Point 5: Smaller and fragile countries need sustained development support

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Several Issues and Opportunities:◦ While growth is solid, a wide range of vulnerabilities remain

across the region

◦ Along with Middle Income and Upper Middle Income Countries, others such as Myanmar and Timor Leste need strong support

◦ Conflicts or climate change related fragilities remain in some countries

Point 6: ADB stands ready to provide expanded support to ASEAN, and work with all partners including private sector and civil society

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Key highlights:◦ Annual commitments expanding to $6 billion per year now, up

from around $3.5 billion a few years back◦ Philippines and Indonesia are the largest in terms of annual

commitments (e.g. Philippines Build-Build-Build Program)◦ Strategy 2030 provides the key drivers for change on a thematic

basis (e.g. Livable Cities; Addressing Remaining Poverty)◦ Support for Innovation (e.g. Innovation Hub; ASEAN Policy

Network; ASEAN Catalytic Green Facility)◦ Sustained support for RCI

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Notes:

1. A detailed information pack with 5 separate sets of presentation materials is available. Kindly contact ADB North America Representative Office (Mr. Bart Edes, Resident Representative, bedes@adb.org; Ms. Fei Yu, Deputy Res Rep, feiyu@adb.org; or Mr. Jeff Gelman, External Relations Officer, jgelman@adb.org)

2. For any additional information on ADB’s role in Southeast Asia, kindly contact Mr. Ramesh Subramaniam, Director General, Southeast Asia Department, rsubramaniam@adb.org)

THANK YOU!