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SHF2018丨Shamshad Akhtar: Asia's Role and Responsibility in Addressing Global Challenges

Author:  |  Publication Date:2018-11-07

Distinguished Delegates,

The theme of this year’s Forum, Asia’s Responsibilities in a World of Change, is timely given the increasing talk of the unravelling of globalization which risks fracturing a shared narrative that has supported prosperity in our region for decades. With the gap between rich and poor widening, the erosion of potential productivity, frequency of the crisis and disasters, inadequacy of financial flows and intermediation process to support people and asset creation and growing threats from climate change – we are grappling with considerable challenges.

Yet Asia-Pacific’s growth and trade story has been spectacular. Over 1990 and 2008, economy grew by6 percent annually sustained by trade expansion as exports grew by 13 percent. Trade now accounts for over half of Asia-Pacific’s regional GDP and Asia-Pacific contributes about 40 percent of global Exports.

Over the past four years, our region’s resilience and dynamism drove the global growth. Two thirds of the region’s economies, accounting for more than 80 percent of GDP, grew faster in 2017 than the previous year. Global economic recovery has improved the outlook for the region in 2018 and 2019 though outcomes will depend on how countries navigate through the tightening of monetary policy in advanced economies, rising oil prices and the wave of protectionism.

Besides growth edge, pursuing 2030 Agenda, the region has launched social and environmental reforms, albeit at different pace, which would facilitate further reduction in extreme poverty building on dramatic fall from 30 per cent in 2000 to around 10 per cent in recent years. Region already has witnessed a rise in average life expectancy to 80 years and improvements in other social indicators.

Moving from these near-term results, it is notable that our region is largest trading hub and Asia-Pacific GDP rose to $27.5 trillion equivalent to North America and Western Europe share in global GDP, at around 36 percent. According to alternate policy scenario’s region by 2050 the region could account for over half of global GDP.

This scenario depends a lot on how region pursues sustained, inclusive and balanced growth through effective implementation of sustainable development. In this context: First order of priority would be regional political stability and harmony. Among others, success of inter-Korean Summit would open up new opportunities for Korean Peninsular and beyond and can spur regional cooperation. At the same time, collective regional action is called to address fragilities in different hotspots, some even suffering from humanitarian crisis. With Shanghai Cooperation Organization – a regional political grouping –whose enlarged membership now to be scaled to 18 and its broader mandate offers an institutional mechanism to promote nexus between development and peace.

Second, dealing with inequalities is critical as the rising and pervasive income inequalities impacts growth and magnifies social tensions. Some degree of income inequality may be inevitable, inequality of opportunity is real barrier to development. Over the past 30 years, income inequality increased in 4 of the 5 of populous countries, home to over 70 per cent of our region’s population. China’s income inequality rose by close to ten percent. Indonesia’s by over eight percent, and Bangladesh and India’s by four and five percent. Inequality of opportunity and access to services are pervasive. In the region, education, clean fuels, basic sanitation and bank accounts remain out of reach form any citizens and only some 40 per cent of the region’s population has access to health care services. Besides promoting inclusive growth, region needs to reverse inequalities through holistic fiscal policies where equity is promoted through tax and public expenditure policies that can allow for also investments in sustainable social protection Systems.

Third, the demographic change afoot in our region is considerable. Today, the ageing population is just shy of550 million. By 2050 it is expected to more than double, raising the percentage of its population aged 60 or above from 13 percent to 25 percent. Put simply, the Asia-Pacific region is ageing at unprecedented pace with limited time to adapt. Our ability to adapt to a rapidly ageing population calls for action on multiple fronts: seeking for innovative solutions on how to finance and support better the long-term care services for the elderly and examine ways to harness technologies to improve older peoples’ lives. Designing sustainable pension systems in an environment with a large informal sector is another challenge.

Fourth, energy access remains an overwhelming concern for both 420 million people without access to electricity,2 billion without clean cooking fuels and industry facing energy shortages. Our region, accounting for half of global GHG emissions --set to rise given the region’s growth prospects and the high energy intensity –continue to pose risks to health of people from the pollution. Being an import dependent region, the dramatic rise in oil prices from $30 per barrel two years ago to $80 per barrel pose renewed macroeconomic implications. Meanwhile oil exporters despite facing relief as they recoup the hit caused by downturn in prices have yet not fully diversified their economies or build strong fiscal buffers to safeguard their balance sheets should there be another round of price volatility.

Energy transition is the only sustainable approach to resolve multiple challenges. While change is underway but fast tracking is an imperative. Advancements in energy technologies are gaining momentum as the costs of renewables acquisition is driving down. These developments provide an opportunity to reduce energy deficits, change energy mix and improve energy accessibility. Though, region has been able to reduce its energy intensity, but our enormous energy efficiency potential has yet to be fulfilled. At the same time, energy transition needs to promote energy supplies, to cater to the growing demand pressures. The costs of inaction are significant. GDP in the region could decrease by as much as 3.3 percent by 2050 and 10 percent by 2100.On the other hand, the costs of action are modest. Transitioning to a low-carbon pathway (under a 2°C scenario) has to be central to energy transition and is estimated to cost the region a mere 1.4 to 1.8 percent of GDP by 2050 and 2 per cent by 2100. Ongoing regional energy connectivity through CASA 1000 and other projects underway as well as enhancements of power grids to, among others, allow for integration of variable sources of renewable energy will be critical for sustainable energy development and energy security.

2030 Agenda can only be delivered if multilateralism and global governance reinforces it. Trust in the multilateral architecture and its institutions has eroded. Asia and the Pacific, consistent with its growing role in global economy is acting more responsibly to foster multilateralism and global governance but more commitment and action is in order – both from North and South in trade, finance and climate change areas. I will touch upon these three critical subjects.

Focusing on trade, multiple rounds of multilateral trade liberalization over last 70 years, coupled with liberalization pursued through regional and unilateral trade agreements resulted in a substantial decline globally in average applied tariffs on industrial goods from around 40 to 4%. However, offsetting its impact as been a substantial rise in non-tariff measures(NTMs) ranging from technical regulatory to procedural barriers such as the rise in stock of 370 sanitary and 355phytosanitary measures in Asia and the Pacific alone. Further, 2008 crisis caused Governments to expand support measures such as industrial subsidies and financial sector support which interfere with free flows of goods, services and investment. Over and above, the growing protectionist rhetoric and threats via reintroduction of the 20th century commercial measures undermine markets. The multilateral trading system, eroded by delays the Doha Round, has led to alternative, and compromising approaches to liberalization weakening global system of rules to protect vested interests.

The recent success of the WTO Trade Facilitation Agreement (TFA) which along with many of the Asia and the Pacific plurilateral trade agreements should contribute to enhancing the WTO multilateral trading system. In the face of rising protectionist trade policies, Asia-Pacific countries should• Defend the WTO’s dispute settlement mechanism by refusing unilateral retaliatory actions and instead build alliances with other WTO members;

     Switch priority from negotiation of liberalization to improved rules-setting;
    • Nurture and strengthen regional and plurilateral institutions and agreements that respect principles of non-discrimination, transparency and predictability of rule enforcement, and

    • Reduce capacity gaps on trade-related matters among countries of the region.

Next, global agenda of the size and scale being pursued calls for newer approaches to financing development. Our dilemma is that despite collective resource potential of $56 trillion including regional savings, foreign exchange reserve and institutional investments, our ability to finance climate friendly infrastructure, estimated to be close to $27 trillion, remains unattended too. At the same time our regions, tax potential anywhere between 6 to over 10 percent at country level remains untapped, and capital markets either lack depth, and liquidity and local bond markets have yet to be fully exploited. Generating new sources of finance and deploying them effectively for development remains challenge.

New approaches however infuse new dynamism to financing for development. Domestic resource mobilization has now become a multilateral concern where close to now $400 million is now being deployed from ODA to build capacities of domestic tax systems and bodies to address base erosion issues both because of generous incentives offered to industry and weakness of tax collection agencies, and profit shifting tendencies of foreign companies. Development cooperation frameworks are now factoring in the contributions of the South-South flows and initiatives such as the Belt and Road Initiatives to finance infrastructure. There is now also recognition that newer vehicles such as AIIB, New Development Bank and Silk Road Fund offer newer approaches to multilateral financing options. This brings to new multilateral capital subscription, which can leverage billions for infrastructure and green financing and allows regionally sponsored institutions to give more weight to the say and voice of the developing countries shareholders. There remains need for further enhancement of voice of emerging markets in existing IFIs.

Finally, globally the brunt of the deleterious consequences of climate change is visible: sea level rises, floods and increasingly frequent and severe natural disasters. Global warming and the resulting sea level rise mean our vast region is exposed to transboundary climatic and environmental risks. In 2017, monsoon rains in South Asia claimed 1,200 lives, affected 40 million people and cost $1.2 billion. By 2030, floods could cost the subregion as much as $215 billion each year. Pollution of air, water and land is severe and can result in premature deaths. The Paris Agreement on Climate Change has provided new impetus for the multilateral approach to steer execution of the climate change accord. However, for it to be achieved, ambition and compliance need to be strengthened. Pledges must be regularly upgraded, and substantial transparency introduced so that compliance with pledges can be monitored. International finance, technology and capacity-building should be delivered to realize these ambitions. Strengthening compliance entails countries acting to punish those that fail to make serious commitments or renege on those they have made.

A better socio-economic and environmental case should be made for the opportunities contained in the Paris Agreement led Nationally Determined Contributions to public, businesses and other stakeholder in addition to donor communities. A common metric is needed to monitor collective progress towards requisite emissions reductions both by states and signatories of the Paris Agreement.

Regional platforms can play a pivotal role in helping countries reinforce multilateral principles and policies and develop solutions to promote open and liberal trade regimes, develop capacities to unleash domestic and private resources, and address shared vulnerabilities and risks which cut across the policy spectrum – from challenges created by natural disasters, to food security, to climate Change.

To conclude, to successfully deliver on sustainable development globally, Asia must not only shoulder greater responsibilities, but also have their voices heard and views reflected in global economic and financial architecture, commensurate with their rising economic weight. UN ESCAP, as the regional arm of the United Nations in Asia and the Pacific, is well positioned to support its member States and strengthen their role in global governance frameworks. Member States can leverage our intergovernmental platform to coordinate and develop proposals to do so. These solutions are critical to ensure our region can effectively deliver on the 2030 Agenda for Sustainable Development.

(This article is edited based on the recording and has not been reviewed by the Speaker.)