Managing Director's Remarks at ASEAN Luncheon

IMF News, November 5, 2019

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First overseas trip as Managing Director of the IMF was to the ASEAN region.
ASEAN has been a "bright spot in the global economy" with rapid growth and poverty reduction driven by global integration, collaboration, and sound economic policies.
In 2019, the 10 ASEAN countries contributed 10 percent of global growth—just about as much as the 19 countries in the Euro zone.
Growth in ASEAN is decelerating alongside the rest of the world.

Global projection: 3 percent growth for this year, the lowest rate in a decade.
ASEAN projection: 4.6 percent growth in 2019, a downward revision from the previous estimate of 5 percent.
Causes of slowdown:
- Trade tensions reducing business confidence and investment.
- Brexit, high debt, and geopolitical tensions increasing uncertainty.
Policy guidance for near-term navigation of slower growth:
- Tap all instruments as appropriate—monetary policy, fiscal policy, and structural reforms.
- Reduce trade tensions; welcome recent announcements from the U.S. and China and hope to move from a trade truce to a sustainable, long-term trade peace.
- ASEAN should deepen integration beyond goods to services, finance, and labor.

Long-term priorities: address inequality, pressures from aging in some countries, quality infrastructure, quality human capital, and climate change.
IMF research and experience highlights the following areas:

a) Human capital
More spending is needed for quality infrastructure and more investment in people despite good progress on the Sustainable Development Goals (SDGs).
Asian Development Bank estimate: between 2016 and 2030, ASEAN needs to invest $2.8 trillion in quality infrastructure.
Human capital index dispersion in ASEAN:
Singapore: number one in the world.
Vietnam: number 40.
The rest of the ASEAN countries spread all the way to 111.
Recommendation: invest in people today; mobilize domestic resources and enable massive private-sector investment for the SDGs.

b) Female labor force participation
Female labor force participation in ASEAN is about 7 percentage points lower than the East Asia and Pacific average.
Potential impact: tapping women’s talent could raise per capita GDP growth in ASEAN by about 1½ percentage points and significantly reduce inequality.

c) Social protection
Social protection needs to be at a higher level and better targeted.
New identification systems (examples cited: India and the Philippines) can help target assistance more precisely to those who need it most.

d) Climate change
Urgent collective need to make rapid progress on climate change: reduce emissions, offset what cannot be reduced, adapt to new climate realities, and build resilience.
Transitioning from a brown to a green economy would be a big boost for growth in ASEAN; early movers would gain competitive advantage.
Policy recommendation (supported by IMF research): introduce a price on carbon, with the most efficient approach being a carbon tax.
Key design point: retool the tax system rather than simply adding a new tax.
Use carbon revenues to compensate vulnerable people and those most affected.

The IMF is available to provide advice and technical assistance to all countries, not only those in economic trouble.
The IMF embraces the “ASEAN Way” of collaborating and cooperating to help achieve sustainable development.
Inspirational close: Quoting Nelson Mandela—“It always seems impossible until it is done.”

Managing Director's Remarks at ASEAN Luncheon — November 4, 2019