M ANAGING ANAGING C C HANGE HANGE IN IN A A R R ESURGENT ESURGENT

M

M ANAGING ANAGING C C HANGE HANGE IN IN A A R R ESURGENT ESURGENT

M

M ANAGING ANAGING C C HANGE HANGE IN IN A A R R ESURGENT ESURGENT

A

A SIA SIA

Kyung Wook HUR

Korean Ambassador to the OECD

Oct 17 2011, New Delhi

Ⅰ Ⅰ Ⅰ

Ⅰ. Introduction

Ⅱ Ⅱ Ⅱ

Ⅱ. Strengthening Asia’s Voice

Ⅲ Ⅲ Ⅲ

Ⅲ. Global Public Goods

1. Global Development Cooperation 2. Climate Change

C C C

C ^{ONTENTS ONTENTS ONTENTS ONTENTS}

3. Resource Depletion 4. Global Trade

5. Financial Market Stability 6. Global Standards

7. Engagement with the OECD 8. Peace and Security

Ⅳ Ⅳ Ⅳ

Ⅳ. Conclusion

2

S S

S S HIFTING HIFTING ^HIFTING HIFTING W W W W EALTH EALTH ^EALTH EALTH

Ⅰ

Ⅰ

ⅠⅠ. INTRODUCTION

• Share of Real World GDP : 25%(2008) → 36%(2030) → 52.3%(2050)

• In 2050 (2010 PPP USD), India 1^st; China 2^nd

* Source: CitiGroup Global Economic View(2011.2.21)

3

Source : The Economist(2010.2.25)

P P

P P ^ITFALLS ITFALLS ITFALLS ITFALLS

Ⅰ

Ⅰ

ⅠⅠ. INTRODUCTION

•

Risk of extrapolation :

- An economy prone to sudden shifts

•

Mega-Challenge & Risks :

4

•

Mega-Challenge & Risks :

- Middle Income Trap - Climate Change - Inequality

•

Asian Century not preordained

R R R

R ESPONSIBLE ESPONSIBLE ^ESPONSIBLE ESPONSIBLE S S S S TAKEHOLDERSHIP TAKEHOLDERSHIP TAKEHOLDERSHIP TAKEHOLDERSHIP

Ⅱ

Ⅱ

ⅡⅡ. STRENGTHENING ASIA’S VOICE

• No More Free Ride / Passive Onlooker

• Proactive , not Aggressive

5

• Proactive , not Aggressive

• Common but Differentiated Responsibilities

• Long-term Time Horizon

•

- Rank & File

- Better contribution to global public goods

E E E

E ^{XISTING XISTING XISTING XISTING} IIII NTERNATIONAL NTERNATIONAL NTERNATIONAL NTERNATIONAL O O O O RGANIZATION RGANIZATION RGANIZATION RGANIZATION

Ⅱ

Ⅱ

ⅡⅡ. STRENGTHENING ASIA’S VOICE

6 Developing Asia’s Shares in IMF Quotas and in World Trade and GDP (%)

• IMF / AMF (based on Chiang Mai)

•

FSF / Asian FSF

R R R

R ^{EGIONAL EGIONAL EGIONAL EGIONAL} O O O O RGANIZATION RGANIZATION RGANIZATION RGANIZATION : C : C : C : C ^{LUB LUB LUB LUB} T T T T ^{HEORY HEORY HEORY HEORY}

Ⅱ

Ⅱ

ⅡⅡ. STRENGTHENING ASIA’S VOICE

•

FSF / Asian FSF

• Strengthening ADB

* Northeast bank

7

•

G20

- Premier Forum of International Economic Cooperation - No Quota

- Institutionalization

G20 &

G20 &

G20 &

G20 & ^{LEADERSHIP LEADERSHIP LEADERSHIP LEADERSHIP}

Ⅱ

Ⅱ

ⅡⅡ. STRENGTHENING ASIA’S VOICE

- Institutionalization

8

Population

Population GDPGDP FX reserveFX reserve

G20 66.6 85.0 81.0

Asia 43.5 22.0 44.0

(Unit: %)

•

Intellectual

• Rewarding Investment

• Shrinking & Interconnected World

- Annual Costs and Benefits of Inaction and corrective action

W W W

W ^{HY HY HY HY} ? ? ? ?

Ⅲ

Ⅲ

ⅢⅢ. G^LOBAL PUBLIC GOODS

- Annual Costs and Benefits of Inaction and corrective action

* Costs of Continued Inaction : 1 trillion dollars a year

Costs of Correctives action : 1~10% of Costs of Continued Inaction

Source: Kaul et. al(2003) 9

Ⅲ

Ⅲ

ⅢⅢ -1. GLOBAL DEVELOPMENT COOPERATION

• Population living with less than $1.25 a day has been reduced

- 900mil.(2005) → 759mil.(2008) → 660mil. (2010/Estimated)

A A

A A SIA SIA ^SIA SIA ’’’’ ^S S S S SUCCESS SUCCESS SUCCESS SUCCESS IN IN IN IN POVERTY POVERTY POVERTY POVERTY REDUCTION REDUCTION REDUCTION REDUCTION

10

- HCR(Headcount Ratio) : 27.1%(2005) → 21.9%(2008)

(est.)

Ⅲ

Ⅲ

ⅢⅢ -1. GLOBAL DEVELOPMENT COOPERATION

• In 2007, Asian donors provided $35.6billion

•

Asia as capital exporting region cannot rely on outside ODA financing

• Regional ODA to be strengthened

G G G

G ^{ROWING ROWING ROWING ROWING} A A A A ^{SIA SIA SIA SIA} ’’’’ ^{S S S S} ODA ODA ODA ODA CONTRIBUTION CONTRIBUTION CONTRIBUTION CONTRIBUTION

11

0%

5%

10%

15%

20%

25%

30%

35%

40%

2002 2003 2004 2005 2006 2007

Asian donor’s ODA/DAC ODA

• Regional ODA to be strengthened

• South-South trade likely to continue booming

Source: The Super-Cycle Repot(2010)

Ⅲ

Ⅲ

ⅢⅢ -1. GLOBAL DEVELOPMENT COOPERATION

• Proliferation of Asian Perspectives on Development

- Mainstreaming of “the growth-oriented Asian development approaches” in global development strategy

- G20 Seoul Development Consensus

IIII NTEGRATE NTEGRATE INTO ^NTEGRATE NTEGRATE INTO INTO INTO GLOBAL GLOBAL GLOBAL GLOBAL DEVELOPMENT DEVELOPMENT DEVELOPMENT COMMUNITY DEVELOPMENT COMMUNITY COMMUNITY COMMUNITY

12

- G20 Seoul Development Consensus - South-South Cooperation

- Knowledge Sharing

• Participation in “the New Global Partnership for Development”

- “Busan” : Birthplace of broader partnership

focusing on “Development Effectiveness”

- Outside or Inside

Ⅲ

Ⅲ

ⅢⅢ -2. CLIMATE CHANGE

• Climate Change: one of the most urgent and critical issues facing

the global community

- IPCC Recommendation :

6^o C → 2^o C , CO2 80% Cut by 2050

• Asia Has More to Lose

13

• Asia Has More to Lose

Ⅲ

Ⅲ

ⅢⅢ -2. CLIMATE CHANGE

• Negotiations on Post-Kyoto Climate System - Logjam

• Leadership by Major Asian Countries

- Active voluntary mitigation actions (e.g.: Korea -30% from BAU by 2020) - Delay will cost more

• Four Elements Required for an International Agreement

14

- Clarity on the commitments of developed countries

(by how much they are willing to reduce their GHG emissions) - Clarity on the actions that major developing countries

(China and India : how to undertake mitigation actions)

- Clarity on the financing needed to help developing countries - Decision on how that money will be managed

* some progress on third and fourth issue but little progress on the first and second issue

• Cannot Neglect

E E E

E ^NERGY NERGY NERGY NERGY E E E E FFICIENCY FFICIENCY ^FFICIENCY FFICIENCY : C : C : C : C ONSERVATION ONSERVATION ONSERVATION ONSERVATION

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Abolish Price Subsidy → Restore Price Mechanism

- $ 409 billion (2010)

Fossil Fuel Subsidy (IEA, 2011)

15

E E E

E ^NERGY NERGY NERGY NERGY E E E E FFICIENCY FFICIENCY ^FFICIENCY FFICIENCY : C : C : C : C ONSERVATION ONSERVATION ONSERVATION ONSERVATION

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Subsidies are an extremely inefficient means of assisting the poor

- Only 8% of the $409 billion spent on fossil-fuel subsidies in 2010 went to the poorest 20% of the population

16

went to the poorest 20% of the population

E E E

E ^NERGY NERGY NERGY NERGY E E E E FFICIENCY FFICIENCY ^FFICIENCY FFICIENCY : C : C : C : C ONSERVATION ONSERVATION ONSERVATION ONSERVATION

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Without further reform Without further reform, spending on fossil-fuel consumption Without further reform Without further reform subsidies is set to reach $660 billion in 2020, or 0.7% of reach $660 billion in 2020, or 0.7% of reach $660 billion in 2020, or 0.7% of reach $660 billion in 2020, or 0.7% of

global GDP global GDP global GDP global GDP

17

•

Phasing Phasing----out Phasing Phasing out out out fossil-fuel consumptions subsidies by 2020 by 2020 by 2020 by 2020 would:

- Slash growth in energy demand by 4.1%

- Reduce growth in oil demand by 3.7mb/d

 - Cut growth in CO2 emissions by 1.7 Gt

E E E

E ^NERGY NERGY NERGY NERGY E E E E FFICIENCY FFICIENCY ^FFICIENCY FFICIENCY : C : C : C : C ONSERVATION ONSERVATION ONSERVATION ONSERVATION

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Direct Subsidy to the Poor Direct Subsidy to the Poor Direct Subsidy to the Poor Direct Subsidy to the Poor

Energy Poor in Developing Asia (IEA, 2011)

18

Without access to electricity Relying on the traditional use of biomass for cooking

Population(Mn) Share of Pop(%) Population(Mn) Share of Pop(%)

2009 676 19 1,920 54

2030 376 9 1,730 41

Energy Poor in Developing Asia (IEA, 2011)

D D D

D IVERSIFICATION IVERSIFICATION IVERSIFICATION IVERSIFICATION : N : N : N : N ^EW EW EW EW ENERGY ENERGY ENERGY ENERGY SOURCE SOURCE SOURCE SOURCE

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Renewable energy

- Low Carbon Growth : $2.7 trillion market by 2020

19

D D D

D IVERSIFICATION IVERSIFICATION IVERSIFICATION IVERSIFICATION : G : G : G : G REEN REEN ^REEN REEN G G G G ^ROWTH ROWTH ROWTH ROWTH

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

•

Paradigm shift: "Green" and "Growth" can go hand- in-hand

•

New Source of Growth

20

•

New Source of Growth

•

Potential to be “Winner” of Green Race

Ⅲ

Ⅲ

ⅢⅢ -3. RESOURCE DEPLETION

D D D

D IVERSIFICATION IVERSIFICATION IVERSIFICATION IVERSIFICATION : G : G : G : G ^REEN REEN REEN REEN G G G G ROWTH ROWTH ^ROWTH ROWTH

•

Global Green Growth Institute (GGGI)

- Focus on Developing Countries

- Provide and Facilitate Technical and Financial Support

21

- Provide and Facilitate Technical and Financial Support - Promote Green Growth through Research

- Disseminate the Results of Research & Activity

Ⅲ

Ⅲ

ⅢⅢ -4. G^LOBAL TRADE

T T T

T RADE RADE ^RADE RADE : P : P : P : P ^UBLIC UBLIC UBLIC UBLIC G G G G ^OODS OODS OODS OODS

•

Biggest policy threat to global growth

→ Protectionism (1929, Beggar-Thy-Neighbor)

22

Ⅲ

Ⅲ

ⅢⅢ -4. G^LOBAL TRADE

DDA & R DDA & R DDA & R

DDA & R ^EGIONAL EGIONAL EGIONAL EGIONAL FTA FTA FTA FTA

•

DDA (Doha Round): Stalemate

•

Regional FTA: 53

→ 87

→ 118

23

- ASEAN FTA

- Korea-China-Japan FTA : Joint Study - APEC : FTAAP

•

Regional Integration & Open Regionalism

•

Potential Breakthrough to the Current Crisis

Volatile Capital Flows Volatile Capital Flows Volatile Capital Flows Volatile Capital Flows

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

•

1986-87 US Savings & Loan Crisis

•

1994 Mexican Peso Crisis

•

1997 Asian Crisis

24

Measures 1. Financial Safety Net Measures 1. Financial Safety Net Measures 1. Financial Safety Net Measures 1. Financial Safety Net

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

•

IMF New Instrument IMF New Instrument IMF New Instrument IMF New Instrument

- FCL (Flexible Credit Line) : Preventive / No Conditional - PCL (Precautionary Credit Line)

25

- PCL (Precautionary Credit Line)

•

Link : Regional Financial Arrangement(RFA) & IMF Link : Regional Financial Arrangement(RFA) & IMF Link : Regional Financial Arrangement(RFA) & IMF Link : Regional Financial Arrangement(RFA) & IMF

Measures 2.

Measures 2. Measures 2.

Measures 2. AMF AMF AMF AMF

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

•

CMIM based on ASEAN+3 ⇒ ⇒ ⇒ ⇒ AMF

- Crisis preventive function in CMIM - Improve AMRO's capacity

- Cooperation between CMIM and IMF

26

- Cooperation between CMIM and IMF

* CMIM

- Participants : ASEAN+3 & Hong Kong

- Total Size : (CMI) $ 78 billion → (CMIM) $ 120 billion

Measures 3. Reserve Flow in the Region Measures 3. Reserve Flow in the Region Measures 3. Reserve Flow in the Region Measures 3. Reserve Flow in the Region

•

Asia w/ Increasing Reserve

- 75% of Global Reserve (around $10 trillion in 2010) - By 2050 : Continue to Increase

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

27

•

Reserve Reflow in the Region Required

- Financial Sector - Real Sector

Measures 3 Measures 3 Measures 3

Measures 3----A. A. A. Financial Sector A. Financial Sector Financial Sector Financial Sector

•

Asian Bond Market Initiative (ABMI)

- CGIF (Credit Guarantee and Investment Facility) : Initial Capital of $700 million

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

28

Initial Capital of $700 million

- ABMF (ASEAN+3 Bond Market Forum) - RSI (Regional Settlement Intermediary)

Measures 3 Measures 3 Measures 3

Measures 3----B. Real B. Real B. Real B. Real Sector Sector Sector Sector

•

Regional Infrastructure Investment

- $ 750 billion / year between 2010 and 2020 (ADB) - Regional Investment Project

Ⅲ

Ⅲ

ⅢⅢ -5. F^INANCIAL MARKET STABILITY

29

- Regional Investment Project

* Asian Land Transport Infrastructure Development(ALTID)

[ Asian Highway (AH), Trans-Asian Railway (TAR), Interconnecting AH & TAR Networks]

* Trans-Asian Energy System

•

PPP’s Role

Ⅲ

Ⅲ

ⅢⅢ -6. GLOBAL STANDARDS

(GOVERNANCE & TRANSPARENCY)

• Importance of Governance & Transparency - “Social Capital” as Source of Growth

- To Accommodate Growing Middle Income Class

• Current State

30

Ⅲ

Ⅲ

ⅢⅢ -6. GLOBAL STANDARDS

(GOVERNANCE & TRANSPARENCY)

• Rule of Law

• OECD Governance

- Code of Liberalization of Capital Movements

- Code of Liberalization of Current Invisible Operations

31

- Declaration on International Investment & MNEs (Guideline) - Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions

- Model Tax Convention on Income & on Capital

•

OECD from “Richman’s Club” to “Global Policy Network”

- Source of Global Standards

•

EE5 Initiative

Ⅲ

Ⅲ

ⅢⅢ -7. ENGAGEMENT WITH THE OECD

32

- Russia at the Door

•

Progressive Engagement (Win-Win)

- Committees & Working Parties

•

Signal to the Outside World

•

North Korea’s Nuclear Issue North Korea’s Nuclear Issue North Korea’s Nuclear Issue North Korea’s Nuclear Issue Nuclear Issues

Ⅲ

Ⅲ

ⅢⅢ -8. P^{EACE AND} SECURITY

•

Peace & Security : Must for Prosperity

North Korea’s Nuclear Issue North Korea’s Nuclear Issue North Korea’s Nuclear Issue North Korea’s Nuclear Issue

- Not only a threat to regional security

- Decisive impact on the credibility of the international non-proliferation regime

•

All Asian Members’ Efforts to Pressure DPRK All Asian Members’ Efforts to Pressure DPRK All Asian Members’ Efforts to Pressure DPRK All Asian Members’ Efforts to Pressure DPRK

- Abandon nuclear program/join the international community

33

•

Time and Venue : March 26-27, 2012, Seoul

•

Participants : 47 Heads of State and Int'l Organizations

(UN, IAEA, EU)

Seoul Nuclear Security Summit

Ⅲ

Ⅲ

ⅢⅢ -8. P^{EACE AND} SECURITY

•

Top-level meeting including non NPT members

- To build sustained cooperation to safeguard against nuclear terrorism

* President Lee : a willingness to invite Kim Jong-il to the 2012 Seoul Nuclear Security Summit once North Korea decides to give up its nuclear ambitions (his Berlin speech of May 2011)

34

Other Regional Issues to be Solved in Peaceful Manner Other Regional Issues to be Solved in Peaceful Manner Other Regional Issues to be Solved in Peaceful Manner Other Regional Issues to be Solved in Peaceful Manner

Ⅲ

Ⅲ

ⅢⅢ -6. P^{EACE AND} SECURITY

•

Border Issues between Thailand and Cambodia

- Military and civilian casualties since the beginning of 2011

•

South China Sea Issue

35

•

South China Sea Issue

- Mutually beneficial solution among the countries concerned in a peaceful and stable manner.

•

Afghanistan Reconstruction Issue

- Successful transfer of the responsibility of public order and safety to the Afghanistan authority in July 2011

Institutional Tools to Ensure Peace and Security in Asia Institutional Tools to Ensure Peace and Security in Asia Institutional Tools to Ensure Peace and Security in Asia Institutional Tools to Ensure Peace and Security in Asia

Ⅲ

Ⅲ

ⅢⅢ -8. P^{EACE AND} SECURITY

•

Further Efforts to Strengthen Institutional Tools

- North Korea nuclear issue : Six-party talks

- Other regional issues : ARF (ASEAN Regional Forum)

•

ARF

36

•

ARF

- Time to move forward to enter into preventive diplomacy stage - Focus on contents & deliverables

•

Asia’s Leadership in Combating Terrorism

- UN comprehensive convention on international terrorism negotiation

•

Economic Integration will Mitigate Tension

Asia at a Crossroads

• Comprehensive & Strategic Approach

• Integrate with Open Regionalism

• Avoid Pitfalls

Voices & Influences

• Responsible Stakeholder

Ⅳ

Ⅳ

ⅣⅣ. C^ONCLUSION

• Responsible Stakeholder

• G 20 as an Institution

• Intellectual Leadership

Global Public Goods

• Future Perspectives

• ‘The one who pays the piper calls the tune.’

37

Global Asia : “Future Is In Our Hands”