FOSTERING GROWTH THROUGH DIGITALISATION …

1 Economic Outlook for Southeast Asia, China and India 2018 FOSTERING GROWTH THROUGH DIGITALISATIONC onsult this publication on line at work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit for more Outlook for Southeast Asia, China and India 2018 FOSTERING GROWTH THROUGH DIGITALISATIONThe Economic Outlook for Southeast Asia, China and India is a bi-annual publication on regional economic GROWTH , development and regional integration in Emerging Asia. It focuses on the economic conditions of Association of Southeast Asian Nations (ASEAN) member countries: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. It also addresses relevant economic issues in China and India to fully reflect economic developments in the region. Each edition of the Outlook comprises four main parts, each highlighting a particular dimension of recent economic developments in the region.

2 The first part presents the regional economic monitor, depicting the economic outlook and macroeconomic challenges in the region. The second part takes stock of recent progress made in key aspects of regional integration. The third part consists of a special thematic chapter addressing a major issue facing the region. The 2018 edition focuses on FOSTERING GROWTH THROUGH DIGITALISATION . And the fourth part includes structural policy country notes offering country-specific reviews and 1: Macroeconomic assessments and economic outlook for Emerging AsiaChapter 2: Progress and challenges of regional integration in ASEAN and Emerging AsiaChapter 3: DIGITALISATION in manufacturing and services in Emerging AsiaChapter 4: Structural policy country notesISBN : 978 -92- 64 -28617741 2017 24 1 P1 Economic Outlook for Southeast Asia, China and India 2018 FOSTERING GROWTH THROUGH DIGITALISATION20181. <Header left page - cHapter>Economic Outlook for Southeast Asia, China and India 2018 FOSTERING GROWTH THROUGH DIGITALISATIONE conomic Outlookfor Southeast Asia,China and India 2017 ADDRESSING ENERGY CHALLENGES3ecONOMIc OUtlOOK fOr SOUtHeaSt aSIa, cHINa aNd INdIa 2018: FOSTERING GROWTH THROUGH DIGITALISATION Oecd 2018 This work is published under the responsibility of the Secretary-General of the OECD.

3 The opinions expressed and arguments employed herein do not necessarily reflect those of the OECD, its Development Centre or of their member document and any, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international credits: Cover design by the OECD Development to OECD publications may be found on line at: OECD 2018 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given.

4 All requests for public or commercial use and translation rights should be submitted to Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at or the Centre fran ais d exploitation du droit de copie (CFC) cite this publication as:OECD (2018), Economic Outlook for Southeast Asia, China and India 2018: FOSTERING GROWTH THROUGH DIGITALISATION , OECD Publishing, Paris, : 978-92-64-28617-7 (print)ISBN: 978-92-64-28618-4 (pdf )Annual: Economic Outlook for Southeast Asia, China and IndiaISSN 2310-1105 (print)ISSN 2310-1113 (online)1. fOreWOrd3ecONOMIc OUtlOOK fOr SOUtHeaSt aSIa, cHINa aNd INdIa 2018: FOSTERING GROWTH THROUGH DIGITALISATION Oecd 2018 ForewordThe Economic Outlook for Southeast Asia, China and India is a biannual publication on Asia s regional economic GROWTH , development and regional integration processes.

5 It focuses on the economic conditions of the Association of Southeast Asian Nations (ASEAN) member countries (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam) and two large economies in the region, China and India. This publication evolved from the Southeast Asian Economic Outlook. Beginning with the first release of the Update to the Outlook in June 2016, the Outlook has become a biannual publication, with the main report released in the fall and its update released the following spring. The Outlook was initially proposed at an informal reflection group on Southeast Asia in 2008 as a follow-up of the Council Meeting at Ministerial level (MCM) in 2007 and was accepted by ministers/senior officials from ASEAN countries at the occasion of the 2nd OECD-Southeast Asia Regional Forum in Bangkok in 2009. The Outlook project was officially launched in 2010 and each edition is regularly presented at the occasion of the ASEAN/East Asia Summit.

6 It was included in the OECD s Southeast Asia Regional Programme (SEARP) at the Steering Group Meeting in Jakarta, Indonesia in March 2015, with its role of providing a horizontal view of activities, identifying emerging trends in the region and providing a backbone for the different streams of the Programme confirmed at the 2015 MCM. The Outlook serves as a strategic foresight and policy dialogue tool for the SEARP and includes summaries of recent developments in the region on issues related to the Programme s six Regional Policy Networks and three Initiatives. Each edition of the Outlook is comprised of four main parts: a regional economic monitor, an overview of recent developments in regional integration, structural policy country notes and a thematic focus specific to each year s report. The 2018 edition of the Outlook focuses on the transformative effects of the digital economy and policy challenges for Emerging Asian countries in seizing the opportunities it presents.

7 DIGITALISATION has already affected ways of doing business, trade and productivity in the region. New technologies and improved access to the internet and information and communication technologies will continue to reshape manufacturing and services sectors. FOSTERING inclusive GROWTH THROUGH DIGITALISATION requires reforms to trade and investment policies, the development of supportive infrastructure, and addressing labour market OECD Development Centre is committed to working alongside governments of developing and emerging economies and regional actors to identify key areas of intervention in order to address these challenges. The Centre enjoys the full membership of three Southeast Asian countries, namely Indonesia, Thailand and Viet Nam, as well as India and China. This project has also benefited from the generous support of other Emerging Asian countries. Like other regional economic outlooks produced by the OECD Development Centre, this report was prepared in collaboration with regional partners; UNESCAP and the Economic Research Institute for ASEAN and East Asia (ERIA) contributed to the 2018 edition.

8 The Outlook also benefited from discussions with the ASEAN Secretariat. The OECD is committed to supporting Asian countries in their efforts to promote economic and social well-being THROUGH rigorous analysis, peer learning and best practices. 5ecONOMIc OUtlOOK fOr SOUtHeaStaSIa, cHINaaNd INdIa 2018: fOSterINggrOWtH THROUGH DIGITALISATION Oecd 20181. table Of cONteNtS5ecONOMIc OUtlOOK fOr SOUtHeaSt aSIa, cHINa aNd INdIa 2018: FOSTERING GROWTH THROUGH DIGITALISATION Oecd 2018 Table of contentsExecutive summary ..17 Economic outlook to 2022 ..17 Recent developments in regional integration ..17 The impacts of DIGITALISATION on manufacturing and services ..18 Key structural policy challenges ..18 Overview ..19 Chapter 1: Macroeconomic assessments and economic outlook for Emerging Asia ..19 Chapter 2: Progress and challenges of regional integration in ASEAN and Emerging Asia 25 Chapter 3: DIGITALISATION in manufacturing and services in Emerging Asia ..28 Chapter 4: Key structural policy challenges in Emerging Asia.

9 35 Chapter 1. Macroeconomic assessments and economic outlook for Emerging Asia ..41 Introduction ..42 Overview and main findings: The economic outlook for 2017-22 ..43 Other key points of the economic outlook and assessment ..45 Recent macroeconomic developments and medium-term prospects ..47 The impact of increased trade on current accounts differs across Emerging Asia ..66 Net FDI trends in Emerging Asia remain generally encouraging ..68 Headline inflation continues to diverge in Emerging Asian economies ..69 Monetary accommodation may have bottomed out in Emerging Asia ..71 Stock markets in Emerging Asia have been robust ..74 Fiscal positions exhibit some vulnerabilities but are largely stable ..75 Risks to GROWTH and policy challenges ..77 Chapter 2. Progress and challenges of regional integration in ASEAN and Emerging Asia ..91 Overview: Building momentum for the ASEAN Economic in goods: ASEAN is working to further reduce tariffs ..93 Trade in services: ASEAN strives to liberalise services, but progress is slow.

10 98 Conclusion ..103 Chapter 3. DIGITALISATION in manufacturing and services in Emerging Asia ..105 Introduction ..106 Recent developments in and impacts of DIGITALISATION ..106 Challenges for policy makers ..119 Conclusion ..134 Chapter 4. Structural policy country Darussalam and Singapore ..185 CLM ..197 CLM ..197 China and India ..221 China and India ..221 Annex A. Statistical annex ..2371110ecONOMIc OUtlOOK fOr SOUtHeaSt aSIa, cHINa aNd INdIa 2018: FOSTERING GROWTH THROUGH DIGITALISATION Oecd 2018ecONOMIc OUtlOOK fOr SOUtHeaSt aSIa, cHINa aNd INdIa 2018: FOSTERING GROWTH THROUGH DIGITALISATION Oecd 20181. acrONYMS aNd abbrevIatIONSacrONYMS aNd abbrevIatIONSA cronyms and abbreviationsABCASEAN Broadband CorridorABIFASEAN Banking Integration FrameworkABISASEAN Business & Investment SummitABMIA sian Bond Market InitiativeACAPASEAN Competition Action PlanACCMSMEASEAN Coordinating Committee on Micro, Small, and Medium EnterprisesACCPASEAN Committee on Consumer ProtectionACCSQASEAN Consultative Committee on Standards and QualityACEFA gricultural Competitiveness Enhancement FundACIAASEAN Comprehensive Investment AgreementACMFASEAN Capital Markets Forum ACTSASEAN Customs Transit SystemADBA sian Development BankADBIA sian Development Bank InstituteAECASEAN Economic CommunityAEFASEAN Ecotourism ForumAEGCASEAN Experts Group on CompetitionAEOI Automatic Exchange of InformationAFASASEAN Framework Agreement on ServicesAFCA sian Financial CrisisAFTAASEAN Free Trade AreaAHNASEAN Highway NetworkAIArtificial IntelligenceAIXASEAN Internet Exchange NetworkAMCA sset Management CompanyAMDALE nvironmental Impact AssessmentAMROASEAN+3 Macroeconomic Research OfficeAPECAsia-Pacific Economic Co-operationAPOA sian Productivity OrganizationASAPCPASEAN Strategic Action Plan for Consumer ProtectionASCCASEAN Socio-Cultural CommunityASEANA ssociation of Southeast Asian NationsASEAN+3 ASEAN-10 countries plus