Economic and Social Development in Pacific Asia (Growth Economies of Asia Series)
Contents:
Chapter 2 The second chapter examines how Asia-Pacific economies could increase domestic public financial resources and leverage private finance to support sustained, inclusive and sustainable economic growth. Chapter 3 The goal of chapter 3 is to delve into certain aspects of financing for development issues from a subregional perspective, and to share knowledge and lessons learned regarding dealing with challenges that are specific to certain subregions. Economic performance and outlook 2.
Global context — stronger economic growth and associated challenges 2. Economic growth in Asia and the Pacific — a broad-based upturn and stable outlook 2. Inflation — picking up but still low 2. Consumption, investment and trade dynamics — strengthening the drivers of growth 3. Subregional economic updates — diversity of the region 3. East and North-East Asia 3. South and South-West Asia 3.
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North and Central Asia 3. Macroeconomic risks and medium-term challenges to the economic outlook 4. Protectionism, financial risks and commodity prices — examples of key macroeconomic risks 4. Potential growth, technology and future of work 4. Economic policy considerations 5. Monetary and financial policy — securing macrofinancial stability 5. Fiscal policy — making effective use of fiscal space 5. Structural reforms — fostering inclusive innovation 5. Quality of growth — enhancing economic resilience 6. Sizeable investment gaps to achieve sustainable development 3.
Flow of funds 3. Focus areas of this chapter 4. Strengthening tax revenues 4.
Improving tax administration 4. Expanding the tax base 5. Prudent sovereign borrowing from financial markets 5. Room for a higher level of public debt 5. Increasing the role of public bond financing 6.
Leveraging private finance 6. Enhancing the policy environment for public-private partnerships 6. Deepening financial intermediation 7. Potential of financial technology in East and North-East Asia 2. FinTech affects the entire economy and is growing phenomenally 2. Major drivers of the FinTech revolution 2. Regulatory framework as a driver of FinTech: Developing local currency bond markets in South-East Asia 3. The role of local currency bond markets in mobilizing financial resources 3.
Segments of the market: Initiatives to boost the development of corporate local currency bond markets 3. Asia winning the race on innovation, growth, and connectivity. Asia leads the world. Asian economies are digitally engaged, and this can be leveraged to support the economic growth and development trajectories of emerging economies.
Digital technologies, done right, can be a powerful enabler for Asian economies and economic growth. Investment in digital infrastructure contributes to productivity in the same way as other forms of infrastructure, and by boosting productivity and opening up new channels of commerce, economic growth can be enhanced beyond what would otherwise be the case.
As such, digital tools can support policy agendas and facilitate the achievement of opportunities for businesses, consumers, and government. For business, digital can help encourage trade in the region by helping businesses, particularly small businesses, access global markets. For consumers , digital can provide opportunities in terms of connectivity, mobility, and social networks. For government, digital can drive the development of public infrastructure, particularly around smart cities, which can help them overcome infrastructure development hurdles.
It is acknowledged that there are many other applications of digital technology in the business, consumer, and government spheres. These include the benefits of digital for multinational corporations, analysis of big data, and wide-ranging policy agendas, including privacy and cyber-crime. These are all important issues, but are not the focus of this paper. The use of Internet and digital technologies makes businesses more efficient, innovative, nimble, and agile.
While all organisations, from very small businesses through to multinational corporations, can benefit from digital technologies, this section focuses on small to medium-sized enterprises SMEs , which make up the vast majority of businesses and are a dynamic part of economies in Asia. SMEs are more likely to innovate than larger firms, as they tend to have a greater appetite for risk and, hence, are better placed to pioneer and use new technologies.
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Technology lowers barriers to entry, offers new business models, and supports SMEs in responding to consumer-driven change. While the global economy is moving towards more protectionist policies coming out of Brexit and US policies , the push for trade liberalisation in Asia continues. As noted in the Voice of Asia Edition One paper Trade to trump protectionists and boost global growth , the rising Asian economic giants have been shifting their trade policies towards greater openness and global engagement.
Their rise will underpin further trade gains through Asia and the world in the decades ahead. Digital has a role in supporting trade in the region. A central element of the RCEP is the creation of a safe and efficient transaction environment, avoiding cumbersome regulatory barriers that will affect SMEs playing a part in the digital economy. In addition, an important feature of the trade agreements being negotiated in Asia, including RCEP, is the emphasis on SMEs, which was not usually the case in the previous generation of trade agreements.
This signals a clear shift in focus towards supporting SMEs as part of economic growth in the region. Digital facilitates the breakdown of distance as a barrier and can support these trade agendas in the region. On the other hand, it is important that digital considerations are part of the negotiations to ensure that emerging digital economies do not suffer. Digital technologies bring together more options for business, increasing competition and choice.
This has benefits for consumers and sellers in the form of a broader, more competitive marketplace. However, basing economic development in the growth of SMEs is not without its challenges. To be effective in the marketplace, a business has to be able to attract consumers by providing its products in a manner that is convenient, attractive from a cost perspective, and instils customer confidence in the quality of the product and ease of transaction.
Digital technologies address each of these elements.
Moreover, it highlights medium-term challenges associated with productivity growth and decent jobs. The Japanese economy is unique in its own right as it has one of the most advanced Internet infrastructures in the world. The forecast of Internet users by has been taken from Euromonitor. View in article The forecast of Internet users by has been taken from Euromonitor. What do consumers really want?
It means that businesses, even small ones, are able to engage with customers, both within and across borders. For example, digital platforms such as Alibaba, Taobao, and eBay allow SMEs to compete where otherwise they would face disadvantages of scale. Also, e-payment systems can allow people to transact online, knowing their money is safe and being transferred via a third party.
This can allow people to transact without cash or a physical meeting. For many goods traded at distance or for services such as accommodation or transport in the sharing economy, rating systems support the trade by codifying trust. Dispute-resolution processes also mean people have a backup if things go wrong.
This can make buyers feel safer online and allow for trade across countries. In this way, digital tools can assist trade even if there is limited regulation. The tools include platforms and client relationship management software. A boost in intra-country trade can involve import substitution and potentially reduce costs. The nature of the potential benefits that can be derived from successfully getting SMEs to embrace digital technologies has been explored in two extensive reports prepared by Deloitte for Google in India and Indonesia. In Indonesia, fewer than 1 in 10 small businesses considered themselves as having advanced online capabilities, while 73 percent are offline or have only very basic online capabilities.
The potential benefits of digital technology for Indonesian SMEs include:. Initial anecdotal evidence points towards greater adoption of digital modes of payment by consumers and businesses even after remonetisation is almost complete in the Indian economy. The Indian government has arguably pulled off one of the most significant reform measures in the recent past by demonetising high-value currency notes.
This caused a sudden shortage in currency in circulation, as approximately 86 percent of the currency had to be exchanged.
While the move had some negative impact, there were some long-term positives too. A push toward digitisation in the payment stream was one such phenomenon. The decision, in late , to recall banknotes from circulation has essentially been a shot in the arm for fintech and other banking services in the country.
The shortage of currency made it necessary for all segments of society to use electronic money. The result was a massive increase in digital payment mechanisms even after the economy was completely remonetised. In fact, the economy has witnessed a 59 percent increase in transactions through digital channels in March compared to the first month after demonetization was announced. It is important to note that while some of this increase would be an initial reaction, long-term structural factors show that India is ready for a digital revolution and this event will lead to permanent shifts in digital.
By , the Indian Internet user base is forecast to reach Over the longer term, payment gateways, cards, mobile wallets, online retail, payment banks, and e-marketplace industries are likely to see net gains. Individuals around the globe are embracing and driving change, at least where the technology is available and affordable. Digital has the potential to open up a range of opportunities for consumers, from connectivity and mobility to access to social media and digital banking, and this can support economic growth and development.
Digital is driving connectivity in Asian countries, from mobiles connecting consumers in rural areas to improving liveability and convenience in urban areas, particularly as urbanisation throughout Asia results in congestion and environmental challenges. Asian consumers are either already embracing digital or showing that they will when access improves and costs ease, as evidenced by the strong adoption of mobile. Mobile penetration rates are rising rapidly in the region, driving widespread Internet adoption and transforming consumer behaviour.
In Indonesia, for example, consumers have embraced mobile Internet in a country where difficult terrain has inhibited investment in fixed-line communication. There are over 1. A survey by Nielsen in found that Indonesians who do use the Internet were more likely to access it on their mobile phones than in any of the other major countries in Southeast Asia.
There has been strong take-up of social media; in May , Indonesia was ranked 4th in the world in terms of number of Facebook users 78 million , behind India, the United States, and Brazil. Internet penetration in India has also grown rapidly over the last few years, with around million users in December , and a potential million additional potential users. Also, 77 percent of urban and 92 percent of rural users consider mobile the primary device for accessing the Internet. For mobile broadband services, the cost of mb of prepaid mobile data as a share of income is the highest in the world, other than in Africa, as shown in Figure 1.
There is high participation in social networks, with India leading the way with the highest number of Facebook users in the world million in May Indonesia ranks 4th, with 78 million users.
When considering all forms of social media, over 1 billion individuals across Asia were active users of social media in , with million in China alone and a further million in India and 76 million in Indonesia. In Japan, LINE is the most popular mobile messaging app, allowing users to send messages, share picture, movies, and music. Its appeal to the Japanese includes the ability to post anonymously and the greater detail possible in characters relative to English. Japan also holds the world record for the most number of tweets per second , during a television broadcast of a local movie classic.
Online shopping is emerging as a strong competitor to shopping in physical stores, with its success underpinned by sophisticated payment systems and efficient logistics networks. Some of the major online marketplaces allow users to create accounts with value on the platform itself, so that payments are not delayed while waiting for bank clearance, allowing goods to be delivered faster. The Alibaba Group also operates the Tmall website launched in , which is its business-to-consumer e-commerce platform.
While Taobao Marketplace facilities the transaction of goods between private buyers and sellers, including small businesses, Tmall sellers are typically larger registered businesses. These two platforms had million active buyers as of the end of , 12 which roughly represents 60 percent of all Internet users in China. These numbers also imply that online retailing has had extensive reach in the country. In , more than 2 million Taobao Marketplace stores were registered to rural IP addresses in China. The success of Taobao Marketplace and Tmall is attributed to the ability of the Alibaba Group to customise its features to meet the needs of the local market.
For example, the AliWangWang instant chat program allows for pre-sales consultation and after-sales service.
Economic and Social Survey of Asia and the Pacific 2018
The introduction of the Alipay escrow-based online payment platform in provided consumers the additional security of only paying for goods upon receipt and inspection. At the same time, the availability of Alipay meant that many Chinese consumers who did not have credit cards were able to purchase goods online. In addition to the development of this digital infrastructure, investment in logistics support services has also been critical.
The online shopping experience is ultimately dependent on the goods delivery experience. The Cainiao Network, a partly owned affiliate of Alibaba Group, runs a logistics platform and central data-communications network that helps coordinate deliveries with more than 3, independent logistics companies located across China and abroad Alibaba Group. Again, service coverage goes beyond the cities. For example, Cainiao served more than 1, villages across a number of provinces at that time, and around 20 percent of the parcels delivered to rural areas were delivered on the same day or the next day Alizila.
As these trends converge and combine, the nature of retail, distribution, marketing, and consumer engagement is changing. Consumers also stand to benefit from gains in digital banking.
In developed Asian markets, Internet banking is now near universal and smartphone banking has grown more than threefold since In emerging Asian markets, about a quarter of consumers are using computers and smartphones for their banking. This is important for the traditional banking system, as more than 80 percent of consumers in developed Asian markets are willing to shift some of their holdings to a bank that offers a compelling digital proposition.
In emerging Asia, more than 50 percent of consumers indicate such willingness. Digital banking includes smartphone and Internet banking. Smartphone banking is making particular inroads in developing Asia, with penetration increasing over fivefold in the three years from to , going from 5 percent of the population using smartphone banking in to 26 percent in Mobile banking can also improve financial inclusion in the region.
For example, in Papua New Guinea, mobile network operators have been exempted under the Banks and Financial Institutions Act to conduct mobile phone money transfers. Further, mobile banking promotes financial inclusion by providing access even in regions where the number of physical branches is limited. Financial inclusion through digital banking has been taken very seriously in India, where a large section of the population still relies on informal sources of financing. The government started to push for banking via digital modes in through the popular JAM Jan Dhan, Aadhar, and mobile program.