Presentation at EcoSoc Dialogue with the Regional Commissions Geneva, 8 July 2011 Sustaining the dynamism of Asia-Pacific Role of regional economic cooperation Presentation at EcoSoc Dialogue with the Regional Commissions Geneva, 8 July 2011 by Dr Noeleen Heyzer Undersecretary General, United Nations and Executive Secretary, UNESCAP

2 Strong recovery in 2010, robust outlook for 2011 Strong recovery in 2010 with 8.8% growth Outlook for 2011 is robust at 7.3% Asia-Pacific region emerges as the fastest growing region and a growth pole of the world economy Recovery broad-based across sub-regions

3 Key downside risks and policy challenges 1. Return of food-fuel crisis affecting recovery and hurting the poor Oil prices could reduce growth up to 1% for some countries in 2011 High food and oil prices could lead to up to 42 million extra people in poverty in 2011, in addition to 19 million already affected in Need for an urgent response at the national, regional and international levels given the global nature of the challenge –In particular, regional food banks such as ASEAN+3 Rice Reserve and the SAARC Food Bank are important initiatives

4 2. Managing volatile capital flows Asia-Pacific region has been highly exposed to volatile capital flows resulting from expansion of global liquidity –Leading to dramatic asset price rises, in the capital and real estate markets and financial volatility –Exchange rate appreciation even in countries with current account deficits Reserves to counter outflow risk not always sufficient, costly Capital controls increasingly used, as advocated by ESCAP, and need to be encouraged where necessary

5 3. Boosting regional demand to sustain dynamism Medium-term challenge is to boost demand in the region to complement sluggish demand in developed countries Demand can be boosted in some countries by increasing the consumption of the poor, in others by increasing investment –Increase consumption through better social protection and public service provision, thus reducing precautionary savings –Increase investment by bridging huge infrastructure gaps, through infrastructure financing mechanism Exploiting the potential of regional economic integration

6 Large potential for increasing intra-regional trade Intra-regional trade has grown faster than regions global trade since 1998 Estimates suggest that potential of intra- regional trade is much higher and is growing fast Intra-regional trade is driven by presence of trade complementarities. Considerable complementarities exist within and across AP subregions Complementarities are generally higher across subregions than within subregions Case for broader cooperation across subregions

7 Need to create a broader regional framework for cooperation The sub-regional groupings like ASEAN, SAARC, BIMSTEC, ECO, the Pacific Islands Forum and numerous bilateral preferential trading arrangements provide framework for regional economic integration However, they do not lead to a seamless, region-wide market Need to deepen integration within subregions but also to build on them a broader regional arrangement

8 Asia-Pacific transport links are unevenly developed ESCAP is assisting in development of transport connectivity through intergovernmental agreements on Asian Highway and Trans-Asian Railway Also working on a third intergovernmental agreement on Dry Ports

9 Soft connectivity also needs to be strengthened Costs and time of preparing documents, customs clearance and inland transport regulations can also inhibit trade Streamlining trade procedures through national single windows can help – if the electronic data and documents are accepted by authorities in partner economies The harmonization across countries of arrangements for cross- border and transit transport is critical to ensure the smooth movement of goods through national borders ESCAP is assisting the region through capacity-building in trade facilitation

10 Financial cooperation for closing the infrastructure gaps Asia-Pacific region is characterized by wide infrastructure gaps Huge investments to close them Regions foreign exchange reserves are larger than US$ 5 trillion Lack a well developed regional financial architecture does not allow them to be mobilized for regions development needs Important steps in monetary and financial cooperation are the Chiang Mai Initiative Multilateralization and Asian Bond Funds Need to develop the financial architecture beyond them to channel regions savings to infrastructure needs

11 Towards an Asia-Pacific century The Asia-Pacific region emerged from the global financial crisis as a growth driver and anchor of stability of the global economy Enhancing regional connectivity will facilitate the creation of a region- wide market to sustain the regions dynamism in decades to come and narrow its development gaps Many promising opportunities for fruitful regional cooperation in other sectors such as energy and food security ESCAP Commission at its 68 th Session in 2012 will discuss steps to strengthen regional economic integration in Asia-Pacific

12 THANK YOU For more details, please refer to The Economic and Social Survey of Asia and the Pacific It can be downloaded from: