Assalamu’alaikum Warahmatullahi Wabarakatuh, Peace be upon us,
Excellencies Ministers of Economic Affairs
Excellency Mr Pascal Lamy, Director General WTO
Excellency Mr Supachai Panitchpadi, Secretary General UNCTAD
Excellency Mr Surin Pitsuwan Secretary General ASEAN
Excellency Ms Patricia Francis, Executive Director ITC
Excellency Mr Sindiso Ngwenya, Secretary General COMESA
Distinguished Representatives of International Organizations,
Distinguished Delegates, speakers and Guests,
Ladies and Gentlemen,
Selamat Pagi, Good Morning
I am delighted to welcome all of you to Jakarta. Indonesia is honored to host the World Export Development Forum (WEDF) on the theme of “Linking growth markets; new dynamics in global trade”.
This Forum is very timely. It is taking place at a time when governments are exploring new ways to stimulate growth, job-creation and trade-led inclusive development. With that in mind, and in thinking about the sessions that lay ahead of us over the next two and a half days, it is useful for us to understand why growth markets are so important to developing and transition-economy countries – the countries which are the focus of the International Trade Centre.
With the ongoing euro-zone uncertainty and faltering economic growth in other developed economies, it has become clear that the drivers of global economic growth are to be increasingly found in the growth markets of the south. In 2012, the predicted economic growth rate for OECD countries is 1.6 percent, whereas for BRIC countries it is 4.9 percent. Our current 2012 growth prediction for Indonesia is 6.4 percent. Looking into the future, a recent World Bank report notes that by 2025, the six emerging, growth markets of Brazil, China, India, Indonesia, and the Russian Federation will collectively account for more than half of all global growth.
However, let us not forget that this re-alignment to emerging, growth centres of the South is not a new phenomenon. Uncertainty in developed markets may have brought the spot-light upon new sources of growth, but this re- alignment is part of a much broader, longer-term, structural change in the global economy. Output growth in developing countries has outpaced output growth in developed countries for the last half century.
The dynamism of the South is also reflected in trade flows. The export share of all developing economies in world trade increased from 33 percent in 2001 to 46 percent in 2011. Much of this rise has been due to an expansion of trade not between developed countries and developing countries, but among developing countries. Indeed, since 1990, South-South trade has grown at almost twice the rate of world trade generally. In Indonesia, about 50 per cent of our trade in 2011 was with other developing countries, mainly in East Asia. Trade with China and South Korea collectively accounted for 21 percent of Indonesia’s total trade in 2011, as compared with 11 percent ten years ago in 2001. Similarly, Indonesia’s trade with other ASEAN partners in 2011 was 24 percent of total trade as compared to 17 percent in 2001. Although still only small, the share of Indonesia’s total trade with Latin America also doubled over the same 10 year period.
There seems to be no reason why these trends will not continue over the long-term, with the share of South-South trade in global trade likely to double in the next two decades, according to the Asian Development Bank. And importantly, other research shows that the potential benefits from enhanced South-South trade may be at least as large as the gains that developing countries can obtain from better access to rich country markets. Certainly, the scope for welfare gains in South-South trade is high as barriers to South-South trade are higher than those governing trade among developed countries.
For these reasons, developing and transition-economy countries are increasingly searching for growth in non-traditional export markets. For example, the Government of Indonesia is spearheading, with quite some success, the development of new export markets for Indonesian exporters in Africa, Latin America and other non-traditional regions.
The Government of Indonesia is also a proud signatory to the Global System of Trade Preferences among Developing Countries – or GSTP. This agreement is the only multilateral initiative for liberalisation of trade among developing countries across regions. Through the GSTP, developing country exporters have privileged access to the markets of other developing country partners in Asia, Africa, Latin America and the Caribbean.
Given all of this, I am delighted that the focus of this forum will be on encouraging more linkages with growth markets, South-South trade and other emerging dynamics in inter-regional trade.
As part of the discussions, that will involve both public and private sector representation, some important topics over the next two and a half days will be:
- Developing the hard and soft infrastructure necessary to facilitate trade;
- Supply chain gaps and opportunities;
- Meeting the demands of new consumer markets; and
- Financing trade between growth markets.
I will offer some thoughts on these issues soon but before doing so it is worth remembering that increased trade, economic integration, specialization and the removal of barriers to the movement of goods, services, capital and people is a major enabler of growth and job creation in all countries. It is also a critical driver of poverty reduction in developing countries.
Given the significant benefits, I look forward to hearing the outcomes of this afternoon’s sessions on developing both the hard and soft infrastructure necessary to facilitate trade.
With regards to the hard infrastructure, delegates will discuss examples of how hard infrastructure, such as ports, roads and communications networks can improve connectivity and tackle trade constraints. With regards to the soft infrastructure, it is increasingly accepted that trade facilitation services such as customs services, and related enabling services such as port, logistics, transport and distribution services are critical to the development of a conducive environment for doing business and enhancing trade. Let us not forget that the benefits of trade facilitation reforms are often higher than the benefits that accrue from the lowering of tariffs. At the global level, in a comprehensive study of 155 countries, the World Bank found that improving trade logistics by lowering transaction costs and increasing trade speed and predictability could enlarge global trade flows by $468 billion annually, a figure much larger than the predicted benefits of the Doha Round.
It is clear that an emphasis on trade facilitation today is likely to bear real fruit in the future.
The Forum’s agenda will also examine best practice PPPs and how they can be replicated, as well as take a critical look at Non-tariff measures at, and behind, the border.
As the Forum program notes, Non-tariff measures (NTMs) are of particular concern to exporters and importers in developing countries, often representing a major impediment to international trade and market access. Some research highlights that Non-tariff Measures, like more conventional tariffs, are also much higher for south-south trade than for trade between developed and developing countries. Furthermore, they tend to be more opaque than conventional tariffs and are often subject to significant change. In this regard, I particularly urge delegates meeting here in Jakarta to focus on, and showcase examples from the around the world of, initiatives that have specifically enhanced regulatory transparency and predictability, especially of NTMs, and improved the trade and investment climate more broadly.
I hope that concrete, practical progress will be made by delegates on this and on other related mechanisms that promote business-to-business and people- to-people connectivity. Such measures should ultimately increase private sector utilization of regional trade agreements and encourage the afore- mentioned linkages with growth markets. Let’s work on identifying priority areas and measures to improve the competitiveness of our exporters, particularly our SMEs, and facilitate increased cross-border transactions.
All of these issues are addressed by Indonesia in its Masterplan for the acceleration and expansion of Indonesia economic development 2011 – 2025 (MP3EI). MP3EI is an ambitious Masterplan that addresses these hard and soft infrastructure and trade facilitation issues, and provides an economic development strategy for our archipelagic country of more than 17,000 islands. It aims to build connectivity, human resources and Indonesia’s economic potential through the development of six economic corridors within and among Indonesia’s main islands.
Indonesia’s MP3EI is complemented at the regional level by the Master Plan on ASEAN Connectivity as well as the ongoing development of sub- regional interconnectivity among ASEAN Members States, namely: Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), Brunei- Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), and Greater Mekong Sub-region (GMS). Full implementation of these initiatives will lead to a deep ASEAN economic integration via infrastructure connectivity in transportation, telecommunication and information technology, institutional connectivity and people-to-people connectivity. Enhanced connectivity will translate into enhanced competitiveness.
In broader terms, and in keeping with the theme of this forum however, we need to think about an ASEAN Connectivity that is locally integrated and globally connected. As the ASEAN Leaders stated earlier this year, ASEAN will:
“Commit to implement AEC blueprint measures toward full economic integration under the ASEAN single market and production base, by deepening and broadening its internal economic opportunities, fostering effective cross-border facilitation to provide greater market size and bigger economies of scale, and by nurturing dynamic linkages with the global supply chain and the world economy by increasing competitiveness through both hard and soft connectivity, and by attaining regional integration through effective implementation of various ASEAN initiatives and Action Plans.”
In the same way as ASEAN Connectivity is the first step in the development of enhanced connectivity between ASEAN and the wider region, the evolving regional trade architecture must simultaneously re-enforce ASEAN integration through to 2015 while also providing a platform to drive enhanced integration in Northeast Asia, South Asia and beyond.
Another major theme of this forum will be supply chain gaps and opportunities. I understand on day two, both government officials and private sector delegates will come together to address the issues of improving commodity supply chains for greater regional and global food security.
Trade is an important component of an overall food portfolio for growing countries. It helps to stabilize domestic food availability and will be an increasingly important stabilizer in the face of climate change-induced supply shocks. Yet concerns over the risks of increasing world market price volatility are understandable because the risks are quite real, making it all the more important that food policy analysis and policymaking capability be reinvigorated.
As a member of ASEAN, Indonesia is working toward an increasingly integrated, even paperless, trade system to facilitate the exchange of goods (including food) across borders. Regional trade facilitation could also extend to the coordination of food safety and food inspection activities that assure safe food comes across borders. At the regional level, ASEAN is also working on programs that increase productivity and production and coordinates food policy in the region with regards to information, stocks, demand, prices and logistics. Implementation of the ASEAN Integrated Food Security Framework is critical, as is the ASEAN Plus Three Emergency Rice Reserve (APTERR). Such initiatives serve to increase cooperation, enhance trade, lower cost and improve commodity supply chains and competitiveness.
Such initiatives amongst trading partners need to be complemented by specific interventions along particular supply chains, both for food and non- food commodities. Delegates will, I understand, also have the opportunity to discuss how to more effectively facilitate innovations along the supply chain for small smallholder producers and SMEs, as well as how to more effectively leverage the economies of scale that large corporations, large commodity traders and commodity exchanges bring.
Excellencies, Ladies and Gentlemen,
As a related matter, no forum on growth markets would be complete without a focus on policies and mechanisms to grow value and meet the burgeoning demands of new consumer markets, especially in growth markets. As the middle-income classes expand in the new growth markets, the need for higher-value products and services also expands. This is leading to new opportunities for developing countries to move up the value chain, as well as for employment creation in sectors other than commodities, including in services and in environmental niche markets.
However, this task will not be easy. Current world production networks still largely hinge on final demand in developed, industrial countries – this, in part, is the legacy of developing countries historically being focused on exploiting preferential access to developed markets. Accordingly, re- orientating north-south supply chain trade away from North America and Europe for consumer goods in emerging growth markets may prove less than straightforward. Supply chains will have to be refashioned to focus on marketing products to an emerging middle class with substantially less purchasing power than their developed world peers.
Important in this regard will be your parallel discussions on promoting service sector exports and innovation and integrating SMEs into global value chains.
Year after year, the services element grows in every economy. In most countries services now represent the lion’s share of economic output, with productivity growth and innovation in services industries becoming more and more fundamental in driving economic growth. Moreover, the services sector has also been the source of most global job growth over the last decade. Services are clearly people-intensive industries.
However, extensive barriers to services trade and the integration of SMEs into global value chains remain. This is disappointing as at the global level reducing barriers to services trade is estimated to generate twice the economic impact of reducing barriers to goods trade. I understand the focus of your discussions will be on the promotion of services and on how trade support institutions can help companies innovate and succeed in global markets. But let us not forget the need to reduce barriers to trade and investment in services and identify ways trade support institutions can directly help improve the competitiveness of our service providers.
Let us also be reminded that services are not only important in their own right in terms of value added, employment and export earnings generated but, equally important, in how they affect the performance of other sectors, such as agriculture, mining and manufacturing. I noted above, the importance of trade facilitation services, but taken more broadly, services are a critical input to the export of most agricultural, mining and manufactured goods.
Service sector performance is therefore clearly important in stimulating all global trade. But in the context of this forum’s focus on linking growth markets, some observers note that service sector performance has more of an impact on the exports of merchandise exports in developing countries than in developed countries. This is because the share of manufacturing and supply of exported goods in GDP tends to be higher in developing countries than in developed countries.
Trade-led inclusive sustainable development also needs to be tackled through effective fiscal policies, specific policies targeting SME integration into regional and global supply chains and policies to assist the poor and marginalized. Initiatives should aim to more effectively link SMEs from Least developed countries (LDCs), particularly those not in Asia, into regional and global value chains. In many growth markets, micro, small and medium sized enterprises are considered engines of economic growth and development constitute the backbone of national economies and provide the greatest opportunities for employment-generation and poverty alleviation.
For SMEs to benefit from economic integration, we must enable them to compete in the free market system. In this regard, SMEs must have better access to information, technology, markets and finance - through, for example, financial inclusion programs. By the same token, many developing and transition-economy countries now need a concerted drive on micro-economic regulatory reform to ensure they remains competitive, to make it easier to start and grow SMEs, to encourage higher levels of domestic and foreign investment, and to improve productivity and spur growth and development. Increased effort in this area will help many developing and transition-economy countries compete in the world economy and lift living standards. This effort also has clear links to the agenda I already mentioned on Non-Tariff Measures and “behind the border” barriers to trade in services and investment.
Similarly, your deliberations on increasing Women Business Owners’ share of corporate and government procurement reflect an important, emerging new channel through which inclusive and equitable economic development could be promoted and sustained. Indonesia recognizes that gender equality and women’s empowerment are critical to achieving development results. Formal data in Indonesia show that women own more than 50 percent of all micro enterprises and dominate the labour force of SMEs with a 70 percent share.
However, women entrepreneurs both here in Indonesian and elsewhere in growth markets face gender-based barriers to starting and growing their businesses including limited access to markets, technology, information and commercial credit. These factors create persistent gender inequalities in the labour market, which in turn have an economic cost. I hope that delegates here today will address these inequalities and identify some practical, best- practice mechanisms to open up corporate and Government procurement markets for women business owners.
Last but not least, the important issues of trade financing will be examined on Day 3, particularly with respect to assisting SMEs commence new and expand existing exporting activities in the agribusiness sector. This is critical in Indonesia where the agribusiness sector employs more than 40 percent of the workforce - the overwhelming majority of which are in micro, small sized enterprises - and provides income to two-thirds of the country’s poor. Accordingly, I hope delegates will share success stories of how SMEs have been brought into agribusiness supply chains and how other innovative trade finance initiatives can facilitate inter - or intraregional trade.
Excellencies, Ladies and Gentlemen,
Let me finish by making my most important remark. I would like to re- iterate the point that we must work to ensure that the emergence of growth markets and the new dynamics in international trade, must be made to matter to our people. I urge delegates here today to ensure businesses, especially SMEs, and entrepreneurs truly benefit from greater linking of growth markets to the rest of the world. We must ensure that, through greater trade
and investment, we improve the quality of our lives. And equally important, we must strive to include our people in every step we take to promote greater linkages and integration amongst our nations.
Excellencies, Ladies and Gentlemen,
With that in mind, let us progress. Let us find innovative ways to further bolster South-South cooperation and contribute to the growth of world trade. Let us accelerate the linkages between the growth markets and the rest of the world and achieve a common platform for enhanced economic cooperation beyond these uncertain times.
I wish all participants in these important meetings success.
Finally, by saying “Bismillahirrahmanirrahim” I declare the World Export Development Forum (WEDF) open.