11 ASEAN ECONOMIC Community A Long Term View DTN Annual Symposium 2012 AEC 2015 and Beyond February 24, 2012 Mathew Verghis Lead Economist The World Bank

22 A Preview In the long term: Asian Century or Middle Income Trap? What trap? Claiming the Asian Century

33 Asia could enter the Asian Century by 2050…

4 …Or could enter a Middle Income Trap!

5 Current trajectory not encouraging

6 What trap? Global environment might be less favorable Reaching limits of low-wage based manufacturing Environmental concerns Growth with equity

7 What could be the new sources of growth for ASEAN?

8 1. Moving to higher value added regional trade

9 Share of processing imports in China’s total imports by country of origin, 2007 (%) ASEAN can increase exports of finished products to China

10 2. Skills Development to Move Up Value-Chain Lack of skills and skills mismatch are major obstacles to firms’ operations in ASEAN

11 Skill Gap in Creativity, Leadership and English are largest 2. Skills Development to Move Up Value-Chain

12 Increased quality of higher education would help raise competitiveness of ASEAN countries 2. Skills Development to Move Up Value-Chain

13 Quality of basic education is key to further skills improvements 2. Skills Development to Move Up Value-Chain

14 3. Services Sector as a new engine of growth Rising services share have led the way for successful economies

15 ASEAN members maintain high level of restrictiveness in services trade OECD 3. Services Sector as a new engine of growth

16 …Environmentally and Socially 4. Making sure growth is Sustainable… CO 2 missions per capita

17 THANK YOU