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this IssueInsideFocus story 12th Asean-India Foreign Ministers Meeting: Recognizing the Emerging Nodes of Cooperation Between India and Asean ..................................................... 2

the World bankA Hydropower Project brings Development to Himalayan Villages. ............................................................................... 4

World Bank Group ready to provide financial support worth $15-18 billion over the next three years ................................ 5

August 2014, Volume 2, Issue 8

Message from Mr Chandrajit Banerjee, Director General, CII

Substantial mutual cooperation between India and Southeast Asia began in the economic sphere in 1992 and was broadened to include the political and security fields when India was accorded full ASEAN dialogue status in 1995. India then became a member of the ASEAN regional forum (ARF) in 1996 and the East Asian Summit in 2005.

Since then, the areas of cooperation between India and ASEAN has grown tremendously and spans sectors such as Trade, Science & Technology, Human Resource Development, Health And Pharmaceuticals, Space Science, Agriculture, New And Renewable Energy, Information And Communication Technology, Telecommunications, Transport. The vigorous cultural and civilization connections between ASEAN and India hold a significant potential for development of a strong partnership for further strengthening global linkages.

The August edition of the Multilateral Newsletter highlights the key deliberations made at the 12th ASEAN-India Foreign Ministers Meeting held in Nay Pyi Taw, Myanmar on 9 August 2014. In addition, the edition covers major happenings from the World Bank, United Nations Conference on Trade and Investment (UNCTAD), Asian Development Bank (ADB) and United Nations Development Programme (UNDP).

Chandrajit Banerjee

Multilateral

unctad Asia tops the world in foreign direct investment, according to new UNCTAD report .............................................................. 6

adbBridge the Income Gap to Create a Future Asia’s Poor Deserve ........................................................................ 7

undp Poverty, Malnutrition and Sanitation Remain Concerns for India: UN MDG Report 2014 ................................................................. 9

NeWSletter

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India-ASEAN relations have been progressing steadily ever since the “Look East Policy” was initiated in 1991. India became a sectoral dialogue partner of ASEAN in 1992 and was upgraded to full dialogue partnership in 1996. Since the last two decades the initiatives taken through various dialogues to deepen cooperation between India and ASEAN is based on three pillars-politico-military, economic and socio-cultural.

The areas of cooperation between India-ASEAN is diverse and spans sectors such as trade, science & technology, human resource development, health and pharmaceuticals, space science, agriculture, new and renewable energy, information and communication technology, telecommunications, transport and infrastructure, and tourism and culture.

Co-operation between India and ASEAN is being intensified, including in the cultural, educational and academic fields through promotion of people to people contacts, and initiatives such as the Eminent Persons Lecture Series, Youth Exchange Programmes, and Special training courses for diplomats.

India now stands as ASEAN's fourth biggest trading partner and accounts for ten per cent of India's global trade. The bilateral agreements that have emerged in the recent years demonstrate the extent of India’s interest in engaging with Southeast Asia. There is a growing acknowledgement on the part of ASEAN about the larger responsibility and role that India plays in the Southeast Asia.

Addressing the 12th ASEAN-India Foreign Ministers Meeting in Nay Pyi Taw, Myanmar on 9 August 2014, some of key highlights made by Ms. Sushma Swaraj, External Affairs Minister are as follows:

Connectivity, trade and investment can lead to bring a seamless integration of economies and enable ¾optimizing the use of resources.

Negotiations on a Transit Transport Agreement - It is vital that India, Myanmar and Thailand begin negotiations ¾on a Transit Transport Agreement at the earliest so that this can be concluded by the time the Trilateral Highway completes in 2016.

Need to identify ways in which complete the unutilized 18 sectors connecting Tier II and Tier III cities in ¾India to tourist and business destinations in ASEAN.

Need to encourage a symbiotic relationship between the infrastructure of roads/railways/shipping lines, ¾which the ASEAN want India to help create, and regular economic activity with India to sustain such 'connectivity'

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12th AseAn-India Foreign Ministers Meeting: Recognizing the Emerging Nodes of Cooperation Between India and AseAn

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Looking towards the action plan for 2016-2021, Education, vocational skills training, healthcare, pharmaceuticals ¾and medical training should play a prominent role as the areas impact the youth and elderly.

The work plan under preparation by the SOMTC+India meeting will allow concerted action against international ¾terrorism, transnational crime, combating drug trafficking and ensuring cyber security.

For the future consistency of our engagement, it is important that as ASEAN integrates and works towards ¾an ASEAN Community by 2015, ASEAN-India integration keeps pace. This is particularly necessary for people-to-people connectivity for tourism and business. There is a need to enhance visa facilitation for business purposes, including grant of long-term (5-10 years) multiple entry business visas and stay permits for professionals and their families. This needs to be given urgent priority on the agenda ahead.

The USP of the ASEAN India strategic partnership is the common vision for the future development of our ¾people. As we approach the year 2015 as a landmark year for the ASEAN and 2017 would be the 25th anniversary of the ASEAN India strategic partnership.

Taking a step forward

Forging a strong mutual association requires not only addressing future challenges, but also seizing new opportunities and proactively initiating new ideas for future cooperation. ASEAN and India must undertake initiatives that enable to reap the benefits of mutual cooperation.

India must match its new found profile either in terms of economic or strategic role by the tangible actions to be taken at the ground level. Some of the recommendations that can enable the development in the regions are:

Public- Private Partnerships (PPPs) – Government of the respective region should work in close collaboration • with the private entrepreneur to look at various funding opportunities and tap the expertise available to enhance the benefits.

Enabling an investor friendly enabling environment•

Initiatives to leverage and provide affordable access to ICT •

Need to enhance efforts to increase engagement with stakeholders to enhance capacities•

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WorlD Bank

A Hydropower Project brings Development to Himalayan Villages

A growing economy like India is hungry for energy. With almost 60 percent of its installed capacity being contributed by conventional thermal power plants, the country is keen to move towards low-carbon energy sources.

Fortunately, India is rich in fast-flowing rivers that cascade down from the mighty Himalayas – the vast water towers of Asia - and have huge potential for generating clean and renewable energy.

But, building hydropower projects in the fragile, geologically-young Himalayas is not easy, and only a fourth of India’s enormous hydropower potential has been harnessed so far.

The Rampur Hydropower Project, situated high in the upper reaches of the mountain state of Himachal Pradesh, has begun to feed into India’s electricity grid, providing much-needed additional renewable

power for homes, hospitals, schools and businesses.

The run-of-the-river project on the Satluj is showing that, if done right, hydropower plants can indeed generate clean electricity with a minimal impact on the environment. The project, constructed by SJVN Ltd, a public sector developer, and supported by the World Bank, will generate 412 MW of low-carbon electricity.

It will also avert 1.4 million tonnes of CO2 emissions that would have spewed into the atmosphere each year had the same amount of power been generated through conventional coal-fired plants.

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sTORY HIGHLIGHTs

In Himachal Pradesh, India, a newly completed project is showing • that hydropower projects can generate electricity with a minimum impact on the environment.

The project has brought much-needed development and cash benefits • to the local people.

It has also set new standards for the disposal of construction debris • in a way that does not deface the mountainsides or obstruct the river’s natural flow.

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WorlD Bank

World Bank Group ready to provide financial support worth $15-18 billion over the next three yearsThe World Bank Group will bring increased financial and knowledge resources to help India return to the path of sustained high growth needed to bring prosperity to millions, especially the poor living in the lower income states. World Bank Group President Jim Yong Kim made this renewed commitment during his first meeting with Prime Minister Narendra Modi.

“From my discussions with Prime Minister Modi and Minister Jaitley, it is clear that they are committed to increasing India’s economic growth,” Kim said. “I assured them that the World Bank Group will bring to bear all possible knowledge and financing to help them in this task. A large proportion of the world’s poor live in India and we will give all our support to the Government as it strives to create jobs and build prosperity for its people. The World Bank Group will be ready to provide financial support worth $15-18 billion over the next three years.”

Discussions with the Prime Minister and other officials focused on the government’s plans to re-ignite growth by investing in infrastructure to create jobs; providing quality education and skills training to 8 million young people who enter the labor force each year; and better equipping the 10 million people who leave rural areas for towns and cities each year for jobs.

“The government is committed to introducing key reforms, which are critical to India achieving its full economic potential,” said Kim. “They have identified infrastructure development and job-oriented skill development as the deep drivers of growth. The World Bank Group is ready to support these development initiatives with financing, as well as knowledge and capacity building, that is informed by global experience.”.

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Asia tops the world in foreign direct investment, according to new UnCTAD reportAsia continues to be the world's top recipient region of foreign direct investment (FDI), accounting for nearly 30 per cent of global FDI inflows, UNCTAD’s World Investment Report 20141 reveals. Total inflows to developing Asia (excluding West Asia) amounted to $382 billion in 2013, 4 per cent higher than in 2012.

The report looks forward to the Sustainable Development Goals (SDGs) that will succeed the Millennium Development Goals and is subtitled Investing in the SDGs: An Action Plan.

stable performance of east Asia - FDI inflows to East Asia rose by 3 per cent to $221 billion in 2013. With inflows at $124 billion, China again ranked second in the world and narrowed the gap with the United States, the country with the largest global inflows.

Inflows to the Republic of Korea reached $12 billion, the highest level since the mid-2000s, and those to Taiwan, Province of China rose to $4 billion. Hong Kong, Special Administrative Region of China, – the region's other high-income economy and the second largest FDI recipient in East Asia – experienced only 2 per cent growth in FDI inflows to $77 billion. In March 2014, the Chinese Government decided to move the headquarter of CITIC Group to Hong Kong, Special Administrative Region of China, which is likely to help enhance its competitive advantages for attracting investment from leading transnational companies (TNCs), including those from mainland China.

slower growth in south-east Asia - Inflows to the Association of Southeast Asian Nations (ASEAN) countries rose by 7 per cent in 2013, to $125 billion. The rapid growth of FDI inflows to the regional grouping, from $47 billion in 2009 to $118 billion in 2012, has now slowed, the report shows.

In Singapore, the largest FDI recipient in South-East Asia, a number of mega-deals took place in 2013, driving FDI inflows to a new record of $64 billion (figure 1). With inflows remaining at around $19 billion in the three years up to 2013, Indonesia's performance in attracting FDI has been stable. In Malaysia, inflows increased by 22 per cent to $12 billion. In Thailand, inflows grew to $13 billion; however, many FDI projects there were shelved due to political instability. FDI performance in ASEAN's low-income economies varied: while inflows to Myanmar increased by 16 per cent to $2.6 billion, those to Cambodia, the Lao People’s Democratic Republic and Viet Nam remained at almost the same level.

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unCtaD

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Bridge the Income Gap to Create a Future Asia’s Poor DeserveAsia’s past successes in reducing poverty are under threat. More than 80 per cent of Asians live in countries where inequality is widening. The same forces that drove the region’s rapid growth for the past 30 years – globalisation, new technology and market reform – are widening the gap between rich and poor.

As the region’s middle class expands, more than 1.6bn Asians continue to live on less than $2 a day. These people lead highly vulnerable lives. It is time for Asian governments to raise the bar on growth; to commit to a future in which all their citizens have access to the basic tools needed to participate in a modern economy and to benefit from the region’s huge growth potential.

Fiscal policy can play an important role in making this happen. Three actions will help governments lead their countries toward the path of growth and broadly shared benefits.

First, governments should invest more in improving access to education and healthcare, both of which improve welfare. Moreover, better educated, healthier people have a greater chance of finding and keeping work, and of earning higher incomes. Yet access to such services is deeply unequal in many Asian countries. This is a major source of income inequality.

Public spending on education averages 5.3 per cent of output in the advanced economies and 5.5 per cent in Latin America, but only 2.9 per cent in Asia. The difference is even starker when it comes to public spending on health. Permanently raising public spending on education by 1 percentage point of output could lower the Gini coefficient – a common measure of inequality – by 1.1 percentage points within a decade; doing the same for healthcare buys a 0.3 percentage point gain.

Second, governments should adjust tax policy to raise more revenue and fund increases in public spending. Asia’s revenue base remains small by global standards. In the past decade, the ratio of tax revenue to gross domestic product averaged 18 per cent in developing Asia, well below the global average of 29 per cent. And in the decades ahead, many countries will face rising costs associated with ageing societies and mounting environmental pressures.

A wide range of revenue sources need to be explored. One option is to increase personal income tax – which is low in developing Asia, at 1.7 per cent of GDP in 2010, compared to 7.6 per cent in advanced countries. Another is value added tax. Corrective taxes – such as those levied on cigarettes, alcohol and pollution – are yet another possibility. Taxes on property, capital gains and inheritance are naturally progressive, claiming a higher proportion of wealth and income from the rich than they do from the poor. These, too, should be explored.

Experience in the Philippines, which raised taxes on cigarettes and alcohol in 2013, shows how powerful such reforms can be. Revenues increased by about $1.4bn. What is more, 85 per cent of the new revenues are allocated to health infrastructure and services. This enabled health insurance to be extended to an additional 9.5m poorer families.

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aDB

Governments should also reform the large energy subsidies that are common in Asia, which can amount to as much as 8 per cent of GDP. These costly programmes do little to narrow income gaps: the rich tend to use the most energy. Targeted financial transfer programmes do much more to level the field.

Third, policy makers should adopt equality goals when they plan their budgets. Addressing inequality will take time; if progress is measured, it has a better chance of being made. Governments need to look beyond annual budget cycles and balance competing demands on public resources. A framework that incorporates explicit equity objectives into fiscal policy – such as targets on access to education and healthcare – would be a powerful device of commitment. Politicians should make detailed plans to increase the share of public spending benefiting target households. Overall fiscal sustainability cannot be sacrificed.

Fiscal policy should play a bigger role in promoting inclusive growth in Asia. This is a long-term challenge. Policy makers must plan and act now to create the future Asia deserves..

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unDP

Poverty, Malnutrition and Sanitation Remain Concerns for India: UN MDG Report 2014The new Millennium Development Goals Report 2014 examines the latest progress made towards achieving the MDGs. It shows that millions of people’s lives have improved due to concerted global, regional, national and local efforts to achieve the MDGs, which serve as the foundation for the next global development agenda.

The Report was released in India by Najma Heptulla, the Union Minister for Minority Affairs. Jayati Ghosh, Professor, JNU and Lise Grande, UN Resident Coordinator also spoke on the occasion.

Some of the key highlights from the report are:

Several MDG targets have already been met ahead of time and substantial progress across the globe has • been made in almost all areas.

Extreme poverty has been reduced by 50 percent. A staggering 700 million people have been lifted out of • poverty, the majority in Asia.

Fewer people are dying from malaria, tuberculosis and HIV/AIDs than would have been the case. The UN • estimates that more than three million deaths from malaria, 6.6 million from HIV/AIDS and 22 million from tuberculosis have been averted because of better prevention and prompt treatment.

More than 2 billion more people now have access to improved drinking water.•

In many countries, women are now more politically active and in schools, disparities between boys and • girls are being overcome.

The planet remains at serious risk. Global emissions of carbon dioxide are almost 50 percent above their • 1990 level, millions of hectares of forest are being lost every year, many species are closer to extinction than ever before and renewable water resources are becoming scarcer.

Although the percentage of undernourished people has declined by more than 10 percent, a lot more needs to • be done right away if the target of reducing the number of hungry people by 50 percent is to be reached.

Child malnutrition continues to haunt the globe. The report estimates that one out of every four children • suffers from some form of chronic malnutrition.

A billion people are still defecating in the open. This is particularly worrying in light of recent research which • shows a decisive causal link between poor sanitation and hygiene and malnutrition..

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Copyright © 2014 by Confederation of Indian Industry (CII), All rights reserved.

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