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High Technologies, Policies Will Help Unlock Great Economic Potential of E-Commerce

MD Staff

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E-commerce is enabling small and medium-sized enterprises (SMEs) of Asia and the Pacific to reach global markets and compete on an international scale, creating many jobs in the process, according to a report launched jointly by the Asian Development Bank (ADB) and the United Nations Economic and Social Commission for Asia and the Pacific at an international conference in Tashkent today. However, the region has to first tackle difficult issues of information technology infrastructure and strengthening the regulatory frameworks.

“Emerging digital technologies are transforming the e-commerce landscape and offer a new set of modern solutions and opportunities to build more inclusive growth and spur innovation,” ADB Vice-President for Knowledge Management and Sustainable Development Mr. Bambang Susantono said. “It offers a chance to narrow development gaps—whether demographic, economic, geographic, or cultural. It also helps narrow the rural-urban divide. However, realizing the full potential of e-commerce calls for coordinated regional and global efforts.”

The report, Embracing the E-commerce Revolution in Asia and the Pacific, examines how Fourth Industrial Revolution technologies—blockchains, the Internet of things, machine learning, artificial intelligence, and fifth generation wireless networks, among others—will transform the e-commerce industry and help unlock its dynamic potential.

Asia and the Pacific is the world’s largest business-to-consumer (B2C) e-commerce marketplace and continues to grow rapidly, the report says. By the end of 2015, the size of e-commerce relative to gross domestic product was 4.5% in Asia and the Pacific compared to 3.1% and 2.6% in North America and Europe. The Internet retailing market share of Asia and the Pacific is expected to reach around a half of the global total by 2020.

There is wide diversity in ICT infrastructure development and socioeconomic readiness to join the e-commerce marketplace in the region, highlighting the need for the governments to make stronger efforts to catch up, the report says. Despite remarkable progress in basic Internet access and availability, the region lags behind the world average in terms of the speed and affordability of broadband services as well as availability of secure Internet servers. Fixed and mobile broadband subscriptions are more numerous in Asia and the Pacific than in other developing regions. There is a wide variation in affordability of broadband access, with the irony being that the poorer the economy, the higher the cost of broadband.

Availability of alternative payments also varies widely across countries in the region, according to the report. The top four economies in the region spend around 200 times the bottom four economies spend in credit card payments per capita. With limited online payment options, many economies in the region still rely on cash-on-delivery to make online purchases. On the legal front, most economies in the region have some type of electronic transaction and cybercrime legislation. However, the laws related to privacy, data protection, and consumer protection remain laggard.

Lack of awareness of potential opportunities digital businesses offer, and low computer literacy and English proficiency in the context of the English-centric nature of websites, software, and computer interfaces pose additional challenges to many developing economies in the region.

The report offers policy recommendations to help lower barriers to e-commerce development. Developing a viable e-commerce ecosystem requires a holistic approach and concerted efforts by all stakeholders in e-commerce development, including national governments and international development institutions, trade associations and industry bodies, businesses (e-commerce vendors, payment service providers, and logistics service providers, among others), and consumers. Policy priorities should be on establishing a legal and regulatory framework for e-commerce, harmonizing international laws and standards, promoting ICT infrastructure development, broadening Internet access and affordability, and supporting financial and e-payment infrastructure.

In Central Asia, trade and transport facilitation has formed the backbone of Central Asia Regional Economic Cooperation (CAREC) program since its launch in 2001. Out of total cumulated investments of $31 billion, trade and transport facilitation related infrastructure amounted to 80% of the total. Infrastructure in conjunction with trade facilitation has led to a significant reduction in clearing time at border crossings by 68% since 2010, through reducing travel time and increasing travel speed. Given the important role of trade for economic growth and poverty reduction in Asia, ADB will continue to provide robust support for the region’s trade facilitation initiatives.

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Malaysia’s Economy Remains Resilient but Faces Global Headwinds

MD Staff

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Malaysia’s economy is expected to grow at a more moderate pace in the near term, growing at 4.7 percent in 2019, according to the World Bank Malaysia Economic Monitor, launched today. But external factors, such as current trade tensions and increased volatility in financial and commodity markets, are weighing on Malaysia’s economy going forward.

A more uncertain external environment places a higher premium on reforms to boost resilience. Both the budget and the mid-term review of the government have specified a series of new goals and initiatives that can strengthen governance and transparency, improve public sector efficiency, and foster equitable growth.

“We are encouraged to see the Malaysian government taking measures to both preserve growth, restore fiscal buffers, and improve governance,” said Mara Warwick, Country Director for Brunei, Malaysia, Philippines and Thailand. “Such reforms will pay dividends over time, with efforts to improve not just the quantity of economic growth, but also of the quality of economic growth.”

Domestic demand continued to support the economy, with private consumption accelerating at 9.0 percent in Q3 2018 (Q2 2018: 8.0 percent) boosted by the removal of the Goods and Services Tax during that period. Momentum in private investment also grew from 6.1 percent in Q2 to 6.9 percent in Q3 2018, driven by the expansion in manufacturing and services sectors.

Restoring fiscal buffers will be crucial for the country to effectively respond to future shocks to the economy. Efforts to reform the role of the state in business would level the playing field and unlock future productivity growth. Reforms to increase the effectiveness of social safety nets have the potential to achieve greater impact with limited public resources.

This edition of the Malaysia Economic Monitor includes a special focus on human capital development.  The main message of the special focus is that Malaysia will need to boost its human capital if it is to join the leading ranks of inclusive, high income nations. The World Bank’s Human Capital Index shows that in the absence of renewed efforts on human capital, a child born today in Malaysia will reach only 62 percent of potential, in terms of productivity and lifetime income.

Priority areas for improving human capital in Malaysia are learning and child nutrition. Due to limited learning in school, the 12.2 years of basic schooling expected for a child born today are equivalent to just 9.1 years in the highest performing systems—a learning gap of 3.1 years more than 1 in 5 children under age 5 is stunted, a key marker of child malnutrition, which limits cognitive development and opportunity throughout life.

The Malaysia Economic Monitor series provides an analytical perspective on the policy challenges facing Malaysia as it grows into a high-income and developed economy. The series also represents an effort to reach out to a broad audience, including policymakers, private sector leaders, civil society, and academia.

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Global coal demand set to remain stable through 2023, despite headwinds

MD Staff

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While global coal demand looks set to rise for the second year in a row in 2018, it is forecast to remain stable over the next five years, as declines in Europe and North America are offset by strong growth in India and Southeast Asia, according to the International Energy Agency’s latest coal market report, Coal 2018.

Air quality and climate policies, coal divestment campaigns, phase-out announcements, declining costs of renewables and abundant supplies of natural gas are all putting pressure on coal. As a result, coal’s contribution to the global energy mix is forecast to decline slightly from 27% in 2017 to 25% by 2023.

But coal demand grows across much of Asia due to its affordability and availability. India sees the largest increase of any country, although the rate of growth, at 3.9% per year, is slowing, dampened by a large-scale expansion of renewables and the use of supercritical technology in new coal power plants. Significant increases in coal use are also expected in Indonesia, Vietnam, Philippines, Malaysia and Pakistan.

Coal in China accounts for 14% of global primary energy, the largest around in the world. Developments in the Chinese coal sector have the potential to affect coal, gas and electricity prices across the world, for instance through inter-fuel substitution or regional arbitrage. This puts China’s coal sector at the centre of the global energy stage. While China accounts for nearly half of the world’s coal consumption, its clean-air measures are set to constrain Chinese coal demand going forward. We forecast Chinese coal demand to fall by around 3% over the period.

Meanwhile, in a growing number of countries, the phase out of coal-fired generation is a key policy goal. But market trends are proving resistant to change.

“The story of coal is a tale of two worlds with climate action policies and economic forces leading to closing coal power plants in some countries, while coal continues to play a part in securing access to affordable energy in others,” said Keisuke Sadamori, Director of Energy Markets and Security at the IEA. “For many countries, particularly in South and Southeast Asia, it is looked upon to provide energy security and underpin economic development.”

This is why the IEA sees technologies like Carbon Capture, Utilisation and Storage (CCUS) as essential tools to bridge current and future energy needs with global and national climate ambitions. To help build a new momentum behind the technology, the IEA and the Government of the United Kingdom recently co-chaired an international summit where ministers, senior governmental officials across the world, CEOs from major energy companies and the financial community came together to identify practical steps to accelerate investment and deployment of CCUS.

“Tackling our long-term climate goals, addressing the urgent health impacts of air pollution and ensuring that more people around the world have access to energy will require an approach that marries strong policies with innovative technologies,” said Mr Sadamori. “It must rely on all available options – including more renewables, of course – but also greater energy efficiency, nuclear, CCUS, hydrogen, and more.”

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Faster Transition to Clean Energy Would Bring Great Benefits to Poland

MD Staff

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Scaling up renewable energy sources in Poland would benefit the economy, improve people’s health, and reduce serious environmental problems – including the worst air pollution among cities in Europe – says a new World Bank report, “Poland Energy Transition: The Path to Sustainability in the Electricity and Heating Sector.”

The report says that an ambitious target for Poland would be for the share of renewable energy in power generation to reach almost 50 percent by 2030 (versus 14 percent now) – with the share of coal dropping below 40 percent (versus 80 percent now). This transition would drastically lower air pollutants and CO2 emissions while costing the economy just seven percent more than the transition now planned by the Polish government. Furthermore, the local and global environmental benefits would fully compensate for these additional costs.

The most ambitious scenario set forth in the report could also lead to a 25 percent reduction (20,000 jobs) in direct coal mine jobs by 2030, however, it will be more than offset by potential 100,000 jobs a year created by improving the energy efficiency of homes in Poland. Active labor market policies can help mitigate impacts on jobs, which are expected to be negligible at the national level and modest at the local level, given a dynamic economy and tight labor market in the coal-producing Silesian region.

“Poland has already achieved success in decoupling economic growth from emissions. It has simultaneously increased its gross domestic product seven times and decreased its emissions in the electricity and heating sector by 30 percent since 1989”, says Carlos Piñerúa, World Bank Country Manager for Poland and the Baltic States.

“However, Poland’s heavy reliance on coal creates serious environmental problems and imposes heavy health costs on the population, who breathe polluted air. Our analysis shows that investing in renewables now would be good for people’s health as well as economically justified.”

The report acknowledges coal has contributed enormously to Poland’s economic and social development. Yet, European and global environmental trends mean that a transition to cleaner energy is inevitable and technological progress has made switching to cleaner energy affordable and cost-effective. Globally, the energy sector is moving toward sustainability, driven by economics, the need to reduce air pollution, and the national targets set as part of the Paris Agreement.

“More than 60 percent of Poland’s existing coal-fired power plants is over 30 years old. The replacement of these plants presents an opportunity to reduce air pollution and carbon emissions by shifting to cleaner sources,” says Xiaodong Wang, senior energy specialist at the World Bank and the author of the report.

“The decisions made today will strongly shape emissions in 30-40 years, so if Poland wants to put itself on a sustainable path, the time to act is now.”

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