OECD Observer No 308 Q4 2016 by OECD

Spotlight on Korea

No 308 Q4 2016

Finding new momentum The innovation wave OECD Observer Roundtable on Korea The Miracle on the Han River Data on economic performance

www.oecdobserver.org

The PISA education scorecard Gender equality and men Malaysiaâ&#x20AC;&#x2122;s 2020 challenge Economic Outlook: Country snapshots The OECD: New wings or the same old club?

ÂŠCharlotte Moreau

Korea at the OECD 20 years of progress

CONTENTS No 308 Q4 2016

READERS’ VIEWS 2

Urban future; Women graduates; Pay gap; Twitterings

EDITORIAL 3

The OECD and Korea: Celebrating a milestone Angel Gurría, Secretary-General of the OECD

NEWS BRIEF 4

Europe paying a heavy price for chronic diseases; Use ﬁscal policy against low-growth trap; Tax policy reforms; Soundbites; Economy; Country roundup; Darren Walker; Other stories; Plus ça change

OECD.ORG 6

BlogServer

SPOTLIGHT ON KOREA 9

Marking 20 years at the OECD: A new way forward Yoo Il-ho, Deputy Prime Minister and Minister of Strategy and Finance, Republic of Korea 10 Korea and the OECD: The past 20 years and beyond Yun Byung-se, Minister of Foreign Aﬀairs, Republic of Korea 11 From early footsteps to adulthood: Two decades of achievement Jong-Won Yoon, Ambassador of Korea to the OECD 13 Korea and the OECD

Korea’s innovation wave, page 16

www.oecdobserver.org ©OECD December 2016 ISSN 0029-7054 Tel.: +33 (0) 1 45 24 9112 Fax: +33 (0) 1 45 24 82 10 sales@oecd.org Founded in 1962. The magazine of the Organisation for Economic Co-operation and Development OECD Publications 2 rue André Pascal 75775 Paris cedex 16, France observer@oecd.org www.oecd.org

14 Korea’s economy: Finding a new momentum Randall Jones, OECD Economics Department 16 The innovation wave 17 Getting smart: Korea’s creative economy 18 Korea’s digital governance 19 Education: Korea’s class act faces new tests 20 From a green jewel, a green economy 22 Lessons in rural development Carl Dahlman and Vicente Ruiz, OECD Development Centre, and Randall Jones, OECD Economics Department 24 Databank: Snapshots on Korea 26 OECD Observer Roundtable on Korea 28 Well-being in Korea 29 To the Miracle on the Han Donald Johnston, former Secretary-General of the OECD (1996-2006) 30 Korea’s accession to the OECD: A history Peter Carroll, Tasmanian School of Business and Economics, University of Tasmania, and William Hynes, OECD 32 Korea in the OECD Observer: A selection from the archives 33 Ode to my Father 34 People at the OECD 35 OECD Young Professionals Programme

ECONOMIC OUTLOOK 38 How to escape from the low-growth trap Catherine Mann, OECD Chief Economist 40 Country snapshots 2017-18

Rural lessons, page 22

Published in English and French by the OECD EDITOR-IN-CHIEF: Rory J. Clarke PLANNING AND DEVELOPMENT EDITOR: Diana Klein EDITORIAL ASSISTANT, WRITER: Neïla Bachene LAYOUT: Design Factory, Ireland ILLUSTRATIONS: David Rooney, Sylvie Serprix WRITER: Clara Young ADVERTISING MANAGER: Aleksandra Sawicka ADVERTISING SALES: LDMD PRINTERS: SIEP, France; Chain of Custody certiﬁed. Applications for permission to reproduce or translate all or parts of articles from the OECD Observer, should be addressed to: The Editor, OECD Observer, 2 rue André Pascal, 75775 Paris, cedex 16, France.

ECONOMY AND SOCIETY 52 Can Malaysia become a high-income country by 2020? Vincent Koen and Mohamed Rizwan Habeeb Rahuman, OECD Economics Department 54 Africa: Towards comprehensive revenue data Michelle Harding and Emmanuelle Modica, OECD Centre for Tax Policy and Administration, and Sébastien Markley and Henri-Bernard SolignacLecomte, OECD Development Centre 55 Climate, inequality and cities: How the world’s mayors can make a diﬀerence Lamia Kamal-Chaoui, Director, Centre for Entrepreneurship, SMEs, Local Development and Tourism, OECD, and Mark Watts, Executive Director, C40 Cities Climate Leadership Group 56 Gender equality: Let’s bring the men to the table Anne Fulwood, W20 Representative for Australia 58 The PISA 2015 scorecard: Must do better on inequality

OECD.ORG 60 The OECD: New wings or still the same old club? Philip Pierros, Minister-Counsellor and Deputy Permanent Representative, EU Delegation to the OECD, and Philip Wegmann, Master’s student of Political Theory, Goethe-University Frankfurt, Germany, former Assistant, EU Delegation to the OECD and UNESCO Contents continued ▸

Education, page 19, and PISA results, page 58

All signed articles in the OECD Observer express the opinions of the authors and do not necessarily represent the oﬃcial views of the OECD or its member countries. Reprinted and translated articles should carry the credit line “Reprinted from the OECD Observer”, plus date of issue. Signed articles reprinted must bear the author’s name. Two voucher copies should be sent to the Editor. All correspondence should be addressed to the Editor. The Organisation cannot be responsible for returning unsolicited manuscripts. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Readers’ views 62 20th anniversaries: Poland, 22 November 2016; Hungary, 7 May 2016 63 Recent speeches by Angel Gurría; List of OECD ambassadors 64 Calendar highlights

We welcome your feedback. Send your letters to observer@oecd.org or post your comments at www.oecdobserver.org or www.oecdinsights.org

BOOKS 65 Reviews: Making mathematics accessible to all; Urban water 66 New publications 67 Focus on Korea 68 Review: Tapping Latin America’s young potential ORDER FORM... ORDER FORM

DATABANK 69 Korea’s young students excel, as women outsmart men 70 Main economic indicators 72 Korean-African trade techs up; Crossword

Urban future It will be interesting to see how things evolve in the coming decades; particularly in handling trafﬁc, walkability, and general congestion caused by the massive inﬂux of a concentrated population. Most cities are not designed to accommodate the population growth numbers you’ve noted above…Great article!

inequality, and help us understand which efforts are being effective.

Brad V. Done, commenting on “Building better cities: Why national urban policy frameworks matter”, from OECD Observer No 307 Q3 2016, posted on www.medium.com

Twitterings

Women graduates No offence, but earning a degree in formal education is not equivalent to measuring intelligence. If it were so, then you could logically say white people are smarter than black people because more white people have university degrees. So let’s not go down that road. There’s plenty to celebrate about women in higher education without turning this into clickbait.

Sam Ursu, commenting on “Women outsmart men”, from OECD Observer No 307 Q3 2016, posted on www.medium.com Climate, inequality and cities, page 55 Germany Netherlands Switzerland Ireland Belgium Denmark Poland Portugal Norway US Austria France Sweden OECD average Czech Republic Spain Latvia Russia Luxembourg Italy Hungary Lithuania Croatia CABA (Argentina)

509 509 506 503 502 502 501 501 498 496 495 495 493 493 493 493 490 487 483 481 477 475 475 475

509 503 492 521 499 500 506 498 513 497 485 499 500 493 487 496 488 495 481 485 470 472 487 475

506 512 521 504 507 511 504 492 502 470 497 493 494 490 492 486 482 494 486 490 477 478 464 456

The PISA 2015 scorecard, page 58

Pay gap It seems to me there must be two components to the pay gap: women not reaching the same levels of seniority compared with men with similar education or experience, and women not being paid equally with men at the same level of seniority. Furthermore, it seems there are probably some legitimate, or at least unintentional, reasons for the former cause–such as differences in gender expectations of career ambition–and some malignant reasons–such as discrimination against women during competitive promotions–whereas there are no benign reasons for the latter cause. Understanding the different components of these metrics would help us target the changes necessary to eliminate gender

John Evens, commenting on “Do men’s and women’s choices of ﬁeld of study explain why women earn less than men?”, from http://oecdeducationtoday. blogspot.fr, posted on www.medium.com _____

ISOCARP @ISOCARP A supporting article from @OECDObserver on #spatialplanning growing too complex not to be a technocrat activity. Loys Bonod @loysbonod @OECDEduSkills @OECDObserver Not a word about Korea’s shadow education? @tomloveless99 Mikko Strahlendorff @strahlen Dear 140 char media, please read a little more - Data matters! “Big data, satellites and climate change” by @OECD Jari Pirhonen @japi999 @OECD #privacy principles are a good reminder that privacy is so much more than #security. #digicyber16 #GDPR Angelika Poth @CemrPoth Great! @OECD Secretary General @A_Gurria promises support to cities that engage on inclusive growth #cities Dylan Wiliam @dylanwiliam @OECD published a useful survey of approaches to the regulation and impact of publicly-funded private schools: http://bit.ly/2fYxoVr Follow us on Twitter @OECDObserver Comments and letters may be edited for publishing. Send your letters to observer@oecd.org or post your comments at these portals: www.oecdobserver.org, www.oecdinsights.org, or at the other OECD portals on this page.

EDITORIAL

The OECD and Korea: Celebrating a milestone Korea’s development strategy has served it well, but appears to be in need of re-engineering

Angel Gurría Secretary-General of the OECD

In 2016, we celebrate Korea’s 20th anniversary of OECD membership. Throughout this time, Korea has achieved impressive convergence in living standards towards the Organisation’s top performers. In fact, as this special anniversary edition shows, from being one of the poorest countries in the world half a century ago, Korea is now the world’s 11th largest economy and 6th largest exporter. It is home, not only to some of the world’s most famous household brands, from cars to smartphones, but to the K-pop and fashion wave that has seduced young people everywhere. No wonder people refer to Korea’s transformation as “the Miracle on the Han River”. During its 20 years as an OECD member country, Korea has overcome stern tests too, including the Asian ﬁnancial crisis shortly after it joined. Fundamental to Korea’s achievements have been investment, innovation and human capital. Korean students regularly rank among the best performers in the OECD’s PISA tests, while the country is a leader in investment in research and development. At the same time, Korea has not been afﬂicted by the curse of rising inequality that has struck most other OECD members over the past decade. The level of income inequality remains slightly below the OECD average. Membership in the OECD has, in turn, provided an opportunity to exchange ideas with the most advanced countries and to learn best practices. The OECD has played a crucial analytical and advisory role for Korea during the past two decades. In exchange, Korea has brought knowledge and diversity to our membership, and has been a vital ambassador in the Southeast Asian region in helping the OECD to reach out and become more global, inclusive and effective. Korea has also been a very active member of the Organisation. It chaired the OECD Ministerial Council Meeting in 2009 and played a leading role in adopting the Green Growth Initiatives. In 2010, Korea joined the OECD Development Assistance Committee, thus becoming a donor

nation. Moreover in 2015, the OECD Committee for Scientific and Technological Policy met at ministerial level in Korea, the first time ever outside the OECD headquarters. Indeed, we have achieved so much together. But anniversaries are also an opportunity to reflect on our challenges and trace a path to a brighter future. In this respect, numerous challenges persist. Korea’s growth rate has slowed to some 2.8% per year since 2011. The development strategy has served it well, but appears to be in need of re-engineering to face the social, economic and environmental challenges ahead. In addition, Korea’s population is also expected to undergo the most rapid ageing of any OECD member over the next half century. The short transition from the fourth-youngest country today to the third oldest by 2050 creates a number of challenges, notably for public finances. Public social spending is projected to rise from around 10% of GDP in 2013 to as high as 29% by 2060. Korea also faces the challenge of boosting productivity to achieve inclusive growth. The country’s dualistic economy is characterised by large productivity gaps between manufacturing and services, and between large and small firms. As a result, overall productivity is only 55% of the top half of OECD countries. To leverage its position as a leading innovator, and thereby stimulate economic growth, President Park Geun-hye introduced the “creative economy” initiative in 2013. The initiative’s goals focus upon harnessing the productive potential of Korea’s private sector, in particular its lagging services sectors and smaller firms. There is scope to enhance the impact of Korea’s substantial R&D investments, for example, by strengthening the links between public research institutions and the private sector, as well as by improving the regulatory environment for innovative entrepreneurs. Smaller firms should also be encouraged to adopt information and communication technologies that allow them to seize the opportunities of the digital economy. Meanwhile, the focus of the “creative economy” on green innovation, as part of the 2nd five-year plan of Korea’s National Strategy for Green Growth, can help reduce greenhouse gas emissions–an important objective in the context of implementing COP 21 agreements on climate change. Challenges also remain in terms of addressing old-age poverty and labour market duality. To keep Korea on an “inclusive growth” path, win-win reforms to increase growth and reduce inequality should be prioritised, such as encouraging female labour market participation and investing in skills relevant to labour market needs. And as OECD experts in this edition point out, a stronger focus on well-being and the work-life balance would also help. The OECD continues to work with the Korean authorities on these and other policy priorities. The OECD and Korea have come a long way together since 1996, and what better way to celebrate this 20th anniversary than to look forward to strengthening our fruitful collaboration in the design, development and delivery of better policies for better lives. www.oecdobserver.org/angelgurria and www.oecd.org/about/secretary-general @A_Gurria See also: “Korea: Policy priorities for a dynamic, inclusive and creative economy”, October 2015, OECD Better Policies Series.

OECD Observer No 308 Q4 2016

News brief Europe paying a heavy price for chronic diseases Better public health policies and more effective health care could save hundreds of thousands of lives and billions of euros each year in Europe. The premature deaths of 550,000 working age people across EU countries from chronic diseases, including heart attacks, strokes, diabetes and cancer, cost EU economies €115 billion or 0.8% of GDP annually, according to a new joint OECD-European Commission report. While earlier diagnosis and better treatments have substantially increased the share of people surviving these diseases, many countries lag behind in terms of cancer survival rates. The burden of ill-health on social beneﬁt expenditures is huge, with 1.7% of GDP spent on disability and paid sick leave each year on average in EU countries, more than what is spent on unemployment beneﬁts.

We’re heading for a trade war and we’ll all lose. Daniel Finkelstein, The Times, 30 November

It is time to change the political discourse on globalisation: trade is a good thing, but fair and sustainable development also demands public services, infrastructure, health and education systems. Thomas Piketty, The Guardian, 16 November

Like it or not, globalisation is here to stay. Headline, Les Echos (French daily newspaper), 28 October

For globalisation to be politically sustainable, it must be more economically equitable. Javier Solano and Strobe Talbott, The New York Times (international edition), 20 October

Automation and globalisation are combining to generate a world with a surfeit of labour and too little work. Ryan Avent, The Guardian, 9 October

Trade isn’t an end in itself, but a tool for better jobs, increased prosperity and reduced global poverty. Christine Lagarde, Jim Yong Kim and Roberto Azevêdo, The Wall Street Journal, 6 October

Tax policy reforms

See www.oecd.org/health/

Use fiscal policy against low-growth trap “The global economy has the prospect of modestly higher growth, after five years of disappointingly weak outcomes,” OECD Secretary-General Angel Gurría said while launching the latest OECD Economic Outlook. “In light of the current context of low interest rates, policy makers have a unique window of opportunity to make more active use of fiscal levers to boost growth and reduce inequality without compromising debt levels. We urge them

Soundbites

to do so,” Mr Gurría said. The Economic Outlook projects that well targeted public spending initiatives could catalyse private economic activity and help to get the global economy out of the low-growth trap. Growth in the US is projected at 2.3% in 2017 and 3% in 2018, for the euro area at 1.6% and 1.7%, and in Japan, at 1% and 0.8%.

While ﬁscal consolidation was the key driver of tax reforms in the aftermath of the global economic crisis, the main emphasis of recent tax reforms has shifted back to measures aimed at boosting economic growth. Austria, Belgium, Greece, Japan, the Netherlands, Norway and Spain were the countries that implemented, legislated or announced the most comprehensive tax reforms in 2015, according to Tax Policy Reforms in the OECD. The report highlights a move in some countries towards higher taxes on personal capital income, but only relatively limited moves toward reform of environmental and property taxes.

See our Outlook section, pages 38-51.

See www.oecd.org/tax/

OECD-area inﬂation rose to 1.2% in September 2016, compared with 0.9% in the previous month. Excluding food and energy, annual inﬂation was stable at 1.8% in September, for the third consecutive month.

unemployed, 9.5 million less than at the peak recorded in January 2013, but still 6.8 million more than in April 2008, when the crisis started affecting the labour market. The unemployment rate in the euro area was at 10% in September, with the largest falls observed in France, Ireland and Belgium, but increased in the US by 0.1 percentage point to 5%, while falling by 0.1 percentage point

Economy Real GDP growth in the OECD area picked up markedly to 0.6% in the third quarter of 2016, compared with 0.3% in the previous quarter. Growth accelerated in most G7 economies, with the exception of the UK and Germany, where growth slowed to 0.5% and 0.2%, compared with 0.7% and 0.4% in the previous quarter. In the EU and in the euro area, growth was stable at 0.4% and 0.3%.

The unemployment rate in the OECD area, at 6.3% in September, has been stable since May 2016. Across the OECD area, 39.5 million people were

NEWS BRIEF

Country roundup

Other stories

Sweden should promote quality practical training to help young people into work, according to a new OECD report. www.oecd.org/sweden/

The post-crisis recovery in entrepreneurial activity remains mixed across countries, but new OECD data provides tentative signs of a turning point, with trends in enterprise creation rates pointing upwards in most economies. A revival in entrepreneurial activity could help improve economic growth and provide an important longer-term boost to productivity, given the positive link between start-up rates and productivity growth.

Finland could do more to help vulnerable laid-off workers, through access to more intensive employment services before and after dismissal. www.oecd.org/finland/ Asia-Pacific countries should strengthen their health systems and sharply increase spending to deliver effective universal coverage in order to meet the changing needs of their fast ageing populations. www.oecd.org/dev/asia-pacific/ Malaysia’s economy has proven resilient, but more can be done to boost innovation, raise productivity and inclusive growth, according to two new reports from the OECD. See also page 52. www.oecd.org/countries/malaysia/ Lifting many of the regulations stifling business competition in Greece would benefit both consumers, through lower prices, and firms, via higher turnover. www.oecd.org/greece/ Empowering the 40% of young Latin Americans not in formal jobs, education or training could spark new growth engines, says latest Latin American Economic Outlook. www.oecd.org/dev/americas/ Slovenia has implemented important and difficult labour market and pension reforms

©OECD/Hervé Cortinat

Hungary has become the 30th member of the OECD Development Assistance Committee (DAC), the leading international forum for bilateral providers of development co-operation. www.oecd.org/hungary/

On 22 November the president of the Ford Foundation Darren Walker visited the OECD, where he talked about inclusive growth and justice.

in response to the global ﬁnancial crisis, but more is needed. www.oecd.org/slovenia/ Panama signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, making it the 105th jurisdiction to do so, the aim being to boost transparency and combat cross-border tax evasion. www.oecd.org/countries/panama/ Middle Eastern and North African (MENA) countries need structural reforms to spur trade, investment, jobs and trust, the 2016 MENA-OECD Ministerial Meeting agreed. www.oecd.org/mena/ Latvia has successfully consolidated its hospital sector and strengthened primary care since the ﬁnancial crisis, and barriers to high quality care must now be removed, says a new OECD report. www.oecd.org/latvia/

Consumer prices, selected areas in Korea to 4%, and remaining at 7% in Canada. The OECD-area employment rate increased to 66.9% in the second quarter of 2016, thus continuing the recovery since early 2011, although at a slower pace than in the three previous quarters. In the euro area, the employment rate rose by 0.2 percentage points to 65.3%, the eleventh consecutive quarter of growth.

September 2016, % change on the same month of the previous year % OECD total 3.0 2.0 1.2 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0

1.8

All items Food Energy

-0.4

All items non-food, non-energy

-2.8

See www.oecd.org/industry/ Young people who leave school at 16 with low skills are facing increasing challenges in ﬁnding a job, and their chances may not improve even if the economy picks up, according to a new OECD report. Governments must ensure that young people obtain at least an upper-secondary qualiﬁcation or gain vocational skills. See also page 58. See www.oecd.org/social/ The share of the public holding antiimmigration views has grown, driven by concerns that borders are insecure, immigrants stretch local services and some do not want to integrate. The 2016 International Migration Outlook stresses that systematic and co-ordinated action is needed to vigorously address antiimmigration backlash. See www.oecd.org/migration/

Plus ça change… Economic comment periodically expresses the fear that innovation may breed lasting unemployment. The fear has yet to be borne out, even though blacksmiths and grooms have had to give way to bus drivers and garage hands. What has mattered, to date, has been the speed with which new skills were learned and the degree of compassion (not protectionism) that society has accorded to those too old to learn. Countries which have willingly embraced new technology and high investment have found that a good recipe for rising living standards and low unemployment. “What threatens jobs?”, in Issue No 115, March 1982

OECD Observer No 308 Q4 2016

OECD.ORG

BlogServer Financing the Sustainable Development Goals (SDGs) in cities: Innovative new approaches Gail Hurley

Many of the investments needed to achieve the SDGs will take place at the sub-national level and be led by local authorities, especially in urban areas. Massive public and private investments will be needed to improve access to sustainable urban services and infrastructure, to improve cities’ resilience to climate change and shocks, and to prepare them to host 2.5 billion new residents over the next three decades, particularly in developing countries. From OECD “Development Matters” platform. More here: http://oe.cd/1EH

Time to deploy the ﬁscal levers actively and wisely Catherine Mann

The role of fiscal policy has been at the heart of the policy debate since the financial crisis. With the global economy stuck in a low-growth trap and monetary policy overburdened, it is time to re-assess the use of fiscal policy levers. From OECD Ecoscope. More here: http://oe.cd/1EI

The gig economy will not abolish working 9 to 5 Rory O’Farrell

Prospects for global governance Ron Gass

A world society is emerging where nation states are dominant, but in a complex, multi-polar world in which the poles–including business, civil society, and multilateral agencies–are developing various forms of power through alliances and shared objectives– or even common enemies. In the global system that is emerging, economic growth and the technological advances that underpin it have to be geared to meet human ends.

From OECD Ecoscope. More here: http://oe.cd/1EJ

From OECD Insights. More here: http://oe.cd/1EG

Urban green growth is about asking the right questions at the right time

New insights on teaching strategies

Maha Skah

Pablo Fraser

Are you a city-dweller, concerned about the challenges of urbanisation, resilience and inclusiveness? Cities and urban areas represent unrivalled concentrations of people, economic growth, commercial networks, and innovation–and have the potential to make a signiﬁcant contribution to the transition towards a low-carbon world.

Education’s purpose is to prepare children for a fast-moving, ever-changing world. Teaching faces the additional challenge of classrooms becoming increasingly more culturally diverse. Now, more than ever, this requires an adaptation of current teaching strategies. From OECD Education & Skills Today. More here: http://bit.ly/ 2geXimX

From OECD Insights. More here: http://oe.cd/1EK

Deﬁning “green skills” using data

Julia Stockdale-Otárola

Katharine Mullock

At times we describe cities with the most hopeful and endearing terms. Think of “The City of Light”, “The City of Lilies”, “Pearl of the Danube”, “The Holy City”, and so on and so forth. There are other times when only the unique stench, pollution and squalor found in city streets seem to warrant attention.

The EU joined more than 55 other countries, including China and the US, in ratifying the Paris climate agreement, thus setting it in motion. Negotiated almost a year ago, the climate deal commits countries to freeze further increases in the global average temperature to well below 2 degrees Celsius above pre-industrial levels. From OECD Skills and Work blog. More here: http://bit.ly/2fYMzAc

There is little new about the “gig economy”. The word “gig” originates from 1920s jazz musicians who played a small concert or engagement at a venue. Dolly Parton may have sung about working 9 to 5, but her life was moving from one gig to another. We have always had plumbers, electricians, and lawyers who do temporary work, and are not paid by clients when they are idle. However, do new apps such as Uber or Deliveroo mean the end of the 9 to 5 job, and do these platforms need to be regulated?

A tale of two cities?

From OECD Insights. More here: http://oe.cd/1EL These extracts from blogs are courtesy of OECD Insights, OECD Education & Skills Today, OECD Ecoscope, Wikigender, Wikiprogress and other content and social media platforms managed by the OECD.

BETTER POLICIES FOR BETTER LIVES

OECDâ&#x20AC;&#x2122;s global knowledge base

www.oecd-ilibrary.org

Marking 20 years at the OECD: A new way forward Korea has one of the most impressive economic growth performances among the OECD countries

Yoo Il-ho Deputy Prime Minister and Minister of Strategy and Finance, Republic of Korea

This year, 2016, marks the 20th anniversary of Korea’s accession to the OECD. In the meantime, Korea has continued to grow, both in quantitative and qualitative terms, yielding a remarkable outcome that befits the ranks of the OECD countries. Korea has one of the most impressive economic growth performances among the OECD countries, with its economic size now almost three times greater than it was at the time of accession. As of today, Korea proudly ranks as the 8th OECD country in terms of economic size. Moreover, Korea has established an advanced economic system that strengthens its presence among the OECD member countries by enhancing its domestic institutions and continuously driving forward reforms in each economic sector. Over the years of our partnership, the OECD has provided valuable policy recommendations on ways to improve corporate governance and the financial supervisory system, increase flexibility in the labour market and enhance social safety nets. Korea has successfully institutionalised those recommendations, has managed to overcome the financial crisis in the late 1990s and has reinforced its economic fundamentals. Korea has also endeavoured to relax overall regulations by adopting the Regulatory Total Amount System (a “one-in, one-out” approach to regulation) and to ease trade and investment barriers by signing Free Trade Agreements (FTAs) with some 50 countries. In this sense, no one can deny that Korea’s joining the OECD has set an important milestone in upgrading the Korean economy. Contributing as a middle power The OECD has contributed to improving the global economy through mutual co-operation among its member countries, and adopted the motto “Better Policies for Better Lives” in commemoration of the 50th anniversary of the establishment of

SPOTLIGHT

KOREA

the OECD. And it has committed itself to making a better world on multiple fronts, such as the environment, the quality of life and development co-operation. For its part, Korea has been playing an active role as a middle power of the OECD. In 2010, Korea became the first non-G7 country to host a G20 summit, and it has taken the lead in tackling climate change by hosting the Green Climate Fund (GCF) and establishing the Global Green Growth Institute (GGGI). On top of this, Korea has played a constructive role in international discussions on development co-operation by becoming the 24th member of the OECD Development Assistance Committee (DAC) in 2010. Recently, Korea has been actively undertaking “Four Initiatives for Development Co-operation”, which focus on improving education and health care in underdeveloped countries, and fostering co-operation on science and technology to help reach the Sustainable Development Goals (SDGs). The world economy is slowly picking up from the aftermath of the global financial crisis, but has yet to recover to pre-crisis levels. Instability is still prevailing over the global economy, forcing us to walk on thin ice amid growing uncertainties. Worries over eroding economic vitality, a lack of jobs and mounting social polarisation have become tasks for countries throughout the world. Facing these tough challenges, the Korean government has strived to break open a new path for growth through bold and active policies and structural reform efforts. In this regard, Korea has unveiled the “Three Year Plan for Economic Innovation”, a comprehensive strategy designed to improve economic fundamentals and unlock growth potential. The Korean government has also carried out reform in the labour, financial, public and education sectors. At the same time, Korea has channelled its energy into industrial reform by reinforcing business competitiveness and nurturing new industries for the so-called Fourth Industrial Revolution. In line with these policy efforts, Korea has continued to do its share by giving momentum to the economic recovery through active fiscal operations and the promotion of business investment. To put an end to the low-growth trend in the global economy, OECD countries should do their bit for greater international co-ordination, such as by implementing active macro-economic policies and conducting structural reforms. The Korean government will remain committed both at the domestic and international levels to paving the way for recovery and the development of the global economy. Based on policy co-ordination within the OECD, Korea will be able to deal with newly arising international challenges more effectively and promote sustainable growth for all countries. Last but not least, Korea will continue to share its development experiences with the global community, serving as a stepping stone to economic growth for emerging countries. Visit the Finance Ministry’s website at http://english.mosf.go.kr/

OECD Observer No 308 Q4 2016

SPOTLIGHT

KOREA

©Rights reserved, Korean government service

Korea and the OECD: The past 20 years and beyond Korea has played a leading role in OECD policy discussions on a whole range of issues

Yun Byung-se Minister of Foreign Aﬀairs Republic of Korea

This year marks the 20th anniversary of Korea’s membership in the OECD. Korea joined the OECD in 1996, following its membership of the World Trade Organization in 1995 as part of its globalisation efforts, and has thereafter risen as a full-fledged middle power, actively contributing to the international community. In particular, the OECD–a group of countries sharing the values of democracy and a free market economy–was conducive to the overall improvement of Korea’s politics, economy and society. As an exemplary country for achieving democracy and economic development, Korea in turn made a humble contribution to the formation of global governance. To be sure, Korea was not immune from challenges and difficulties over the past two decades. Immediately after Korea joined the OECD, the Asian financial crisis hit the country hard. Some were critical that Korea should not have joined the club in the first place. Some even disparaged Korea for popping the champagne too early. However, the path that Korea has taken to date clearly demonstrates that it made the right decision at the right time. The OECD’s policy recommendations and international standards have contributed to upgrading Korea’s policies and institutions. For the Korean people and government, the OECD has established itself as one of the most trusted policy advisors. At the same time, as a reliable partner of the OECD, Korea has played a leading role in OECD policy discussions on a whole range of issues, including development, anti-corruption, the digital economy, innovation, public administration and the environment. In the process, Korea has also contributed to creating and sharing exemplary cases. Development co-operation is a case in point. Since Korea joined the Development Assistance Committee (DAC) in 2010, it has actively shared with other OECD members its experience of transformation from an aid recipient to a donor. As the host of the 4th High Level Forum on Aid Effectiveness in Busan in 2011,

it has also laid the foundation for bringing the important paradigm shift in international development co-operation from aid effectiveness to development effectiveness. Moreover, during the 2015 UN Sustainable Development Summit, in co-operation with the OECD and the UN Development Programme, Korea co-hosted yet another landmark event in which the Saemaul Undong (new village movement) was presented as a new rural development paradigm, reflecting the reality and conditions of developing countries. The Saemaul Undong model is now steadily taking root in a number of developing countries in Asia and Africa, in particular. Turning to science and technology, Korea successfully hosted a Ministerial-level Meeting of the OECD Committee for Scientific and Technology Policy in Daejeon in 2015 and led the discussions on utilising innovations in science and technology to support sustainable development. In particular, the OECD member countries recognised the significance of this event as it became

For the Korean people and government, the OECD has established itself as one of the most trusted policy advisors the ﬁrst ever meeting to be held outside Paris since the Committee’s initial gathering in 1963. The members also appreciated Korea’s active efforts in resurrecting the forum after a hiatus of 11 years following the global economic downturn. Looking ahead, Korea will actively partner with the OECD in overcoming a host of global challenges, ranging from sluggish economic growth, protectionism, an ageing population and climate change, and in developing common policies for inclusive and sustainable growth. The world today is undergoing rapid change owing to technological advances such as the digital revolution. I would count on the OECD as a global policy network to continue functioning effectively in assessing and analysing the changes of our times and presenting us with appropriate policy options. Korea stands ready to contribute to the OECD’s efforts in this regard. The words of former US Secretary of State George C Marshall, who sowed the seeds of the OECD, still hold true today: “[With] a willingness on the part of our people to face up to the vast responsibility which history has clearly placed upon our country, the difﬁculties I have outlined can and will be overcome.” As Korea enters the next 20 years in the organisation, it will continue to stand shoulder to shoulder with other OECD member countries and exert its best efforts to realise our shared vision of creating new growth engines through innovation and thereby achieving sustainable growth. Visit the Foreign Ministry website at www.mofa.go.kr/ENG/main/index.jsp

From early footsteps to adulthood: Two decades of achievement

©Marco Illuminati/OECD

Korea has come of age within the OECD

Jong-Won Yoon Ambassador of Korea to the OECD

Twenty years of age is often regarded as the threshold of adulthood. Coming-of-age celebrations vary across cultures, but the common understanding is that once you become an adult, you are expected to be a mature and responsible member of the society. This year marks the 20th anniversary of Korea’s membership in the OECD. We would like to take this opportunity to confirm our status as a responsible and mature partner within the OECD. To celebrate this occasion and reflect on our experience as an OECD member country, we are planning various events in Paris, such as a 20th anniversary seminar and cultural events including concerts, the screening of a film, “Ode to My Father”, which vividly shows Korea’s painstaking development history, and much more. Korea’s coming of age within the OECD has occurred through 20 years of footsteps, which have helped us make great strides forward in overcoming various challenges and difficulties. In 1997, soon after joining the OECD, we found ourselves in the midst of the Asian financial crisis. The Korean government made steady efforts at overcoming the crisis and implementing structural reforms, working hand in hand with international organisations such as the OECD and the IMF. At the same time, individual Korean citizens took part in rescuing the country by donating their gold to help pay off our national debt. Korea has taken initiatives in setting the global agenda, such as by chairing the annual OECD Ministerial Council Meeting (MCM) in 2009 and being the driver behind the OECD Green Growth Declaration, adopted that year. In 2010, Korea joined the Development Assistance Committee (DAC) and officially became the first country to transform from a least developed recipient to a donor country. Since then, Korea’s official development assistance (ODA) has grown faster than any OECD country in its effort to catch up with the more established donors. Over the past two decades, Korea has enjoyed various achievements within the OECD. Per capita GDP adjusted for purchasing power parity has more than doubled from US$14,428

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to $34,502, and the trade volume has risen more than fourfold from $0.3 trillion to $1.4 trillion, evincing our greater participation in global value chains. The country has recorded outstanding performances in economic growth, employment, Internet penetration, R&D investment, and education. Indeed, Korea is among the leaders in international rankings of school competence among 15-year-olds, as measured under the OECD’s PISA surveys, to name but a few benchmarks. Since the global ﬁnancial crisis in 2008, however, Korea, like many other countries, has faced slower growth, higher unemployment, a slowdown in productivity and a rise in inequality. Indeed, one can say that in becoming an adult, Korea has experienced growing pains, while undergoing various difﬁculties and structural problems. Indicators show that Korea still faces many challenges that need our attention, including relatively long working hours compared with other countries, not to mention high suicide and road-fatality rates, and a persistent gender gap. Korea joined the OECD in order to modernise the country and become a strong global partner. We have put great effort into reforming and developing our laws, institutions, and awareness,

Korea has enjoyed various achievements within the OECD, though has also experienced growing pains which underpin our politics, economy and society. The OECD’s motto, “Better Policies for Better Lives”, is in line with the Korean government’s national strategy of fostering a creative economy, harnessing innovation, strengthening the social safety net and thereby enhancing social inclusiveness. In this context, the OECD’s recommendations, outlined in reports such as OECD Economic Survey: Korea and Going for Growth, are key elements in the government’s Three-Year Plan for Economic Innovation. The OECD provides many answers in the government’s pursuit of building a better society. The OECD’s Better Life Index and the adoption of well-being as a key element in policies contribute greatly to our efforts to promote happiness among Korean citizens. The OECD, as a community with collective wisdom and vast policy experience, continues to provide invaluable analysis, perspectives and policy advice to guide Koreans in achieving happiness. As ambassador of Korea to the OECD, I commit on behalf of my government to contribute to the OECD community by sharing the unique development experience that we can offer, and having come of age, actively taking part in OECD work as a responsible adult member and contributing to building better societies worldwide. Visit http://oecd.mofa.go.kr/korean/eu/oecd/main/index.jsp and www.oecd.org/korea

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Korea and the OECD

President Park Geun-hye and OECD Secretary-General Angel Gurría engage in a lively discussion on ways to enhance science, technology, and innovation at the opening ceremony of the OECD Ministerial Meeting in Daejeon, Korea, 20-21 October 2015. The ministerial meeting was concluded with the Daejeon Declaration on Science, Technology, and Innovation Policies for the Global and Digital Age, or the Daejeon Declaration for short, which sets out the common guidelines and commitments of member countries in the ﬁeld. In the Declaration, ministers

not only agreed that science, technology and innovation are being revolutionised by digital technologies, but recognised the potentially transformative nature of the “next production revolution” for our well-being. Basic and applied research need long-term funding, the declaration points out, as well as a market-friendly competitive environment, while innovation in the public sector needs to be strengthened. The full English text of the Daejeon Declaration can be found at www.oecd.org/sti/ daejeon-declaration-2015.htm

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OECD Observer No 308 Q4 2016

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Korea’s economy: Finding a new momentum

©Michael Dean/OECD Observer

Randall Jones, OECD Economics Department

Korea’s transition from one of the poorest countries on earth in the early 1960s to the world’s 11th-largest economy and sixth-largest exporter by 2015 is unprecedented. The high-growth era that began in the early 1960s was supported by: ﬁrst, an outward-oriented development policy based on the expansion of exports; second,

macroeconomic stability; and third, investment in physical and human capital.

information technology and the growth of a knowledge-based economy.

I was privileged to watch the early days of the “Miracle on the Han River” while living in Korea from 1974 to 1976; then, per capita income was less than 15% of the US level (adjusted for purchasing power parity). Life expectancy was short: my friends who saw through their 50s were honoured with “a feast at age 60” ( ). Poverty was accompanied by political repression and martial law.

Economic development was accompanied by democratisation: the election of President Roh Tae-woo in 1987 was the ﬁrst democratic transition of power in Korean history. His successor, President Kim Young-sam, Korea’s ﬁrst president without a military background, achieved his goal of leading Korea into the OECD in 1996, a feat that represented the culmination of 35 years of extraordinary growth.

Returning to Seoul in 1993 to begin preparing the ﬁrst OECD Economic Survey of Korea, I saw a very different country. Rapid industrialisation had made it a major exporter, with per capita income at 37% of the US level, similar to Greece and Portugal at that time. Development was underpinned by education: enrolment rates reached 90% for primary school in 1964, for middle school in 1979 and high school in 1993. In addition to the economic beneﬁts, universal access to primary and secondary education promoted social mobility and income equality. The focus on tertiary education in the 1990s laid the foundation for Korea’s success in

Korea’s per capita income converges towards OECD average GDP per capita, 2010 constant prices, 2010 purchasing power parity exchange rates, % % 90

80 70 Relative to OECD average

60 50

Relative to the US

However, less than a year later, Korea was hit by the Asian financial crisis. In November 1997, Korea requested emergency assistance from the IMF to avoid a default on its foreign debt. In early December, the IMF announced a record US$57 billion agreement with Korea. Nevertheless, the situation continued to deteriorate due to large-scale capital flight, and the Korean won lost nearly half of its value relative to the dollar during the month of December 1997. The survival of Korea’s economic miracle appeared to be in jeopardy. The financial crisis led to a sharp economic downturn. Output fell more than 5% in 1998 and around half of the country’s chaebols disappeared, including Daewoo, the second largest conglomerate, whose 275 companies manufactured everything from ships to semiconductor chips. The unemployment rate jumped from 2% to 7%, leading to severe hardship in a country with only a rudimentary social safety net. During my visits in 1998, Seoul was covered with signs advertising “IMF” sales, also referred to as “I aM Fired” sales. I was touched by the resilience and patriotism of Koreans. Ordinary citizens lined up to turn in their personal holdings of gold–even wedding bands–to help the country overcome the financial crisis.

30 20

10 0 1970

1975

1980

Source: OECD Economic Outlook database

1985

1990

1995

2000

2005

2010

2014

The 1997 crisis was a result of a number of structural weaknesses that had developed during the high-growth era. As noted in the OECD Economic Survey of Korea in 2000, Korea had been “deﬁcient in developing the rules and principles of a market economy, failing to implement structural reform policies consistent with the changes in the international

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environment”. Two such weaknesses appear to have been fundamental: the low levels of profitability and high levels of debt in the corporate sector, reflecting the tendency of the business conglomerates to diversify across a wide range of industries; and a poorly-functioning financial system that followed government, rather than market, direction in allocating capital, as well as having poor credit analysis and internal risk control mechanisms. Following the old saying “never waste a crisis”, the Korean authorities set out to address these weaknesses, with the OECD providing support. For instance, our annual OECD Economic Surveys of Korea over 1998-2001 helped by focusing on reforms

Korea’s traditional growth model, based on exports produced primarily by chaebols, has become less eﬀective to improve the corporate sector and the ﬁnancial system, as well as the labour market. These policies laid the foundation for renewed growth, which averaged some 4.3% per year during 2001-11.

As stressed in the 2016 OECD Economic Survey of Korea, converging to productivity levels in the most advanced countries requires narrowing productivity gaps between manufacturing and services, and between large and small ﬁrms. This, in

My 40-year experience of Korea leaves me optimistic turn, depends on improving framework conditions through regulatory reform, greater integration in the world economy, and enhanced labour flexibility. Changing the government’s role from that of coach to referee is necessary to promote a creative economy. An essential goal is to ensure that growth is inclusive. One of the hallmarks of Korea’s high-growth era was a relatively low level of inequality, but its performance in this regard has weakened. Indeed, inequality has risen significantly and Korea’s relative poverty rate is the eighth highest in the OECD area, reflecting wide wage gaps between regular and nonregular workers, who account for a third of employment and earn only 64% as

much per hour as regular workers. Breaking down labour market dualism and addressing the large productivity gaps between services and manufacturing, and between large and small ﬁrms, would be sure steps to promote more social cohesion. Quite simply, after rapid economic development, Korea now needs to focus more on well-being. Its work-life balance is undermined by working hours that are the longest in the OECD area. In particular, Korea must reverse the environmental degradation that accompanied rapid industrialisation in order to improve the quality of life. My 40-year experience of Korea leaves me optimistic that the country will overcome these challenges. Korea’s most important resource is its people, which are outstanding in so many ways. I look forward to continued collaboration with Korea and to celebrating further progress over the next 20 years. OECD (2016), OECD Economic Survey of Korea, OECD Publishing, see www.oecd.org/korea

Slowing growth suggests that Korea’s traditional growth model, based on exports produced primarily by chaebols, has become less effective. The OECD is supporting the government’s objective of fostering a “creative economy” by shifting Korea’s economic paradigm to one based on innovation in which new start-ups and the service sector play a more central role.

©Lee Jae Won/REUTERS

Since 2011, however, the annual output growth has slowed, in part reﬂecting a more morose global picture, to 2.8%, leaving per capita income at around 64% of the US level. Domestic problems shared the blame. The current president, Park Geun-hye, stated in 2014 that there would be “no future for us, unless we break the protracted cycle of low growth by changing the fundamentals of our economy”. Sustained output growth is necessary to further raise living standards, deal with the cost of possible rapprochement with North Korea and cope with population ageing, which is projected to be the fastest in the OECD.

Star export: K-pop icon Psy enthrals a lively crowd. The billion-dollar Korean pop music industry has been dubbed “Korea’s greatest export” by Time magazine.

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The innovation wave and Samsung, and beneﬁting from extensive broadband deployment– according to the OECD, Korea ranks 8th in the OECD for mobile broadband subscriptions, and 99% of businesses have broadband connections, OECD data show–the government’s innovation initiative is particularly focusing on start-ups and high-growth small businesses. Small and medium-sized enterprises (SMEs) represented 99.9% of enterprises in 2013, while microenterprises accounted for 93.1%, both higher than the average for most OECD countries (68% and 89.9% respectively), but the digital economy has still to make its mark in this sector.

While policy making and OECD membership helps explain much of Korea’s successes in the last two decades, major firms have had a role to play too. In fact, Korea is associated with several global household brands, as strong demand for the likes of Samsung curved televisions, Hyundai hybrid cars and K-pop hits like “Gangnam Style” jolting the Land of the Morning Calm into the sixth-largest exporter in the world. But while productivity in many large manufacturers has pushed Korea into the world’s top ten producers of cars, ships, mobile phones and DVDs, productivity in smaller firms and the service industry means overall productivity is half the level of leading OECD countries. A central element in President Park’s “creative economy” initiative of 2013 is to forge new pathways to boost productivity and long-term growth across the entire economy. A digital economy can support productivity gains by lowering barriers to entrepreneurship, enabling firms to reduce fixed costs and outsource many activities. Building on its position as a world leader in the provision of information and communication technology goods, like LG

While 33.8% of larger Korean companies (>250 employees) sold online, this was only the case for 14.9% of smaller companies (10-49 employees). Overall, 15.7% of Korean companies were engaged in sales via e-commerce in 2013, below the OECD average of 21%. Yet Korean consumers are willing digital customers– for instance 47% of smartphone users made purchases on their phones in 2013, higher than the OECD average of 38%, according to data from the OECD Digital Economy Outlook. The aim has to be to lift wages and labour productivity among SMEs, which is only a quarter of that of large firms, in order to provoke a beneficial knock-on effect in the wider economy. The concentration of SMEs in the service sector should be an area of policy focus, so that their productivity levels close the gap with manufacturing. SMEs also need a better understanding of the digital tools available such as cloud computing, which enables easier, more flexible and on-demand access to applications and computing power, and which can be particularly beneficial for smaller firms. In 2014, more than 22% of businesses used cloud computing services in the OECD area; in Korea, however, only 10.4% of all companies relied on it in 2012. Korea is also integrating digital innovation into other walks of life with the implementation of the Internet of Things

(IoT) project. Rolled out across areas such as public administration and industry, the project aims to improve public services, productivity and efﬁciency and overall quality of life. To develop the IoT it is important to adapt current regulation in, for example, health care and transport, and in particular to revise medical law to allow for telemedicine. On the same trajectory, it is important to embed new digital skills into training programmes and education, thus making them even more relevant for labour market needs. The digital economy

The digital economy should be a natural tool in the hands of Korea’s digital savvy youth should be a natural tool in the hands of Korea’s digital savvy youth, and its students who regularly rank among the best performers in the OECD’s PISA test, with tertiary educational attainment among younger Korean adults the highest in the OECD. However, a large proportion of young people aged 15-24 are not in education, training or employment. Among the 15-29 age bracket 42% of men and 44.4% of women are part of the labour force, below OECD averages of 64.1% and 53% respectively. The promotion of more a positive attitude towards start-ups and the development of a more entrepreneurial spirit will also be a challenge. Survey data indicates that Koreans believe themselves less capable of becoming an entrepreneur than in most other countries. Many fear failure yet should be encouraged to consider entrepreneurship as a real career choice. Claire MacDonald “Korea: Policy priorities for a dynamic, inclusive and creative economy”, OECD Better Policies Series, report available at www.oecd.org/korea/korea-policy-prioritiesfor-a-dynamic-inclusive-and-creative-economy-EN.pdf OECD (2015) Digital Economy Outlook, http://dx.doi.org/10.1787/9789264232440 Visit the OECD Broadband Portal at http://oe.cd/1lw

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Getting smart: Korea’s creative economy has funnelled billions of dollars into start-ups and a global venture capital fund, the Angel Investment Matching Fund. It has built infrastructure designed to help SMEs obtain financing more easily, launching the Korea New Exchange (KONEX), for example, a securities exchange that lists only SMEs. It also legalised and simplified crowdfunding in 2015, paving the way for yet another source of start-up financing. Korean financial institutions and corporations have followed suit by joining together to form startup funds and

Songdo and Daegu are like Internet of Things living labs

©Thomas Peter/Reuters

incubators. In 2012, its top 20 banks founded the Banks Foundation for Young Entrepreneurs and launched D. Camp (dkamp.kr), a co-working and mentoring hub for ﬂedgling tech entrepreneurs.

Since the 1970s, economic growth in Korea has largely been driven by big companies such as Samsung, Hyundai and LG. These so-called chaebol have been remarkably successful, but have dominated the economy, with little room for small and medium-sized businesses (SME) to gain traction and grow. This dominance is most striking in the data on Korea’s spending on research and development (R&D). Indeed, Korea devoted a little over 4% of its GDP to R&D, more than any other OECD country. However, three-quarters of its private R&D investments went to the conglomerates and, in 2013, just over a ﬁfth went to SMEs. Korean President Park Geun-hye wants SMEs to play a bigger role. By nurturing start-ups and small businesses, particularly in the digital sphere, the president underlined the importance

in her 2013 inaugural speech of aiming at “the convergence of science and technology with industry, the fusion of culture with industry and the blossoming of creativity in the very border areas that were once permeated by barriers.” Korea’s policy makers are now tackling these barriers by loosening regulation, allocating a greater percentage of R&D funding to SMEs (to some 53% of government-funded business investment in R&D in 2013), easing SME access to non-debt financing, creating innovation hubs, and providing tax incentives to companies who provide financing to startups. The government has opened 17 innovation centres throughout Korea. These startup hubs support R&D in the areas of Internet of Things (IoT), biotech, 5G, cloud and fog computing, big data and artificial intelligence (AI). The government

Maru 180 is a Hyundai-sponsored incubator that also connects startups with venture capital (VCs) and mentors. To date, writes Elaine Ramirez, Maru 180’s biggest success story is Memebox, a cosmetics mobile and e-commerce platform that raised nearly US$30 million from international investors in March 2015. Memebox and other Korean blue-chip startups like online retailer Coupang and Whatsapp challenger Kakao signal Korea’s start-up wave, and should help the country close the gap, if not surpass, other advanced economies. In March 2016, President Park announced that the government would invest ଄1 trillion ($860 million) in AI research over the next ﬁve years (see Mark Zastro). This is a positive step, though is put in perspective when compared with multinational giants like Google, which has invested about $30 billion in AI since the 2000s. Where the country may have a “virtual” jump on everyone else is in places like Songdo, a 100% “smart city” in Incheon, south of Seoul. According to a report by Stephanie Chan, Cisco Systems and real-estate developer Gale International have equipped the 600-hectare city with

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Korea’s digital governance an entirely connected infrastructure of high-speed ﬁbre optics, sensors and intelligent utilities grids. Cities like Copenhagen, Addis Ababa and Singapore also have smart aspirations, but they are upgrading, laying IoT technology

President Park is eager to vault Korea to the fore of the fourth industrial revolution over existing infrastructure. Korean cities like Songdo and Daegu are starting from scratch, which can be advantageous. They are like IoT living labs that collect and use abundant user data to improve waste management, street lighting, public transport, buildings, healthcare, security, schooling and every other urban service. By 2050, more than 60% of the world’s population will be living in cities, according to UN predictions. And according to a recent MarketsandMarkets research report, the market size of IoT applications for smart cities will grow from $52 billion in 2015 to $148 billion by 2020. President Park is eager to vault Korea to the fore of the fourth industrial revolution–the seamless merging of the physical world with computer cyberspace, with its immense promise and transformational potential. The country’s smart laboratory cities may well help achieve that aim.

Digital services are smart too: for example, if a person applies for a birth certiﬁcate, the online system called Minwon 24 enables them automatically to apply to get child-support payments or to get vaccination information at the same time. The use of digital tools among public ofﬁcials is also widespread. However, there is a wide gap between the use of e-government services by age group, with over 90% of younger people declaring use, but only 30% among the older generation, which is lower than, say, France or the UK, with 35%.

Chan, Stephanie, (2016), “Innovation has the smart city of Songdo living in the future”, https://newsroom.cisco. com (accessed 26 January) Ramirez, Elaine (2016) “Everyone you need to know in South Korea’s startup scene”, www.techinasia.com (accessed 2 March) Zastro, Mark (2016) “South Korea trumpets $860-million AI fund after AlphaGo ‘shock’”, www.nature.com (accessed 23 March)

There are challenges of course, such as constantly improving user-friendliness and stepping up engagement with civil society organisations and the media. Social media also provides new challenges for all governments, and while Korea’s 3.0 action plans provide some guidelines for the public sector, performance indicators still need to be enhanced.

Where Korea particularly shines is in open data, as the government has increased the amount of data available

OECD (2016), Government at a Glance: How Korea Compares, OECD Publishing For more information, contact Barbara Ubaldi at the OECD

OURdata Index: Open, useful, reusable government data, 2014 Data availability

The president’s full inaugural speech of 25 February 2013 can be found at www.korea.net

on its central open data portal (https://data. go.kr). Since 2013, all public sector agencies have had to register their datasets in the central open data portal by law, and now Koreans can access large quantities of government data on public expenditure and election results, as well as on crime, the environment, health care and education. Open data management guidelines have been developed to assure quality, timeliness and formats, while the government also sponsors promotional events, such as an IoT (Internet of Things) Week, and hackathons for programmers and start-ups. Its “Open Square D” Centre (OSD) opened in 2016 provides a facility for data entrepreneurs to exchange knowledge and to develop their skills.

Given Korea’s prowess in digital services, it should come as no surprise to see the country leading the ﬁeld in e-governance. Its lead, notably in open data, owes much to government efforts and investments in digital infrastructure and systems since the 1990s. In 2014 more than 70% of all Koreans reported having used the internet at least once over the previous 12 months to interact with the public authorities, whether to obtain information on a government website, or to download or ﬁle a form, for instance. That’s far more than the OECD average of 55%.

Data accessibility

Government support to re-use

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 rea Ko

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Source: Government at a Glance: How Korea Compares, OECD 2016

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Education: Korea’s class act faces new tests

©Jo Yong-hak/Reuters. From edition No 297 Q4 2013.

introduced “free semester” programmes for middle school students to enhance motivation, wellbeing and happiness by offering the likes of discussions, experiments, projects, physical exercise, arts, and other activities without written exams.

Korea’s transformation into an economic powerhouse in just 20 years is largely due to what is often claimed to be its only natural resource–its people. Huge investments in education and training boosted productivity and growth, turning the country into an international player with a booming high-tech, export-led economy. Between 1970 and 2000, Korea achieved universal primary and secondary education, and by 2010 it had the largest proportion of 25-34 year olds with at least an upper secondary education among OECD countries. Korea’s 15 year olds are also high performers. The average student scored 542 in reading literacy, maths and science in the OECD’s Programme for International Student Assessment (PISA), higher than the OECD average of 497 and topping the tables. Korea’s excellent academic achievements have laid strong foundations for economic growth, but its education system is not making citizens as happy as they might be, nor is it necessarily helping them to ﬁnd jobs. Pressure to succeed in school is relentless. The single college entrance exam, the suneung, is so critical that planes are grounded on the day of the listening test to avoid disturbing the children. Only 60% of Korea’s children answered yes to feeling happy at school, placing it at the bottom of the league table; the OECD average is 80%. The country’s 11 to 15 year olds report the highest amount of stress out of 30

developed nations, and suicide is the biggest cause of death among teens. Young people also ﬁnd it hard to make the transition from school to work, primarily because of a mismatch between the relevance of their education and skills with the workplace. Despite being among the best performers in terms of their skills proﬁciencies, as measured by the OECD Survey of Adult Skills (PIAAC), less than half of those in the 15-29 age range participated in the labour force in 2013–42% for men and 44.4% for women, which is low compared with OECD averages of 64.1% and 53% respectively. Youth unemployment has risen since the end of 2012, reaching 10.9% in 2015, plus a high number of young people aged 15-24 are neither in employment nor in education and training, particularly those with tertiary degrees. Under the creative economy initiative, the government now needs to offer alternative routes, such as vocational education and training (VET), which would introduce work-based learning, and initiate more involvement from employers with relevant industry experience in the design of programmes and training in the classroom. Korea has been developing National Competency Standards (NCS) since 2013 with learning modules based on NCS for VET schools and Junior Colleges. It also

The network of Meister high schools has already started aligning students’ potential with the real world. Established in 2010, these institutes have an industrysupported curriculum design, with a focus on developing skills that expose students to the workplace. They offer a nearguarantee of employment to graduates. Another interesting initiative is Job World, which opened in the city of Seongnam-si in 2012. It provides career guidance in an interactive way, with the aim of providing its 3,000 daily visitors with a realistic view about possible professional choices. Developing a more relevant skill set would help create a more inclusive workforce, which in turn could offset the future financial burden of the country’s aging population. Older workers have low skills–literacy proficiency among those over 45 is significantly below average– and they struggle to find work if forced to take early retirement. Employers should be encouraged to change their approach to this age group, which is often excluded from training programmes due to the perception of lower long-term employability. Korea’s children, however, are already showing their ability to adapt to a more relevant environment. In the 2012 OECD PISA first assessment of creative problem solving, Korea’s students were among the top performers, showing themselves to be quick learners, highly inquisitive and able to solve unstructured problems in unfamiliar contexts. The future seems bright, therefore, suggesting no further need for the kind of intensive education system that has propelled Korea so headily forward since 1996, but rather a more rounded experience that hones problem-solving skills and includes hands-on experience, as well as an understanding of the value of just letting children play. Visit www.oecd.org/pisa and www.oecd.org/education

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From a green jewel, a green economy installation, building smart energy grids, and storage technologies. In early 2016, Korea became home to one of the world’s largest energy storage system. As a country where road transport is dominant, Korea is also doubling down on an enlightened car policy. The Ministry of Trade, Industry and Energy projects an annual increase in low- and zero-emission cars from 80,000 in 2016 to 920,000 in the next ﬁve years, cutting CO2 emissions by 3.8 million tonnes.

©Charlotte Moreau

It is developing an ambitious electric car infrastructure. The city of Gumi, for example, has 24km of roadway embedded with electric cables, which generate an electromagnetic field to keep vehicle batteries charged. Jeju Island lies in the Strait of Korea. Often described as the “Hawaii of Korea”, it is also a tropical jewel in the country’s strategy towards greening its economy. Korea believes that the basis for a green revolution is not just in the way its market, financing structures and legislation are set up, but information. Jeju Island, which is one of the country’s nine provinces, is its flagship, having been set out as a smart-grid test bed since 2009. Five Korean conglomerates, including Hyundai and SK Group, are outfitting the small island with smart homes, electric car charging stations–500 already in place–and renewable energy infrastructure like solar and biogas. Korea’s green policies are not new. On 15 August 2008, at the 60th anniversary of the founding of the Republic of Korea, then-President Lee Myung-bak set a new pace in the greening programme by voluntarily targeting a 30% reduction in greenhouse gas (GHG) emissions in 2020 from a business-as-usual (BAU) baseline. He also allotted 2% of annual GDP to green growth initiatives and passed a US$30.7 billion green stimulus package. President Park Geun-hye is now adding to this green vision with a second five-year plan (2014-2018). For the UN Conference on Climate Change (COP21) in Paris in November-December 2015, Korea submitted a proposal to cut business-as-

usual emissions by 37% by 2030, as its contribution to the Paris Agreement. Like other countries, Korea is trying to balance competitiveness with its need to confront climate change. Nearly 90% of Korea’s rise in greenhouse gases occurred in a single decade, 1990-2000. By 2013 Korea was the world’s 14th largest economy, but its eighth largest carbon emitter. In fact, Korea’s greenhouse gas emissions increased by 43% in absolute terms between the accession year of 1996 and 2011, while the OECD total declined over the same period. However, much of this reﬂects Korea’s catch-up phase of rapid growth. Moreover, Korea’s GDP grew by 94% over the same period, indicating that GHG emissions have been relatively decoupled from economic growth. This is encouraging, since Korea’s goal is to shrink its carbon footprint with an industrial, urban, and market-friendly green strategy focusing on infrastructure. In the process, Korea also aims to become a leading exporter of green technology. The Korea Environmental Industry and Technology Institute estimates that since 2010, 50 environmentally friendly small and medium-sized businesses have exported ଄1.5 trillion (US$1.3 billion) worth of product. Korea’s efforts to green its energy mix have concentrated on support for renewable energy development and

Transport planning is also moving in a more ecological direction. The cities of Daegu, Busan and Incheon now have expanded bus rapid transit lanes, and

The Korea Export-Import Bank became the world’s first noninternational financial institution to issue a global green bond areas open only to bicycles and public transport. The capital, Seoul, has been successfully experimenting with congestion fees on the Namsan tunnels. The government has likewise tilted its budget toward public transport, increasing spending on railways by 29% and cutting spending on roads by the same percentage (2009-20). In keeping with its business-oriented green policy, Korea has been very effective with financing green endeavours, and at setting up a legislative and market-based environment for carbon-reducing mechanisms. Since 2013, Korea has been the headquarters for the Green Climate Fund, which is designed to be the long-term financing arm of the UNFCCC. Korea has pledged $100 million to the fund. In 2013, the Korea Export-Import (KEXIM) Bank became the first non-international financial institution in the world to issue a global green bond, valued at $500 million;

based on its success, it issued a second bond in 2016. Providing cheaper capital than conventional bank-based financing, climate bonds enable green projects to expand faster. Domestically, there has been extensive support of green technology firms, with the Industrial Bank of Korea reporting sharp double-digit increases in eco-tech investments and green R&D. The government launched the region’s first national Emissions Trading Scheme, cap-and-trade market in 2015. It includes some 525 of Korea’s major polluters, which are responsible for two-thirds of the country’s non-vehicular emissions. This follows the government’s founding of the Greenhouse Gas Inventory and Research Centre of Korea (GIR, visit www.gir.go.kr/) and of the firm-level emissions Target Management Scheme in 2010. There are challenges in what is the OECD’s most densely populated member country, however. Air pollution is a major health concern, and the country faces high water

stress compared to its OECD peers. Rapid urbanisation is severely threatening Korea’s rich biodiversity, and stakeholder engagement around large infrastructure projects with environmental impacts continues to be highly sensitive. For instance, although projects aimed at cleaning up polluted rivers, securing water resources and improving ﬂood control have achieved much, tough ecological challenges remain, notably in relation to habitats for migratory birds, ﬁsh corridors and the like. The third OECD Environmental Performance Review of Korea, to be released end-2016, will provide an assessment of the effectiveness and impact of Korea’s green growth policies and initiatives, and map out the challenges. The review will highlight achievements, pinpoint challenges, and propose recommendations for Korea to continue improving its green performance. Finding a sustainable balance between economic, environmental and social needs will be a priority for Korea’s green

economy as it expands in the years ahead. The green revolution and initiatives on Jeju Island with its smart, low-carbon lifestyle, will help point the way. References Visit www.oecd.org/greengrowth OECD (Forthcoming), Environmental Performance Review: Korea, OECD Publishing Chung, Ah-young, (2013) “Jeju aims to be carbon-free island” The Korea Times, 4 December, www.koreatimes.co.kr/www/news/culture/2016/02/ 320_192345.html Kim, Sung-Young (2015) “South Korea doubles down on Green Growth”, East Asia Forum, 25 December www.eastasiaforum.org/2015/12/25/south-koreadoubles-down-on-green-growth/ NRDC (2015),“Paris Climate Conference: South Korea”, November 2015, https://www.nrdc.org/sites/default/ﬁles/ paris-climate-conference-SouthKorea-IB.pdf Son, Bongsoo and Hwang, Kee Yeon (2002) “Four-year-old Namsan tunnel congestion pricing scheme in Seoul: Success or Failure?”, IATSS Research, Vol 26, Issue 1 “South Korea’s Four Rivers Restoration”, Water & Wastewater International, 2015 www.waterworld.com

Held on 6-7 September 2016 Jeju Island, Korea For outcomes, visit www.greengrowthknowledge.org The Green Growth Knowledge Platform (www.greengrowthknowledge.org) is a global network of international organisations and experts that was established in January 2012 by the Global Green Growth Institute, the OECD, the United Nations Environment Programme and the World Bank.

SPOTLIGHT

KOREA

SPOTLIGHT

KOREA

Lessons in rural development Carl Dahlman and Vicente Ruiz, OECD Development Centre, and Randall Jones, OECD Economics Department Cities are in fashion nowadays among policy makers as countries everywhere look to urban areas as hubs for innovation and growth. But what about the countryside? Economic development led by continuous rural-to-urban migration and rising living standards and opportunities in the urban milieu, not to mention industrialisation, contributes to widening disparities between rural and urban areas. Korea’s development experience shows that socially-inclusive and sustainable growth requires developing rural areas as an integral part of successful economic development. Indeed, Korea’s rapid rise from a mainly agricultural and food-aid recipient nation to one of the fastest-growing, developed OECD economies was made possible by a structural transformation that involved urban and rural areas alike. The Korean government implemented a strong and wellcoordinated rural development strategy. Rural development in Korea was accomplished through several policies. First, land reform in 1948 transferred land from landlords to the previous tenants. The reform thus promoted social inclusion by creating a new class of independent, family proprietors. Then in 1970, President Park Chung-hee launched the Saemaul Undong (“New Village Movement”) to modernise rural areas and limit the growing disparity in income levels with the rapidly industrialising urban centres. Saemaul Undong was based on citizen participation and community efforts backed by government support. Diligence, self-help and collaboration were key for encouraging rural populations to participate in the development process. Initially, the focus was on improving basic living conditions, such as replacing thatched roofs with tiles. Subsequent projects

©Robert Harding/Alamy Stock Photo

While many thatch roofs were replaced by more modern slate roofs as part of the 1970s New Village Movement (Saemaul Undong), some better specimens were preserved, such as in Yangdong village, now a UNESCO World Heritage Site.

concentrated on building irrigation systems, bridges and roads. Overall, Saemaul Undong played a key role in boosting incomes in rural areas and acted as a buffer during Korea’s fast and successful structural transformation. Saemaul Undong was not meant to reverse the economic development trends emerging in urban areas, but instead to harness them to help smooth the transformation of rural areas by redistributing wealth, boosting agricultural productivity, and providing infrastructure and services in rural areas. Today, Korea is sharing the experience of Saemaul Undong with other countries as a possible road map for rural development based on: investing in education and social capital, and establishing robust institutions for rural areas; co-ordinating governance across all sectors while combining top down and bottom up stakeholder approaches; and sequencing policy implementation to improve effectiveness, while closely monitoring progress along the way. Above all, Korea’s approach highlights the importance of strategic planning in rural areas, including urban-rural redistribution and investment, for promoting inclusive country-wide development. The broad lesson is simple: reducing urban-rural disparities means bringing the rural population into the national development process. This beneﬁts people in rural and urban areas alike, and strengthens social and political cohesion, too. No doubt policy makers in OECD countries where rural-urban disparities have widened could learn from this, too. OECD (2016), A New Rural Development Paradigm for the 21st Century: A Toolkit for Developing Countries, OECD Publishing

Who we are •Korea's only independent economic think-tank •Devoted to the principles of free markets, free competition, free enterprise

What we do •In-depth research on corporate policies •Analysis of macroeconomic policies •Promotion of free markets •Education for market capitalism

24 30,000

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SPOTLIGHT KOREA

Databank: Snapshots on Korea Per capita GDP

US$, 2010 constant prices, PPP, 2014

Gross fixed capital formation

% of GDP, 2014

80,000

70,000 25

50,000 20

40,000 15

20,000 10

10,000 5

Unemployment rate

% of labour force aged 15-64, 2014

Hours worked per worker

Average annual hours, 2014

2,500

2,000

15 1,500

10 1,000

500

Income inequality Disposable incomes, 2012,

Gini coefficient (0 = perfect equality, 1 = perfect inequality)

General government debt

2014

0.50 250

% of GDP

0.40

200

0.30

150

0.20

100

0.10

0.00

2008

SPOTLIGHT

KOREA

Life expectancy at birth

Trade-to-GDP ratio

Years

%, Sum of exports and imports as % of GDP 120

86 Japan

100 Korea

France

Korea France

OECD total

60 40

1994

1998

1996

2000

2002

2004

2006

2008

2010

2012

2014

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

General government fiscal balance

Labour income share

% of GDP

Total labour compensation adjusted for the self-employed / total income

0.90

0.85

Korea

0.80

0.75

Korea

0.70

-2

France

-4 France

0.65 0.60

-8

Japan

-10

0.55

-12

0.50

-14

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Japan

1995

2012

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Gross domestic expenditure on R&D

Foreign reserves

% of GDP

Million SDR 300 000

-6

Korea (left) France (left)

China (right) Japan (right)

3 000 000

5.0 4.5

Korea

250 000

2 500 000

200 000

2 000 000

150 000

1 500 000

3.0

100 000

1 000 000

2.5

OECD total

500 000

2.0

France

4.0

1994

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

3.5

1.5

1996

25-34 years

2000

2002

2004

2006

2008

2010

2012

2014

Public social spending

Population with tertiary education % in same age group, 2014

1998

45-54 years

% of GDP

55-64 years

France

OECD total

US 15

Korea

Mexico

Germany

Finland

Japan

Korea

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

OECD Observer Korea 20th Anniversary Edition

SPOTLIGHT

Roundtable on Korea

OECD Observer Roundtable on Korea root of a country’s economic development. We are now living in the Fourth Industrial Revolution, where new things are created everyday through the fusion of artiﬁcial intelligence and bio science, fostering a new technology as a matter of survival rather than choice. The development of new technologies for the future is essential, and these should be generated by individuals and corporations, and supported by the government’s policies.

Korea joined the OECD on 12 December 1996, the ﬁrst Asian country to become a member of the organisation in over 30 years. By all accounts, the country’s economic transformation has been unprecedented, from one of the poorest countries in the world half a century ago to one of its leading economies. In this OECD Observer Roundtable, we asked a range of experts who have witnessed Korea’s progress over the years: What in your view are Korea’s main achievements of the past two decades, and what challenges would you highlight for the next two?

To a start-up nation Dae-whan Chang, Chairman, Maekyung Media Group*

I believe that Koreans have innovation and creativity in their DNA. If we can successfully bring about an extensive innovation in the above three areas, we will be able to become the centre of the world and build a prosperous future. *The Maekyung Media Group includes the World Knowledge Forum and Maeil Business Newspaper, which were knowledge partners of the OECD Forum in the early 2000s. Visit http://m.mk.co.kr/wkforum_2015/eng

In the process of fighting back the financial crisis, Korea luckily seized a chance to rebuild its economy. Korean people strongly united to rescue the sinking economy, voluntarily donating their gold rings and pieces of jewellery, and companies started to gain competitiveness in the world market. Organisations began to seek new growth engines that could sustain them in the future, while boldly carrying out financial and corporate reforms and actively benchmarking global corporate standards.

Towards a quantum leap Seon-joo Kwon, CEO of the Industrial Bank of Korea

Koreans have innovation and creativity in their DNA that had once supported the country’s fast expansion now losing steam. Without innovation, the future of the country will be at stake. Maekyung Media Group has proposed three different innovative ideas that could bode well for Korea over the next 50 years, based on its own recent study. The first one is innovation in leadership. The government and corporate sector have to unify the people and display leadership that can embrace those who are left behind. The second innovation is to transform Korea into a start-up nation. Major companies need to challenge themselves to find businesses, which can become new growth engines for the economy, while small and medium enterprises should strive continuously to expand, based on powerful ideas. Without flexibility, a company will have no future. The third innovation is the development of disruptive technology. Technology is the

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Korea’s economy is facing new challenges in 2016. Externally, it has to ﬁnd new growth sources within the large ﬂow of global changes sparked by the Fourth Industrial Revolution. Domestically, Korea could be locked into low economic growth of 1-2%, with the manufacturing industry

When Korea ﬁnally joined the OECD in 1996, no one would expect an OECD badge to be a double-edged sword for the country. Membership certainly paved the way for the Asian country to globalise itself, but the opening-up policy without a proper understanding of, and preparation for, globalisation and open market reforms also took a heavy toll on the country, forcing it to teeter on the edge of bankruptcy during the 1997 Asian ﬁnancial crisis.

Korea broke the long standing belief that ﬁnancial crises occur repeatedly in developing countries. Korea has gone through trials over the last 20 years after joining the OECD, but through the process of recovery, the Korean economy has become more stable and sound.

Since joining the OECD as the 29th member in December 1996, Korea has strived to improve its economic fundamentals and upgrade its ﬁnancial systems to meet global standards. These efforts paid off, allowing the country to achieve remarkable economic growth despite the aftermath of the Asian ﬁnancial crisis in the late 1990s. As of 2015, Korea ranked 8th in terms of overall GDP and 12th in terms of the international trade-to-GDP ratio among the 34 OECD member countries. Noticeably, Korea became a member of the OECD Development Assistance Committee in

world economy recovers, which is not sure at this moment. Furthermore, with a decreasing fertility rate, we are rapidly entering into the aging society that Japan has known for several years. The OECD expects Korea’s potential growth rate would drop to 1.29% by 2060, faster than any other countries. The problem of so-called “economic democracy” arises as it provokes

2010, making a dramatic transition from an aid beneﬁciary to donor, a status that only 29 countries hold.

Korea is now regarded as a country with an advanced financial system quite substantially. These achievements are attributable to enhanced transparency, greater efficiency and sweeping economic reforms made since joining the OECD. The financial sector has also contributed to national development by offering a creative solution to economic issues and ensuring efficient resource allocation. Now, Korea’s economy is facing a huge paradigm shift. In the era of jobless growth, the nation is committed to implementing a “creative economy” with an emphasis on job creation. At the centre of this strategy lie startups and venture companies. Based on innovation, such companies will be systematically supported to grow into global companies, eventually to create more jobs and drive economic development. To this end, the Korean government is promoting entrepreneurship and nurturing new growth industries. The financial industry in Korea has answered to such government policies by devising technology financing programmes and deploying platforms for FinTech, or financial technology. Only when the industry successfully adapts to the paradigm shift, can it bring about a quantum leap for the nation for the next 20 years. Visit http://eng.ibk.co.kr/

New regulations under the ﬂag of economic democracy will quite likely impair the Korean economy

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The financial sector was one of the key areas in which Korea has worked to meet OECD standards. Through financial liberalisation and reform, Korea is now regarded as a country with an advanced financial system, especially in the areas of banking, insurance and capital markets. For instance, Korea’s financial liberalisation index, as measured by the OECD, jumped from 65% in 1997 to 85.1% in 2006. Furthermore, commercial banks have shown significant development in financial soundness over the past two decades as capital adequacy ratios and non-performing loan ratios have improved

SPOTLIGHT

OECD OBSERVER ROUNDTABLE

Celebrate, but watch for challenges ahead Kwon Tae-shin, President, Korea Economic Research Institute (KERI) A shift from “quantity” to “quality” in economic growth has taken place. Before the 1990s, the Korean economy had rapidly changed and achieved quantitative expansion. Korea finally joined the OECD club in 1996, but it was a mistake to pop the champagne too early as the Asian financial crisis hit its economy in 1997. Yet, we overcame it, and the IMF crisis turned out to be a suffering and a blessing at the same time. Some 16 out of 30 conglomerates were shut down, and people went through the agony of mass layoffs and unemployment. However, the crisis also led to a great transformation of Korea. Its economic foundation was enhanced through the reform of social and economic systems, and corporate governance became more transparent. These must be the greatest achievements over the last 20 years. The challenges we are facing today are as follows: global depression and slowing economic growth in Korea, a low fertility rate and lowering potential growth rate, and idealism in politics and social conflict. These are major concerns for the upcoming two decades in Korea. Its economic growth rate continued to decrease from 6.5% in 2010 to 2.6% in 2015, which though higher than the OECD rate last year has been lower than the global average since 2011, which includes China. Given that the Korean economy is export-oriented, its success depends on when and how the

unusual economic regulations, especially targeting large companies as well as leading to unnecessary social conflicts. Although it originates from a good intention of public interest, newly established regulations under the flag of economic democracy will quite likely impair the efficiency and vitality of Korea’s economy. I hope Korea jumps up to an advanced country level in the next two decades by clearing the aforementioned hurdles. We are standing on the threshold of achieving that status, but we still need to grow more. The OECD recently urged Korea to reform its labour market regulations. This is an inevitable prescription to revitalise the Korean economy. I look forward to popping the champagne again when we make that jump, in the hope that it won’t be too early this time. Visit www.keri.org/web/eng/home

Delivering on promises Ho Jeong Kim, Journalist and Consultant Korea’s 20 years at the OECD crowns a period of remarkable achievement, and this can be said with a hint of pride and without any remorse. Emerging from a colonial past, two wars and a geopolitically tense setting to become one of the most dynamic countries within half a century, Korea’s hard work was rewarded with its accession to the OECD in 1996. The ensuing Asian ﬁnancial crisis has only proved how OECD membership is more than just a coveted trophy, but a reference frame for the Korean society. In the 20 years since it joined the OECD, Korea has replaced the pursuit of

OECD Observer No 308 Q4 2016

SPOTLIGHT

Roundtable on Korea

Well-being in Korea Ranking of well-being topics by users of the Better Life Index in Korea 12% 9.10% 10% 7.91%

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8.42%

8.84%

9.27%

9.50%

10.10%

10.53%

8.91%

6.83%

6% 4%

Ho Jeong Kim

growth for its own sake with growth that lasts, has given social safety nets a stronger focus and business-as-usual practices were examined with a view to reform. The OECD has accompanied Korea through some signiﬁcant changes and commitments. The wider world has witnessed Korea become a provider of development assistance and emerge as a creative force, with its K-culture wave resonating strongly with an international audience. Korea’s 20 years with the OECD has been promising. So what lies ahead? With many commitments made, the stage is now set for Korea to deliver on its promises. Demands to open and become more transparent will grow, while the increasing ﬂow of migration will replace the

2% 0%

ent ent nity nm mu gem viro om nga n C e E ic Civ

s Job

e om

Inc

e ion ng anc cat usi bal Ho Edu ife L k r Wo

Korean users give greater importance to health, safety and life satisfaction.

Korea’s country ranking in the 11 well-being dimensions

Environment

Ranking out of 36 countries Housing

Civic engagement

Income

Health

Jobs

Life satisfaction

Community

Safety

Education

Work-Life balance

The wider world has witnessed Korea emerge as a creative force, with its K-culture wave resonating strongly homogenous society with a diverse one. Demands for better movement of capital, services and goods, and better compliance with business guidelines on corruption and intellectual property rights, as well as labour rights, will also intensify. A fast ageing society, the ever growing role of women and falling fertility rates will bring a renewed focus on health, pensions and education. Korea must also continue to set the pace in Green Growth. Whenever the OECD shares its ﬁndings on our performance, it is in fact encouraging the public to engage, discuss and to challenge. This enriches Korea’s partnership with the OECD, which will mature even further in the years ahead.

9.58%

See www.betterlifeindex.org For notes on Korea’s OECD Better Life Index, visit http://oe.cd/1ge

alth He

n ety ctio Saf isfa sat e f Li

SPOTLIGHT

A SHORT HISTORY

To the Miracle on the Han Donald Johnston, former Secretary-General of the OECD (1996-2006)

messages, not of despair; yes, of considerable sacriﬁce, but suggesting a prosperous future. Since 1998 Korea’s GDP has more than doubled in real terms, and now amounts to US$1.3 trillion! During the past 20 years I have visited Korea several times a year. Indeed, after stepping down from the OECD in 2006 my regular visits have continued. In many ways the Korea I know is unique. Of course it is physically beautiful–and I have yet to enjoy all that beauty– mountains, plains, beaches and the wonderful Jeju Island,

Good education has been central to Korea’s success

©OECD/Nguyen Tien

which I have visited on several occasions. But quite a number of countries have such physical marvels. They do not make Korea unique. It is the people who make Korea unique. Unlike many OECD member countries, Korea does not beneﬁt from an abundance of natural resources. It has engineered its comparative advantages relying on imported materials and energy, and competing with quality exports in world markets.

During my tenure as secretary-general of the OECD, few events gave me as much pleasure as welcoming Korea as a member in the autumn of 1996. At the end of hostilities in 1953 South Korea was one of the poorest countries in the world, having emerged from a bitter conflict, which left much of it in ashes. The toll in human lives was enormous, with as many as 217,000 Korean soldiers and 100,000 civilians killed, along with tens of thousands of UN force soldiers. It seemed impossible that in less than 50 years Korea had rebuilt its physical and human infrastructure and was ready to join the small group of developed countries known by some as the “rich man’s club”. This extraordinary progress on every front became known as the Miracle on the Han, the beautiful river that runs through Seoul on its way to the sea. President Kim Young-sam was in office in 1996 and he was soon to be succeeded by Kim Dae-jung, who assumed office only to be faced with the worst economic downturn since the end of hostilities. Korea suddenly found itself as a victim of the contagious Asian financial crisis, which had its origins in Thailand just months before. The impact of the crisis beginning in late 1997 came under the mandate of Kim Dae-jung. Even economists at the OECD believed that the Miracle on the Han was at an end! The leadership of President Kim Dae-jung and his regular messages to the Korean people were instrumental in surmounting the crisis as no other country has done before nor since. In fact, Korea went from a near 6% economic contraction to over 11% growth in some 18 months!

I believe this Miracle on the Han, which showed its resilience as it recovered from the Asian financial crisis, is a product of the education levels of the Korean people. Their collective response to the financial crisis of the late 1990s also demonstrates this. They understood the messages from President Kim Dae-jung, knew what had to be done, and did it. This thirst for education seems rooted in the culture of Korea. When I read the diaries of the Dutch sailor Hendrik Hamel, a captive for many years in Korea in the 17th century, he described this characteristic as follows: “The nobility and well-to-do people give their children a good education. They take tutors in their service to teach them how to read and write, skills to which this nation is much inclined.” Good education has been central to Korea’s success and it seems that North Koreans have also inherited that trait, with a reported national literacy rate of 99% for those over 15 years of age. That is very encouraging as the peninsula moves, hopefully, towards unification. There is good reason to celebrate this 20th anniversary. Korea has set an example for other emerging market economies to follow. It has even moved from being a recipient of development aid to being a donor and a member of the OECD Development Assistance Committee. The great economist, John Maynard Keynes, advised that one should examine the present, in light of the past, for the purposes of the future. When one does that, it is impossible not to be very optimistic about the future of Korea and its people. For more on Donald Johnston, see http://oe.cd/1lJ

During that period the president invited me regularly to Korea to speak, meet journalists and reinforce his messages. They were

OECD Observer No 308 Q4 2016

SPOTLIGHT

KOREA

Korea’s accession to the OECD: A history membership offered, while the OECD’s decision to commence an informal and exploratory dialogue with the “Dynamic Asian Economies” (DAEs) in 1989, including Korea, was another motivating factor.

Peter Carroll, Tasmanian School of Business and Economics, University of Tasmania, and William Hynes, OECD In 2016 Korea celebrates 20 years of membership in the OECD. In the early 1980s, following a period of remarkably successful economic growth, it commenced a programme of financial liberalisation and then, from 1993, more general economic and regulatory reform. There were three major reasons for the change in approach. The first was the increasing international influence of the market and the second was growing

There were concerns that Korea’s economic and social standards were not yet completely compatible with the OECD principles, which in some ways could be expected. There were four main sticking points in Korea’s accession process: one was the OECD Codes of Liberalisation; second was Korea’s membership of the Group of 77; labour rights formed a third difﬁculty; while the fourth was the country’s developing country status, especially for trade and environmental issues. The possibility of Korean membership was discussed at the OECD in 1990 and soon became entangled with discussions regarding the membership prospects of several Central and Eastern European countries following the break-up of the Soviet bloc. All were sympathetic to Korean membership, and many, including

Membership of OECD formed part of President Kim Young-sam’s globalisation policy

Membership of OECD formed part of President Kim Young-sam’s globalisation policy. Some economists and journalists at home and abroad had expressed scepticism about membership of the OECD, while farmer and social groups were opposed to the aim of full liberalisation. The major reform effort included the decision to attempt to enter the OECD for a variety of related motives. For instance, membership of such an international body would have value in convincing US administrations that Korea was serious about opening its markets. It also added credibility and clout to reform efforts in the face of domestic opposition, notably those in the Seventh Economic and Social Development Plan, 1992-96 and the Liberalisation Blueprint of 1993; indeed, the aim of membership of the OECD was made explicit in the Plan, developed in 1989. There were also the opportunities for policy learning that

As indicated to OECD Secretary-General Jean-Claude Paye by Foreign Minister Lee Sang-ok in 1992, the period to 1996 would be one of increasing Korean engagement and it rapidly became a full participant in the Council Working Party on Shipbuilding, the Development Centre, the Nuclear Energy Agency and the Steel Committee, and was granted observer status in an increasing number of other committees. The process of engagement progressed relatively smoothly with a generally positive OECD Economic Survey of Korea issued in 1994. However, in July of that year, as an early sign of future tensions to come in the formal accession process, the Trade Union Advisory Committee to the OECD (TUAC) made strong representations to the organisation alleging the abuse of trade union rights in Korea, an issue that had not ﬁgured in earlier OECD accession processes. Korea was invited to become an observer on the Employment, Labour and Social Affairs

©OECD

international and domestic pressure for Korea to remove trade restrictions, increasingly important as the Uruguay Round negotiations led to the establishment of the WTO. A third reason was pressure from increasingly powerful industrial groups or chaebols for liberalisation, especially as regards lifting the ceiling on their ownership of bank shares, greater freedom in foreign borrowing and raising the aggregate credit ceiling.

the US, saw Korean accession as a test of the OECD’s openness and ﬂexibility.

Korea’s accession: Korean Foreign Affairs Minister, Gong Ro-Myung shakes hands with OECD Secretary-General Donald Johnston after signing the invitation to join the organisation, 25 October 1996

SPOTLIGHT

A SHORT HISTORY

Committee (ELSAC) in October, which would put it in a better position to respond to TUAC’s assertions.

In March 1995 Korea submitted its application for membership, to the satisfaction of most countries which were keen to see the OECD bringing in new countries and driving global development. Nevertheless, the OECD Council was divided over some issues. Non-European members protested that the criteria proposed by the organisation for assessing the merits of the application were tougher for Korea than for Mexico (1994), the Czech Republic (1995), Hungary (1996), and Poland (1996). After further discussion the matter was resolved and the procedures for accession were agreed. Hence, in the following months Korea underwent a detailed examination that covered its policies and practices relating to capital movements, international investment, international trade, banking, insurance policies, labour relations, education, agriculture, climate change, environment, and maritime transportation. In summary, the examination was followed by agreement on recommendations that its liberalisation policies be accelerated, although Korea

Korea joined the OECD Development Assistance Committee in 2010 (www.oecd.org/dac). At the signing ceremony on 27 November 2009 are (from back row, left to right): Joo Hyung-hwan, DirectorGeneral of Ministry of Strategy and Finance, Angel Gurría, OECD Secretary-General; Oh Joon, Deputy Minister of Ministry of Foreign Affairs; Eckhard Deutscher, DAC Chair; Kim Choong-soo, Ambassador of Korea to the OECD

©Rights reserved/OECD

Foreign Minister Gong Ro-myung, in a letter to the OECD Secretary General in 1996 provided assurances that labour laws would be amended based on recommendations of the Presidential Commission on Industrial Relations reform. But some member countries, as well as TUAC, wanted to see progress of reforms. Indeed, ELSAC deemed that the eventual reform as such did not fully meet the commitments made by the Korean government with respect to freedom of association and the right to collective bargaining (OECD Council document C/M(97)2/PROV). The labour law reform in Korea was a sensitive matter, and put the complexities of the OECD accession process in the public eye. A conﬁdential letter from Foreign Minister Gong was later published in the Financial Times which was “embarrassing for the organisation and disagreeable for one of its members” (OECD Council document C/M(97)2/PROV).

had reportedly agreed to immediately implement only some 65% of the OECD’s Codes of Liberalisation. Korea maintained that they “did their best” and that signiﬁcant progress had been achieved in the liberalisation of capital movements, services and investment. Korea reasoned

Welcoming a new Asian member country was a major step forward that progressive liberalisation of policies was necessary for the stability of the macro-economy. They also felt that more weight could be given to Korea’s track record as a whole and that past efforts strongly pointed in the direction of greater liberalisation. In its final report to the Council the Financial Markets Committee drew comfort from the Korean authorities’ statement that the government would “continue its efforts towards financial liberalisation, including the liberalisation of international capital movements and cross-border financial services” (see paragraph 14 of Annex II in the OECD Council document C(96)168). It nonetheless required a review of financial policies within two years of accession. Korea took up membership of the OECD in December 1996, crowning an era of strong growth and development. Though its advances and assurances in meeting OECD membership requirements had been met, unusually, the organisation continued to monitor its progress on labour relations reform for another

decade, until 2007. For the organisation, welcoming a new Asian member country was a major step forward in consolidating its own opening and outreach in a burgeoning and increasingly important region, in line with the founding aims of the OECD. In the accession ceremony, Foreign Minister Gong expressed the hope that OECD accession would “be remembered as an important turning point in the annals of Korean diplomacy and economic history”. References Burton, John, Taylor, Robert (1996), “S Korea braces for restructuring: OECD membership will promote shift towards market economy”, Financial Times, London Kang, Susan (2008), “Contestation and Collectivities: Protecting Labor Organizing Rights in the Global Economy”, a doctoral dissertation submitted at the University of Minnesota Lee, Chung, Lee, Keun, and Lee, Kangkook (2002), “Chaebols, Financial Liberalization and Economic Crisis: Transformation of Quasi-Internal Organization in Korea”, Asian Economic Journal 2002, Vol. 16 No. 1 OECD (1994), OECD Economic Surveys 1993-94 Korea, OECD Publishing Salzman, James (2000), “Labor Rights, Globalisation and Institutions: the role and inﬂuence of the Organization for Economic Cooperation and Development”, Michigan Journal of International Law, Vol. 21 Tae-Shin Kwon (2008), “Korea’s Experience of OECD Peer Reviews”, Shaping Policy Reform and Peer Review in Southeast Asia: Integrating Economies amid Diversity, OECD Publishing Visit www.oecd.org/korea and www.oecd.org/ investment/investment-policy/codes.htm

OECD Observer No 308 Q4 2016

SPOTLIGHT

KOREA

Korea in the OECD Observer: A selection from the archives Koreans online One country with an exemplary record in broadband is Korea, host of the 2008 OECD ministerial meeting on the Future of the Internet Economy. On broadband reach it is the seventh in the OECD in December 2007, for ﬁbre-optics it lies second only to Japan and is well ahead of the rest of the ﬁeld, and for download speeds, it is in a comfortable third, after France and Japan. Korea is also a leader in mobile technology. Some 94% of households had access to broadband via computers or mobile phones in 2006, three times more than in 2000, and many hotels and public places provide broadband connections for free. In fact, Koreans are so “wired” that Internet addiction is now seen as a treatable condition. (2008), “Koreans online”, OECD Observer No 268, June

Korea: Better social policies for a stronger economy

Korea’s young workers

Knowledge is power!

Credit to Korea

The Korean economic wave continues forward, with strong growth and low unemployment expected in 2008-09. But the upsurge appears to have left some younger people behind. True, at 10%, Korean youth unemployment is below the OECD average of nearer 15%, and though the country has a lower employment rate, this reﬂects a much lower school drop-out rate and high participation in education.

Korea’s economic transformation has been one of the most remarkable of the past century. From the ashes of a terrible war, in a short period of time it rose to become an industrial power, joining the OECD in 1996. Korea has now set itself the ambition of becoming a knowledge-based economy.

Korea’s economic recovery in 2002–with GDP growth of 6% despite a sluggish world economy–reﬂects the success of its economic restructuring programme and the underlying dynamism of the economy. But this should not lead to complacency about resolving remaining structural weaknesses and addressing emerging imbalances, the latest OECD Economic Survey of Korea says.

Willem Adema, Peter Tergeist and Raymond Torres, OECD Directorate for Employment, Labour and Social Aﬀairs

(2003), “Credit to Korea” OECD Observer No 236, March

Adema, Willem, Peter Tergeist and Raymond Torres (2000), “Korea: Better social policies for a stronger economy”, OECD Observer No 223, October

“Korea’s young workers” OECD Observer No 264-265, December 2007-January 2008

“Knowledge is power!” OECD Observer No 240-241, December 2003

Crisis, what crisis, is a tempting way to describe Korea these days. With the economy expanding rapidly again and unemployment below 4%, which is low by most standards, the traumatic effects of the ﬁnancial crisis of late 1997 are receding in many people’s memories.

(1998) OECD Economic Surveys - Korea, (Korean version)

More rights, please

Korea and the OECD: A decade of progress

Korea’s work-life balance Development and Korea: policies for sustainable growth Yes we could

Okyu Kwon, Deputy Prime Minister and Minister of Finance and Economy, Korea

Hee-Jung Kim, Minister of Gender Equality and Family, Republic of Korea

In 1996 just when the Korean government took the initiative and worked hard to join the OECD, some media and civil society organisations were reluctant to extend their support. They worried, saying that it would be too premature for Korea to join the rich man’s club and would cause us great losses.

Of the abundant resources given to mankind, what is the most underused resource of our time? Without a doubt, women! Kim, Hee-Jung (2015), “Korea’s work-life balance policies for sustainable growth”, OECD Yearbook 2015

Kwon, Okyu (2006), “Korea and the OECD: A decade of progress”, OECD Observer No 257, October

We’ll start with a close-up of a woman on her knees. She seems to be scrubbing some tiles. We track back and see that in fact she’s scrubbing the tyre tracks off a forecourt. Back a bit more and we see that she and her colleagues are in front of a huge conference centre. It’s covered with banners in Korean and English announcing the Fourth High-Level Forum on Aid Effectiveness, HLF4. There’s a metaphor there somewhere, and it’s called Busan, the host city and the world’s ﬁfth largest port. (2011), “Development and Korea: Yes we could”, OECD Observer No 287, Q4

Science and technology in Korea South Korea has experienced remarkable economic growth, with real per capita income increasing about ten-fold between the mid-1950s and today, when it has reached nearly US$10,000. In many industrial sectors, such as semiconductors, electronics, shipbuilding and steel, it ranks among the world leaders. As it stands on the threshold of OECD membership, Korea is determined to be one of the major industrialised nations within a decade. One of the main conditions for meeting that goal is to raise the standard of its technology so that in time it can compete on an equal footing with the most highly advanced economies.

©OECD

Aubert, Jean-Eric (1996), “Science and technology in Korea”, OECD Observer No 200, June-July Drive your way: Secretary-General Angel Gurría admires Hyundai Motor Company’s shining works in Seoul, Korea, September 2006.

(1992) Technological change in the Korean electronics industry

All articles are available at www.oecdobserver.org, except for articles published before 1999, which can be searched on the OECD iLibrary (www.oecd-ilibrary.org).

ODE TO MY FATHER An impressive 14 million viewers–that’s not far short of a third of Korea’s population–have flocked to see the film, “Ode to My Father”. Taking you back to the outbreak of the Korean War in the 1950s, “Ode to My Father” depicts in vivid imagery the struggles and achievements that have shaped contemporary Korean history. It is told through the life story of one family man, and though a work of fiction, it evokes real historical events as seen through the eyes of ordinary Koreans. The film has been screened at the OECD in Paris during 2016 to mark the country’s 20th anniversary of membership of the organisation, courtesy of the Korean delegation.

SPOTLIGHT

A SHORT HISTORY

SPOTLIGHT

KOREA

People at the OECD My name is Ji Eun Chung and I have been working as a policy analyst in the Directorate for Education and Skills (EDU)

©Rights reserved

Then I moved to work on the Survey of Adult Skills (PIAAC) project, which is the ﬁrst OECD study that measures adult competencies in 32 countries and regions around the world. Working at the OECD

Eun Jung Kim My name is Eun Jung Kim, and I work as a statistician in the Economics Department at the OECD. I am currently in charge of collecting and analysing relevant statistics for the OECD Economic Surveys of Germany, Estonia and Slovakia, and the OECD Economic Outlook. Prior to joining the organisation, I worked as a junior analyst of insurance contracts and claim records for a private insurance company, after graduating from Korea University. Initially, I came to Paris to study. In 2007, I applied for an internship at the OECD and started to work in the national accounts division of the Statistics

James Kim

©Michael Dean/OECD Observer

My name is James Kim and I work as an Information & Communications Technology Ofﬁcer in the OECD Development Co-operation Directorate (DCD). I’m a Korean-American born in

since 2011. I manage the Fostering Good Education for All project, which aims to address educational inequality in close collaboration with the OECD’s inclusive growth initiative. I ﬁrst joined the OECD as a young professional–I had studied public policies at Seoul National University and economics at the University of London–and contributed to one of the organisation’s leading publications entitled Education at a Glance.

has expanded my horizon tremendously. It allowed me to work on large scale international surveys, gain knowledge of various country policies and learn from cross-cutting projects spanning several multidisciplinary topics on the economic and social front. In particular, I have been very fortunate to work with wonderful people from different international backgrounds. I would like to continue contributing to making our societies fairer and more inclusive by serving our member and partner countries to the best of my abilities, especially for those who are socio-economically disadvantaged.

Directorate during the summer. And I am still here today. This makes me one of the longest serving Korean staff now. I am grateful to be working here and I ﬁnd it rewarding to contribute to improving member countries’ policy making on diverse issues. I also enjoy sharing knowledge with colleagues from different backgrounds and with different ﬁelds of expertise as well as giving each other new insights when dealing with challenging situations.

©Michael Dean/OECD Observer

Ji Eun Chung

This year, Korea is celebrating the 20th anniversary of its membership. I expect

the co-operation between Korea and the OECD will be further strengthened over the next 20 years.

the United States, brought up within the context of the Korean culture with all its traditions and customs, and now I live in Paris with my wife and three French-born children. It is a privilege to work in the OECD and live in France. Some would label me multinational given my background, and I have to admit that I never really thought of that as I never really felt fully part of any one country. However, now having been given the chance to reﬂect on my status on the 20th anniversary of Korea’s joining the OECD, I would say being a multinational is a good way to describe my unique personal experience working and living among such a diverse international group of people. My Korean-American-French status gives me a global identity and deﬁnitely affects my global perspective. It gives me

opportunities to meet new people and shapes my experiences, which allow me to contribute to my local community in Paris and also to the international community. The OECD’s vision, “better policies for better lives” makes more and more sense to me, and reinforces my feeling that the more we get to know about one another and the stories behind the statistics, graphs and data we produce, the more it will give colour, character and more meaning to our work. The excellent and complex work we do for our member countries opens honest conversations over policy routes to better lives and brings the political and stakeholder community closer together, which is vital in today’s fraught atmosphere. As a global citizen, let me add a different take on OECD’s motto: Better together than apart.

SPOTLIGHT

OECD.ORG

economic development from the London School of Economics and Political Science.

I joined the OECD family in 2012, ﬁrst as part of the Global Energy Policy Ofﬁce of the International Energy Agency (IEA), a sister body of the OECD. Prior to joining the IEA, I worked in the private sector analysing power market needs and collaborated with developers and government clients to explore investment opportunities. I also travelled extensively in the Middle East, India, Southeast Asia and South America while based in Seoul. I am a Korean national and was raised in Washington DC. I studied philosophy, politics and economics at the University of Oxford for my undergraduate degree, and received a master of science in local

OECD Young Professionals Programme Ready for a career in global policy making? Then become an OECD YP. When opting for a Young Professionals Programme you have to choose the best. At the OECD our YPs work with experienced and enthusiastic people from a rich diversity of cultures, languages and professional backgrounds. YPs research and analyse current policy issues under the supervision of top professionals, and participate in conferences. We match assignments to academic background, professional experience, and personal preference. And because the assignments are associated with the organisation’s work programme and include knowledge sharing sessions with senior staff, you know you are working on policy issues that matter. Not only do YPs have access to the OECD’s staff

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My name is Yerim Park and I am currently a project co-ordinator in the OECD Global Relations Secretariat, Eurasia division. The international aspect of my work is what I ﬁnd most interesting, through projects, diversity of content, communication and colleagues. I have worked on projects with experts and stakeholders from all over the world, which has been an enriching experience. As project co-ordinator at the OECD, I help implement projects that support non-member countries, for instance, towards development of policy recommendations, capacity building and devising sustainable reforms, while drawing from OECD experiences and best practices. Working on the Ukraine Sector Competitiveness Strategy project in 2015

was one such invaluable experience, as the collaboration took place at a time of major change in that country.

training programmes, but each YP spends six months working with a mentor. You can also seek advice from former YPs and tap into the networking opportunities within the OECD and beyond. In fact, as a YP, you become part of a network of more than 60,000 policy makers and shapers who come to the OECD for workshops, meetings and conferences throughout year. YP candidates will ideally have a graduate degree, excellent English or French, and two years of relevant experience. YPs work on fixed-term appointments of two years, and are based in the OECD’s headquarters in Paris, France. Candidates must be born on or after 1 January 1981 and have OECD member country nationality. We offer competitive salaries and an attractive benefits package. To find out more about the next available programme, qualifications and eligibility, go to: www.oecd.org/careers/ypp

©Andrew Wheeler/OECD

Yerim Park

OECD Observer No 308 Q4 2016

How do you measure

a Better Life? For nearly a decade, the OECD has been working to identify societal progress – ways that move us beyond GDP to examine the issues that impact people’s lives. The OECD’s Better Life Index is an interactive tool that invites the public to share their thoughts on what factors contribute to a better life and to compare well-being across different countries on a range of topics such as clean air, education, income and health. Over ﬁve million visitors from around the world have used the Better Life Index and more than 90 000 people have created and shared their personal Better Life Index with the OECD. This feedback has allowed us to identify life satisfaction, education and health as top well-being priorities. What is most important to you?

Create and share your Better Life Index with us at: www.oecdbetterlifeindex.org

The OECD Better Life Index enables you to rate countries according to the importance you give 11 topics. Each petal of the ﬂower represents one topic and the size of the petal the country’s rating for that topic.

Find out more about how life compares in OECD countries by ordering the book How’s Life? Measuring Well-Being. Available now on the OECD Online Bookshop: http://www.oecd.org/bookshop

OUTLOOK

How to escape from the low-growth trap

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Catherine Mann, OECD Chief Economist

Now is an opportune time to deploy effective fiscal initiatives and promote inclusive trade policies. For the last five years the global economy has been in a low-growth trap, with growth disappointingly low and stuck at around 3% per year. Persistent growth shortfalls have weighed on future output expectations and thereby reduced current spending and potential output gains. Around the world, private investment has been weak, public investment has slowed, and global trade growth has collapsed, all of which have limited the improvements in employment, labour productivity and wages needed to support sustainable gains in living standards. Overall, a slowdown in structural policy ambition and policy incoherence have slowed business dynamism, trapped resources in unproductive firms, weakened financial institutions and undermined productivity growth. In the face of these limited prospects, the OECD has argued in previous Economic Outlooks that fiscal, monetary and structural policies need to be deployed comprehensively and collectively for economies to grow sufficiently to make good on promises to their citizens. The projections in the latest Economic Outlook offer the prospect that fiscal initiatives could catalyse private economic activity and push the global economy to the modestly higher growth rate

of around 3.5% by 2018. Durable exit from the low-growth trap depends on policy choices beyond those of the monetary authorities–that is, of fiscal and structural, including trade policies– as well as on concerted and effective implementation. Collective fiscal action undertaken by all countries, including a more expansionary stance than planned in many countries in Europe, would support domestic and global growth even for those economies, who by virtue of specific circumstances, need to consolidate their fiscal positions or pursue a more neutral stance. Some might argue that there is no space for such fiscal initiatives, given the heavy public debt burden in many economies. In fact, following five years of intense fiscal consolidation, debt-toGDP ratios in most advanced countries have flattened. It is time to focus on expanding the denominator–GDP growth. The latest Economic Outlook argues that the current conjuncture of extraordinarily accommodative monetary policy with very low interest rates opens a window of opportunity to deploy fiscal initiatives. Fiscal space has been created by lower interest payments on rolled-over debt, which also increases gauges of market access and of debt sustainability. On average, OECD economies could deploy deficit-financed fiscal initiatives for three to four years, while still leaving debt-to-GDP ratios unchanged in the long term. A front-loaded effort could allow deficit finance to taper sooner and put the debt-to-GDP ratio sustainably on a downward path. The key is to deploy the right kind of fiscal initiatives that support demand in the short run and supply in the long run and address not just growth challenges but also inequality concerns. These include soft investments in education and R&D along with hard investment in public infrastructures. Such fiscal initiatives would improve outcomes for demand and supply potential even more for economies suffering from long-term unemployment, when undertaken collectively, and when

fiscal initiatives are complemented by country-specific structural policies put together in a coherent package. The mix is different for different countries. Against this backdrop of fiscal initiatives, reviving trade growth through better policies would help to push the global economy out of the low-growth trap, as well as support revived productivity growth. In the latest Economic Outlook trade growth is projected to increase

In many OECD countries, more than 25% of jobs depend on foreign demand from a dismal ratio of global trade-toGDP growth of around 0.8 to be about on par with global output growth–remaining much less than the multiple of 2 enjoyed over the last few decades. This sluggish trade growth compared to historical experience shaves some 0.2 percentage point from total factor productivity growth–which may seem minor–but is meaningful given the slow productivity growth of some 0.5% per year during the post-crisis period. Some argue that slowing globalisation would temper the brunt of adjustments to workers and firms. The Economic Outlook suggests that protectionism and inevitable trade retaliation would offset much of the effects of the fiscal initiatives on domestic and global growth, raise prices, harm living standards, and leave countries in a worsened fiscal position. Trade protectionism shelters some jobs, but worsens prospects and lowers well-being for many others. In many OECD countries, more than 25% of jobs depend on foreign demand. Instead, policy makers need to implement the structural policy packages that create more job opportunities, increase business dynamism, promote successful reallocation and enhance policies to ensure that gains from trade are better shared. Fortunately, the country-specific policy packages that make fiscal initiatives more effective in promoting demand growth and supply potential also help to make growth more inclusive. The transition path

COUNTRY SNAPSHOTS 2017-18

Outlook summary OECD area, % change, unless otherwise indicated

Real GDP growth World OECD US Euro area Japan Non-OECD China Output gap (% of potential GDP) Unemployment rate, % of labour force Inﬂation Fiscal balance, % of GDP World real trade growth

2016

2017 %

2018

2.9 1.7 1.5 1.7 0.8 4.0 6.7 -1.4 6.3 1.0 -3.1 1.9

3.3 2.0 2.3 1.6 1.0 4.5 6.4 -0.9 6.1 1.7 -3.0 2.9

3.6 2.3 3.0 1.7 0.8 4.6 6.1 0.0 6.0 2.1 -2.9 3.2

Source: OECD Economic Outlook No 100

to a more balanced policy set and higher sustainable growth involves financial risks. But so too does the status quo dependence on extraordinary monetary policy. Pricing distortions in financial markets abound. Yield curves are still fairly flat, with negative interest rates. Pricing of credit risk

The risk of a growing divergence in monetary policy stances in the major economies could be a new source of financial market tensions has narrowed even as issuance of riskier bonds has increased. Real estate prices continue to advance in many markets, even in the face of attempted tempering by macro-prudential measures. Expectations in currency markets are on edge as evidenced by high measures of currency volatility. These financial distortions and risks expose vulnerable balance sheets of firms in emerging markets, and challenge bank profitability and the long-term stability of pension schemes in advanced economies. The fiscal initiatives in conjunction with trade and structural policies, as outlined in the scenarios in the Economic Outlook, should revive expectations for faster and

OUTLOOK

ECONOMIC OUTLOOK

http://dx.doi.org/10.1787/888933438659

more inclusive growth, thus allowing monetary policy to move toward a more neutral stance in the US at least, and possibly other countries as well. The risk of a growing divergence in monetary policy stances in the major economies over the next two years could be a new source of financial market tensions even as growth picks up, thus putting a premium on collective action by countries to revive growth in tandem. In sum, policy makers should closely examine fiscal space; low interest rates enable many countries to boost hard and soft infrastructure and other growthenhancing initiatives. Avoiding trade pitfalls, coupled with social measures to better share the gains from globalisation and technological change, are key policy priorities. Using the window of opportunity created by monetary policy and following through on fiscal and structural measures should raise growth expectations and create the necessary momentum for the global economy to escape the low-growth trap. Editorial from OECD Economic Outlook No 100, November 2016 Visit www.oecd.org/oecdeconomicoutlook

Argentina Australia Austria Belgium Brazil Canada Chile China (People’s Republic of) Colombia Costa Rica Czech Republic Denmark Estonia Euro area Finland France Germany Greece Hungary Iceland India Indonesia Ireland Israel Italy Japan Korea Latvia Lithuania Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Russian Federation Slovak Republic Slovenia South Africa Spain Sweden Switzerland Turkey United Kingdom United States

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OECD Observer No 308 Q4 2016

OUTLOOK

Country snapshots 2017-18 Extracts from OECD Economic Outlook No 100, November 2016. For full texts, order at www.oecd.org/bookshop or read at www.oecd-ilibrary.org

Australia The country snapshots in the following pages are extracted from OECD Economic Outlook No 100, November 2016. For details and updates, visit www.oecd.org/oecd economicoutlook Presenting the OECD’s twice-yearly view of the major economic trends and prospects for the next two years, the OECD Economic Outlook puts forward a consistent set of projections for output, employment, government spending, prices and current balances for over 40 countries. Each issue includes a general assessment, chapters summarising key developments, projections for individual countries, an extensive statistical annex of key economic data, charts, tables and more. The OECD Economic Outlook is available on i-Library at: http://www.oecd-ilibrary.org/economics/oecd-economicoutlook_16097408

Tax reform should be core Economic growth is projected to pick up to 3% by 2018. The decline in resource-sector investment will tail off and the non-resource sector will be supported by a steady increase in household consumption and investment as wages and employment rise. Further falls in unemployment will help reduce inequality and are not expected to generate strong inflationary pressures. Monetary policy tightening is expected to commence towards the end of 2017 and this is appropriate given likely monetarypolicy developments elsewhere, the cyclical development of the domestic economy and the need to unwind tensions from the low-interest environment, notably in the housing market, which has in many places experienced rising prices for some time. The government envisages fiscal consolidation. In the event of disappointing growth, however, fiscal rather than monetary support should play the leading role given the housing-market concerns and fiscal leeway. Tax reform should be a core element of structural policy.

GDP growth 2013

2016

Current prices AUD billion

1 555.6

2017

2018

% real change

2.7

2.6

3.1

Austria Solid job creation

Argentina Rebuilding confidence Economic growth is projected to rebound strongly in 2017 and 2018 as the impact of recent reforms and changes in economic policy start to gain traction. Inflation remains high but it will gradually decrease towards the central bank’s target owing to widening economic slack and as the effect of administrative price increases and past currency depreciation wear off. Stronger growth will reduce unemployment from its current rate of 8.5%. Rebuilding confidence in macroeconomic policies is a top priority. The reform of the national statistics agency has improved its credibility and enabled the central bank to introduce inflation targeting. Interest rates were increased sharply early in 2016 to contain inflationary and exchange rate pressures, but are slowly coming down as these tensions fade. Monetary policy remains restrictive, but it should loosen progressively as inflation declines.

2016

Current prices ARS billion

3 348.3

Easing restrictive entry regulations in retail trade and liberal professions would improve labour market prospects, including for migrants, and intensify competition, innovation and growth. Further consolidation of banks would improve cost efﬁciency, but care would have to be taken to avoid reductions in competition and the creation of institutions that are too big to fail. GDP growth 2013

2017

2018

% real change

-1.7

2.9

3.4

2016

Current prices EUR billion

322.4

GDP growth 2013

After four years of disappointing growth, economic activity picked up in 2016. It has been supported by a ﬁscal reform that boosted household disposable income, a catch-up of investment and solid job creation, especially among elderly, women and immigrants. These factors will continue to support growth in 2017 and, to a lesser extent, in 2018.

2017

2018

% real change

1.5

1.3

Belgium

Canada

Low productivity growth

Growth to strengthen outside resource sector

Economic growth is projected to rise only slightly over the next two years. Sluggish real wage growth will hold back private consumption, although lower taxation of labour will support employment. Investment is moderate, despite high profit margins and favourable financial conditions. Consumer price inflation is projected to be stable at under 2%.

Economic growth is projected to increase to 2.3% in 2018. As contraction in the resources sector slows, activity in the rest of the economy is projected to strengthen. Non-energy exports should continue to beneﬁt from stronger export market growth and earlier exchange rate depreciation. Consumer price inﬂation should pick up to around 2% as the effect of falling energy prices fades and excess capacity is gradually eliminated.

Productivity growth has been lower than in most other OECD countries in recent years. It would be boosted by structural reforms that remove barriers to entrepreneurship, strengthen innovation, reduce skill mismatches and foster labour mobility. Improving educational outcomes and labour force participation of vulnerable groups, including ﬁrst and second-generation immigrants, would raise productivity and enhance inclusive growth. House prices and household mortgage debt have increased in recent years, although prudential measures and improvements in bank balance sheets have mitigated the associated risks to the real economy.

OUTLOOK

ECONOMIC OUTLOOK

The moderately expansionary policy stance in the 2016 federal budget will help to speed the economy’s return to full employment. It also increases scope to raise interest rates, which would mitigate financial stability risks arising from high and rising house prices and household debt. A gradual removal of monetary stimulus is projected from late 2017 to stabilise inflation at around the 2% midpoint of the official target range. Macroprudential measures have been strengthened recently, but may need to be tightened further and targeted regionally to reduce financial stability risks.

GDP growth 2013

2016

Current prices EUR billion

391.7

2017

2018

% real change

1.2

1.3

1.5

GDP growth 2015

2016

Current prices CAD billion

1 983.3

2017

2018

% real change

1.2

2.1

2.3

Brazil Chile

Fiscal adjustment needed The economy is emerging from a severe and protracted recession. Political uncertainty has diminished, consumer and business confidence are rising and investment has strengthened. However, unemployment is projected to continue rising until 2017 and decline only gradually thereafter. Inflation will gradually return into the target range. The fiscal stance is mildly contractionary over the projection period, which strikes an adequate balance between macroeconomic stability requirements and the need to restore the sustainability of public finances through a credible medium-term consolidation path. An effective fiscal adjustment would allow monetary policy to loosen further and support a recovery of investment. Raising productivity will depend on strengthening competition, including through lower trade barriers, fewer administrative burdens and improvements in infrastructure.

Growth to edge up Economic growth moderated in 2016, reflecting weaker commodity prices and external demand, while consumer and business confidence have been fragile. Growth is projected to edge up in 2017 and 2018 as a somewhat stronger global economy underpins a gradual recovery in investment and private consumption. As the effects of past currency depreciation wear off, inflation will fall into the central bank’s tolerance range. Monetary policy remains supportive, with the policy interest rate at 3.5%. Recent measures to boost productivity and strengthen investment may help to diversify the economy and support more sustainable growth. However, more needs to be done to address skill mismatches and tackle inequality.

GDP growth 2013

2013

2016

Current prices BRL billion

5 316.5

2016

Current prices CLP billion

GDP growth 2017

2018

137 229.6

2017

2018

% real change

1.7

2.5

2.6

% real change

-3.4

0.0

1.2

OECD Observer No 308 Q4 2016

OUTLOOK

China (People’s Republic of)

Costa Rica

Risks are rising

Strong recovery but high unemployment

Economic growth is being supported by stimulus, but is set to edge down further to 6.1% by 2018. At the same time, risks are rising. The economy is undergoing transitions on several fronts. Private investment will be reinvigorated by the removal of entry restrictions in some service industries, but held back by adjustment in several heavy industries. Housing prices are again rising fast in the bigger cities, but working off housing inventories in smaller cities will take time. Consumption growth is set to hold up, especially as incomes rise and urbanisation continues. Reductions in excess capacity will ease downward pressure on producer prices but consumer price inﬂation will remain low. Import demand for goods will be damped by on-shoring, while services imports, in particular tourism, will grow rapidly. Exports will be held back by weak global demand and loss of competitiveness.

The economy is projected to continue to expand at a strong pace. Growth will be driven by robust household consumption and increased exports due to stronger demand in the US. Investment will be led by public infrastructure planned in the coming years. Inﬂation is starting to pick up and will return to the central bank’s target range of 2-4% at the end of 2016. Although a strong recovery is under way, unemployment rates remain high, especially for the poor who also suffer from high informality and are increasingly leaving the labour force. Targeted policies are needed to make the labour market more inclusive, especially for women. Improving the quality of education and enhancing the effectiveness of cash transfers would help reduce high poverty. GDP growth

Fiscal policy, including via the policy banks, is very expansionary. Monetary policy prudence is called for so as not to aggravate imbalances. Removing implicit public guarantees and ending bailouts would make for better and more market-based pricing of risk. Corporate debt has risen substantially to high levels and the enterprise sector therefore needs to deleverage. Supply-side reforms to cut excess capacity need to accelerate and bankruptcy of zombie ﬁrms be made easier. Leveraged investment in asset markets should be contained and monitored. GDP growth 2013

2016

Current prices CNY trillion

59.5

2017

2018

% real change

6.7

6.4

6.1

Colombia Growth to pick up Economic growth is projected to pick up in 2017 and 2018, driven by stronger external demand and a recovery in agriculture following the end of El Niño. The current account deficit remains high, but is projected to narrow gradually as the sharp peso depreciation contains imports and spurs non-traditional exports. Inequalities remain high despite a slight decline in unemployment. Inflation remains high but is declining as the effects of temporary shocks, such as the past depreciation and weather-related agricultural price hikes, have started to wane. The central bank raised interest rates earlier in the year and managed successfully to contain inflation expectations. Monetary policy can ease gradually as inflation continues to decline. Approving the financial conglomerates law can help reduce risks. Structural reforms in education, health and infrastructure, and reducing informality with reforms in non-wage labour costs, should make growth broader based and more inclusive. GDP growth 2013

2016

Current prices CRC trillion

24.8

2017

4.1

4.0

2.1

2.5

Stable growth Stable economic growth is projected for 2017 and 2018. Solid labour demand will push unemployment towards its lowest rate in the last two decades, supporting consumption. Investment was cut sharply in 2016 due to the transition in EU funding programmes, but is projected to rebound in 2017. Rising cost pressures will push consumer price inflation to the 2% target during 2017. The central bank has committed to preventing exchange rate appreciation against the euro until at least the second quarter of 2017, to insure against deflationary forces. The policy rate could then cautiously be lifted, as the deflationary threat recedes, with fiscal policy supporting demand if needed. Structural policies addressing skill shortages and raising productivity would help sustain the expansion and increase inclusiveness. These include expanding childcare, increasing incentives for business R&D and reducing entry and exit barriers for firms. GDP growth 2013

2016

Current prices CZK billion

4 098.1

2017

2018

% real change

2.4

Power of prognosis The OECD Economic Outlook

ISBN 978-92-64-26758-9 www.oecd.org/bookshop 2.9

4.0

Czech Republic

2018

% real change

2018

% real change

For forward-thinking decision makers 2016

Current prices COP trillion

710.5

2013

2.5

2.6

COUNTRY SNAPSHOTS 2017-18

Denmark Investment picking up Economic growth is projected to gradually strengthen to 1.9% in 2018 fuelled by investment and exports. Household consumption growth will remain robust, backed by employment growth, higher real wages and rising property prices. Both residential and business investment will pick up due to low interest rates and increasing capacity utilisation. The current account surplus will remain sizeable. Implementation of a proposed comprehensive package of reforms addressing a number of structural challenges, such as strengthening work incentives, fostering medium-term ﬁscal sustainability and boosting productivity, would improve economic performance and raise incomes. Frontloading property tax reform would help to rein-in an increasingly buoyant housing market and make the tax mix more growth friendly. GDP growth 2013

2016

Current prices DKK billion

1 929.7

2017

2018

% real change

1.0

1.5

OUTLOOK

ECONOMIC OUTLOOK

uncertainties about European integration. High unemployment and modest wage growth will hold back private consumption, while exports will be hampered by soft global trade and by weaker growth in the UK following the Brexit referendum. Inflation is set to rise very gradually. Across euro area countries, major differences in growth and unemployment prospects will persist. The monetary policy stance should remain accommodative until inflation is clearly rising to the target of near 2%. However, monetary policy has become overburdened and should get more support from fiscal and structural policies. The projected fiscal stance is only slightly expansionary: a stronger fiscal stimulus with accompanying growth-friendly changes in the spending and taxation structure would rebalance the policy mix and support long-term growth. Completing the single market in services and network sectors would boost investment and productivity. Faster resolution of non-performing loans is also essential for stronger investment and may require establishing asset management companies and waiving existing bail-in procedures. Completion of the banking union would strengthen confidence and resilience to future crises.

1.9 GDP growth

Estonia

2015

Gaining momentum

10 387.8

GDP growth is projected to gain momentum in 2017 and reach 2.9% in 2018, mainly driven by domestic demand. Private consumption will remain robust and public investment will pick up, sustained by EU funds. Despite a favourable business environment and good financing conditions, private investment will recover only slowly. Exports will strengthen backed by increasing external demand. However, maintaining price competitiveness will be challenging due to increasing labour costs. Fiscal policy will ease slightly but remain tighter than the fiscal rule of a structural balanced budget. Remaining inefficiencies in insolvency procedures, barriers to SME lending and labour shortages all undermine capital spending and productivity growth, calling for reforming the legal system, promoting new forms of business financing and strengthening the supply of marketable skills further. GDP growth 2013

2016

Current prices EUR billion

18.9

2016

Current prices EUR billion

2017

2018

% real change

1.1

2.4

2.9

Euro area

2017

2018

% real change

1.7

1.6

1.7

Finland Coming out of recession Rising private consumption and investment growth have pulled the economy out of recession. However, output growth is projected to remain sluggish over the coming years, as domestic demand growth is projected to weaken again, although export growth will rise significantly as external demand edges up and competitiveness improves. Unemployment will decline modestly and inflation will pick up only slowly. Substantial progress has been made on implementing the government’s reform programme. The social partners have agreed on a Competitiveness Pact, which lowers labour costs in 2017, and on wage moderation over the following years. Enhancing labour market flexibility would raise the employment rate further. Health care reform is also moving forward, with the decisions to shift some responsibilities from municipalities to newly-created regional institutions in 2019 and reform funding mechanisms. After easing in 2016, the stance of fiscal policy is set to be broadly neutral in 2017-18.

Investment weakness GDP growth

Economic growth is projected to remain subdued. Despite supportive monetary conditions, investment weakness will persist, reﬂecting low demand, banking sector fragilities and

2013

2016

Current prices EUR billion

203.3

2017

2018

% real change

0.9

1.1

OECD Observer No 308 Q4 2016

OUTLOOK

France

Greece

Business investment to pick up

Structural reforms starting to bear fruit

GDP growth is projected to edge up to 1.6% by 2018, as tax cuts and faster job growth support stronger private consumption. Business investment should also pick up owing to tax reductions and low interest rates. In turn, the unemployment rate should continue to gradually fall, thanks to lower social security contributions, hiring subsidies and signiﬁcant upscaling of training available to jobseekers. Inﬂation will remain low, as slack persists.

Growth has rebounded in the second half of 2016 and is projected to gain strength in 2017 and 2018 as structural reforms start to bear fruit, the conclusion of a policy review with creditors raises business and consumer conﬁdence and the economic and political environment stabilises. Exports of services are underperforming because of structural rigidities and capital controls (which particularly affect the export revenue from the shipping industry). Employment is projected to increase but unemployment remains far too high.

A continued reduction in debt servicing costs and some spending restraint is projected to bring the fiscal deficit down to just below 3% of GDP in 2018. Tax and social security cuts have reduced labour costs and improved the investment climate. A recent labour law reform clarifies conditions for dismissals and gives more importance to firm-level agreements on working time. GDP growth 2015

2016

Current prices EUR billion

2 181.1

2017

2018

% real change

1.2

1.3

The Guaranteed Minimum Income should help address rising poverty and make growth more inclusive. The implementation of key structural reforms to reduce the regulatory burden and ease regulation in the energy and transport sectors will boost productivity and growth. The high level of non-performing loans undermines credit growth, holding back investment. To deal with this, the authorities should implement already legislated incentives and performance targets for banks to monitor their progress in reducing bad debt.

1.6 GDP growth 2013

2016

Current prices EUR billion

180.5

2017

2018

% real change

0.0

1.3

1.9

Germany Solid growth Economic growth is projected to remain solid, as a robust labour market, low interest rates and a mildly expansionary ﬁscal stance underpin consumption and residential investment. Demand from emerging market economies and euro area countries is expected to strengthen only slowly, holding back business investment. The unemployment rate will remain at historic lows. The current account surplus will fall somewhat but will remain high. Budgetary policy needs to provide even more support to counter subdued demand in the euro area and to address key structural weaknesses holding back inclusive growth. Reforms to remove barriers to entry and competition in professional services, in telecommunications, postal and rail transport services and crafts would strengthen entrepreneurship, productivity and investment. More effective requirements for banks to separate investment from retail banking, and stricter leverage ratio requirements would reduce ﬁnancial market risks.

GDP growth 2015

Private consumption and infrastructure projects lead growth Growth should pick up in 2017 as new infrastructure projects are launched in the context of the new cycle of EU structural funding, before moderating in 2018. Private consumption should remain the main growth driver, given projected employment gains, in part supported by still large public works schemes, and faster wage growth. Increasing unit labour costs and weak markets will cut export growth. The fiscal stance is becoming expansionary, reflecting lower personal income taxes and other measures to support the economy. However, economic slack is disappearing, pushing up wage growth and consumer price inflation, which is projected to reach the official 3% target by end-2018.

GDP growth 2016

Current prices EUR billion

3 030.1

Hungary

2017

2018

% real change

1.7

2013

2016

Current prices HUF billion

1.7

30 127.3

2017

2018

% real change

1.7

2.5

2.2

COUNTRY SNAPSHOTS 2017-18

Iceland

Indonesia

Strong growth

Growth to edge up

Economic growth is strong with continued expansion in tourism, robust private consumption and favourable terms of trade. Steep wage gains, employment expansion and large investments are fuelling domestic demand. The capital controls introduced during the ﬁnancial crisis are being lifted.

GDP growth has been high and is set to edge up in 2017 and 2018. Government infrastructure spending continues to underpin economic activity, and both private consumption and private investment are showing signs of ﬁrming. The current account deﬁcit is projected to be stable.

Currency appreciation and low import prices have kept inflation low. Inflationary pressures from wage increases and uncertainty with respect to the lifting of capital controls nevertheless call for a tight monetary stance. Moreover, the central bank should continue using its macro-prudential toolkit to tackle potentially large short-term capital inflows that might follow the lifting of capital controls. Reformed wage bargaining could prevent a future wage-price spiral while improved competition and reduced barriers to entry would boost productivity.

The central bank has eased rates six times since the beginning of the year. The government has released a string of reform packages over the past year to improve the business environment, streamline investment and liberalise inward investment. There should be scope for a few more interest rate cuts in the medium term, as inflation is projected to remain subdued. However, the fiscal balance is deteriorating owing to slower growth and low commodity prices. Public expenditure is being reined in to avoid breaching the legal deficit limit of 3% of GDP.

GDP growth 2013

GDP growth 2016

2017

Current prices ISK billion

1 891.2

OUTLOOK

ECONOMIC OUTLOOK

2018

% real change

4.7

4.1

2013

2016

Current prices IDR trillion

2.5

9 546.1

2017

2018

% real change

5.0

5.1

5.3

India

Ireland

The fastest growing G20 economy

Moderating growth

With projected annual growth of 7.5% in 2017-18, India will remain the fastest growing G20 economy. Private consumption will be supported by the hike in public wages and pensions and by higher agricultural production, on the back of a return to normal rain fall. Private investment will revive gradually as excess capacity in some sectors diminishes, infrastructure projects mature, corporates deleverage, banks clean their loan portfolios, and the Goods and Service Tax (GST) is implemented.

Economic growth is projected to moderate gradually. The economy, particularly exports and investment, is already being slowed by the prospect of Brexit. Nonetheless, the Irish economy will continue to expand on the back of solid domestic demand and strong employment and wage growth.

Despite commendable fiscal consolidation efforts at the central government level, the combined debt of states and central government remains high compared with other emerging economies. Inflation expectations are adjusting down only slowly. Overall there is little room for accommodative policies, although some monetary impulse is still to come, as recent cuts in policy rates are yet to be reflected fully in lower lending rates. Repairing public banks’ balance sheets and improving their governance would support the revival in investment. Creating more and better jobs will require policies to improve the ease of doing business further, in particular faster and more predictable land acquisition, and upgrading social and physical infrastructure.

The ﬁscal stance is expected to be broadly neutral, exerting a smaller drag on activity than in past years. The government is nevertheless on track to attain its medium-term goal of balancing the budget. Financial conditions will remain supportive overall. Structural reforms should prioritise making economic growth more inclusive by getting more people back into work and revamping the tax and beneﬁt system. GDP growth 2013

2016

Current prices EUR billion

180.0

2017

2018

% real change

4.3

3.2

2.3

GDP growth 2013

2016

Current prices INR trillion

112.7

2017

2018

% real change

7.4

7.6

7.7

OECD Observer No 308 Q4 2016

OUTLOOK

Israel*

Japan

Growth pick-up to continue

Structural reforms essential

The 2016 pick-up in growth should continue, reaching 3.25% in 2017-18. Support from slight budgetary easing, very low interest rates and measures to support the low-paid should continue to stimulate domestic demand and employment. However, the ongoing weakness of the international environment and the impact of exchange rate appreciation on foreign trade are projected to hold back export growth.

Economic growth is projected to reach 1% in 2017 before slowing to 0.8% in 2018, boosting headline inflation to 1.25% by the end of 2018. With three supplementary budgets in 2016, fiscal consolidation is pausing, helping Japan to cope with the impact of the yen appreciation. Private consumption is projected to continue rising in the context of labour shortages and the historically high level of corporate profits.

So long as inﬂation remains low, an accommodative monetary policy remains appropriate to damp currency appreciation. The rise in mortgage rates induced by the macro-prudential measures adopted by the Bank of Israel to stabilise the property market is welcome. Reforms designed to increase competition in banking should be extended to other sheltered sectors (such as farming) to enhance supply and productivity and foster catchup. Lowering the regulatory burden on businesses by simplifying complex administrative and licensing procedures should be further promoted.

The Bank of Japan should maintain monetary easing, as intended, until inﬂation is stable above the 2% target, while taking account of costs and risks in terms of possible ﬁnancial distortions. Structural reforms are essential to boost productivity and bring more people, especially women, into employment. This would enhance social cohesion, and reduce Japan’s high relative poverty rate. Faster growth is critical to stopping and reversing the run-up in public debt, which is projected to reach 240% of GDP by 2018.

GDP growth 2013

GDP growth 2016

Current prices NIS billion

1 059.1

2017

2018

% real change

3.3

3.4

2015

2016

Current prices JPY trillion

3.3

499.3

2017

2018

% real change

0.8

1.0

0.8

* The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Italy

Korea

Moderate recovery

Growth continuing at a moderate pace

The economy will grow by 0.9% in 2017 and 1% in 2018. Despite stronger job gains, private consumption growth has weakened following rising uncertainty and declining consumer conﬁdence. The large stock of non-performing loans and the uncertain recovery keep hampering banks’ loan disbursements, hindering the recovery of investment. Low growth in Italy’s export markets and geopolitical tensions are restraining exports.

Economic growth continued at a moderate pace in 2016, supported by a supplementary budget and record low interest rates. Growth is projected to edge up from 2.75% in 2016-17 to 3% in 2018. Inﬂation is projected to converge to the central bank’s 2% target by 2018, and the current account surplus to remain large at 6.5% of GDP.

Accommodative euro-area monetary conditions are supporting the moderate recovery. The 2017 budget will appropriately support growth, and a further ﬁscal easing is assumed in 2018. Nonetheless, lower interest payments will help keep the budget deﬁcit stable. The government is making progress on structural reforms, including active labour market policies, the public administration and the school system.

GDP growth 2015

GDP growth 2016

Current prices EUR billion

1 641.5

The Bank of Korea reduced its policy rate to an all-time low of 1.25% in mid-2016. Concerns about rapidly rising household debt suggest ﬁscal policy may now be better placed to take some of the burden. The planned budget consolidation in 2017 will restrain growth. Instead, to support growth, government spending should be increased beyond the levels set in the National Fiscal Management Plan. In addition, structural reforms are needed to boost productivity and labour participation as the working-age population begins to decline.

2017

2018

% real change

0.8

0.9

2013

2016

Current prices KRW trillion

1.0

1 429.4

2017

2018

% real change

2.7

2.6

3.0

COUNTRY SNAPSHOTS 2017-18

Latvia

Luxembourg

Stronger growth ahead

Robust growth

Economic growth is projected to pick up strongly as the disbursement of new EU funds increases investment and the recovery in Russia increases exports. Household consumption will remain robust, supported by continued wage growth, although unemployment will remain high. Wage growth is set to exceed productivity growth, which will hold back the improvement of export performance.

Economic growth is projected to remain robust, due to ongoing supportive monetary conditions, dynamic domestic demand and a rebound in ﬁnancial sector activity, which will foster exports. Inﬂation is projected to rise as slack diminishes and wages are pushed up by the next round of indexation, due at the beginning of 2017.

The ﬁscal stance is expansionary, which is appropriate in view of ample spare capacity, and reﬂects higher expenditure on healthcare and government investment. Strengthening active labour market policies and targeting them on the long-term unemployed would increase employment and make growth more inclusive. Raising the quality of vocational training would boost productivity growth by easing skill shortages. GDP growth 2013

Structural reforms, such as strengthening incentives to accept job offers and stricter job search obligations for recipients of unemployment beneﬁts, would improve the use of existing skills and reduce structural unemployment. Reforms that reduce barriers to labour mobility, such as changes in housing-market and life-long learning policies, should be complemented by the provision of adequate infrastructure and public services to accommodate the needs of new residents. GDP growth

2016

Current prices EUR billion

22.8

2017

2018

% real change

1.1

3.0

2013

2016

Current prices EUR billion

3.5

46.3

3.6

Mexico

Pension reforms needed

Domestic demand drives activity

Economic growth is projected to rise to 2.8% by 2018, as investment beneﬁts from low real interest rates and a gradual recovery in export markets. Consumption growth will hold up following a series of increases in the minimum wage. Inﬂationary pressures will mount as wages rise in response to a further decline in the unemployment rate. The rapidly ageing population calls for prioritising reforms to the pension system and measures that promote labour force participation. In particular, the retirement age should be linked to life expectancy and primary health care should be bolstered. Such measures should particularly focus on low-income workers, given the existing high levels of inequality and poverty.

GDP growth

2018

4.0

Economic activity has been resilient to sharply lower oil prices, weak world trade growth and monetary policy tightening in the US. Domestic demand remains the main driver of economic activity, supported by recent structural reforms that have cut prices to consumers, notably on electricity and telecoms services. Growth will be held back in 2017 and 2018, mostly through investment and consumer confidence, following uncertainties about future US policy, although the economy could benefit from stronger import demand from the US. Macroeconomic policy is being tightened. Banco de Mexico raised policy rates to counter inflationary pressures and keep inflation expectations anchored near the inflation target and more recently in response to heightened uncertainty in the wake of the outcome of the US presidential election. In order to meet the consolidation path and ensure debt sustainability, the 2017 budget includes expenditure cuts, with the objective of returning to a primary surplus. GDP growth

2016

Current prices EUR billion

35.0

2017 % real change

Lithuania

2013

OUTLOOK

ECONOMIC OUTLOOK

2017

2018

% real change

2.1

2.7

2013

2016

Current prices MXN billion

2.8

16 114.5

2017

2018

% real change

2.2

2.3

2.4

OECD Observer No 308 Q4 2016

OUTLOOK

Netherlands

Norway

Steady growth

Growth to strengthen gradually

GDP growth is projected to remain broad-based and steady at around 2%. Private consumption will benefit from improving labour market conditions. The housing market will strengthen further on the back of low interest rates. Wages are set to accelerate as unemployment continues to decline, while inflation will increase gradually from its low level. The current account surplus is expected to remain high despite firm domestic demand and lower gas exports.

Economic growth will strengthen gradually until 2018 supported by higher private consumption and a rebound in non-oil investment, helped by better global prospects and a weaker currency. The pace of decline in petroleum investment is set to slow. The unemployment rate should peak in 2016, whereas inﬂation will edge down as the impact of the exchange rate depreciation abates and economic slack continues.

Very accommodative euro area monetary policy is supporting demand. The ﬁscal policy stance is projected to be broadly neutral. Continuing to improve skills, particularly of immigrants and the long-term unemployed, and better matching skills to jobs, would raise productivity and potential GDP growth while also helping to make growth more inclusive.

GDP growth

GDP growth 2013

2016

Current prices EUR billion

652.8

2017

2018

% real change

2.0

1.9

2013

2016

Current prices NOK billion

3 071.1

2017

2018

% real change

0.7

0.5

1.4

New Zealand

Poland

Growth to moderate

Investment to accelerate

Recent strong economic growth is projected to moderate to less than 3% in 2018. Both net migration and expenditure on the Canterbury earthquake rebuild are expected to slow gradually, slowing domestic demand, especially construction activity. The latest earthquake will entail rebuilding investment, but this is not included in the projection because it is too early to judge the economic effects. Growth will continue to be driven by tourism, with dairy price increases providing a further boost to incomes through the terms of trade. Inﬂation is likely to rise but remain below the mid-point of the ofﬁcial 1-3% target range.

GDP growth is projected to strengthen to around 3% annually in 2017-18, thanks to higher social transfers, low interest rates and rising disbursements of EU funds. Increasing disposable income and consumption, the switchover to the new budgetary period for EU funds and diminishing spare capacity should lead to an acceleration in investment. Stronger aggregate demand is expected to underpin a return to modest inﬂation.

The Reserve Bank has tightened loan-to-value restrictions in order to limit financial stability risks from the high levels of household debt associated with rapid house price increases. These increases have been fuelled by low interest rates, as the Bank has attempted to lift persistently below-target inflation. The fiscal stance is currently neutral to mildly contractionary.

GDP growth 2013 226.7

The central bank is projected to start increasing rates towards the end of 2017, as inflation picks up. New social spending was mostly financed by one-off revenues in 2016. Plans to increase tax compliance are welcome, and scaling down exemptions and special rates would improve efficiency, but lowering the retirement age would decrease potential growth and public revenues, which are already likely to be curbed by population ageing.

GDP growth 2016

Current prices NZD billion

Monetary policy has been very accommodative and ﬁscal policy expansionary, which has supported activity. However, sustained low interest rates have fuelled a protracted housing boom. Additional ﬁscal stimulus, rather than a further easing of monetary policy, should be used to support activity as long as slack remains in the economy. Reforms to improve the business environment, to strengthen competition and to enhance skills and education outcomes are key for raising growth potential and maintaining inclusiveness.

2017

2018

% real change

3.5

3.4

2013

2016

Current prices PLN billion

2.6

1 656.8

2017

2018

% real change

2.6

3.2

3.1

COUNTRY SNAPSHOTS 2017-18

Portugal

Slovak Republic

Subdued growth

Strong growth to continue

GDP growth is projected to remain subdued, at about 1.25% in 2017 and 2018. High corporate leverage and a fragile banking sector will hold back private investment and still high unemployment will restrain consumption growth. As economic slack will persist, inﬂation will remain low.

Strong economic growth is set to continue, reaching 3.8% in 2018. An improving labour market will underpin household spending. Investment is expected to recover, as a slowdown in projects ﬁnanced by EU funds in 2016 will be compensated by other new public infrastructure spending and stronger business investment. Exports will continue to beneﬁt from the expansion in the automotive sector, which is ramping up production.

Boosting investment and productivity are key to raise living standards and growth. Investment incentives could be strengthened through further reforms to simplify administrative procedures, including land use regulations, improvements in judicial efﬁciency to facilitate insolvency procedures, and easing entry barriers in professional services. Removing distressed legacy loans from bank balance sheets and opening up new sources of ﬁnancing are needed to facilitate investment. Improving skills is also crucial to raise productivity, including through a continued expansion of adult education and training and more effective vocational education. GDP growth

The euro area monetary policy stance remains supportive, but a more ambitious structural reform programme is needed to share prosperity widely across society. In particular, measures to improve efﬁciency in health care and education services are important to enhance well-being and make growth more inclusive and sustainable.

GDP growth

2013 Current prices EUR billion

2016

2017

2018

% real change

170.3

2013

2016

Current prices EUR billion

1.2

1.3

74.2

2017

2018

% real change

3.6

3.4

3.8

Russian Federation

Slovenia

Coming out of recession

Activity to gather pace

After two years of recession, the economy will return to growth in 2017, as higher real wages boost private consumption and lower interest rate support investment. However, structural bottlenecks continue to hinder further diversiﬁcation of the economy. The strength of the recovery will also remain dependent on the rebound of oil prices. The poverty rate, which increased from 11% in 2014 to 13% in 2015, will progressively decline as the labour market strengthens and inﬂation slows down.

Economic activity is projected to gather pace in 2017 and 2018. Private consumption will accelerate on the back of employment gains and faster real wage growth. Investment will pick up as renewed EU structural funds bolster infrastructure investments, ﬁrms react to capacity constraints, and housing construction responds to higher property prices. Inﬂation is set to increase as economic slack disappears during 2018.

Tight monetary policy has successfully brought down inflation, and now can be eased further to support the recovery, especially investment. Fiscal policy has been rightly accommodative during the recession. Fiscal consolidation plans for 2017 and 2018 aim at reducing the headline deficit by about 1% of GDP per year on average. A less tight fiscal policy is projected, as considerable economic slack remains and the electoral cycle may push up public spending. GDP growth 2013

As the labour market tightens, there will be greater need for reforms to get the long-term unemployed back to work and improve labour force mobility to enhance the inclusiveness of economic growth. As economic slack is disappearing, ﬁscal tightening may be needed to prevent inﬂationary pressures. The sale of state-owned enterprises would promote competition and help to maintain the gains made in international competitiveness.

GDP growth 2016

Current prices RUB trillion

71.0

OUTLOOK

ECONOMIC OUTLOOK

2017

2018

% real change

-0.8

0.8

2013

2016

Current prices EUR billion

1.0

35.9

2017

2018

% real change

2.0

2.4

2.3

OECD Observer No 308 Q4 2016

OUTLOOK

South Africa

Sweden

Growth to rebound

Growth to slow

Economic growth is projected to rebound in 2017 and strengthen further in 2018, driven by household consumption and investment. In particular, the improvement in electricity production removes bottlenecks and should boost conﬁdence and therefore investment, provided that political uncertainties dissipate. Rising production costs, together with the earlier rand appreciation should weigh on exports.

Economic growth has been strong, but is projected to decline. Shortages of qualified labour and constructible land will slow residential investment, while uncertainty about global demand will slow business investment. Modest real wage gains will continue to damp consumption. The unemployment rate is levelling off as difficult-to-hire low-skilled workers make up a rising share of jobseekers. Labour market tightening will help lift inflation gradually.

The macroeconomic situation is still difficult as growth is weak and inflation is above the central bank’s target. Falling inflation will create scope to ease monetary policy; however, scope for easing may be limited in the short term as the persistent drought is driving up food prices. Lifting barriers to competition and favouring the development of SMEs could boost productivity, employment and living standards. Unless growth accelerates, however, unemployment and inequality will remain very high.

GDP growth 2013

GDP growth 2016

Current prices ZAR billion

3 539

2017

2018

% real change

0.4

1.1

2013

1.7

3 773.4

Spain

Switzerland

Still high unemployment

Moderate growth

The unemployment rate is declining, but remains high, at about 19%. While falling, high long-term and youth unemployment pose particularly acute challenges. More effective active labour market policies and re-skilling are needed, along with a recovery in demand. Boosting living standards in the medium term hinges on increasing productivity via higher investment in innovation, strengthening skills and more intense competition. GDP growth 2013

2017

2018

% real change

3.3

2.7

2.2

Economic growth is rising but will remain moderate as the global outlook remains subdued. The labour market has been resilient, and the recent modest unemployment increase should be reversed by 2018. Interest rates are projected to remain low, helping to revive domestic demand. Deﬂation is ending as the currency has stabilised. The huge current account surplus will persist. Monetary policy settings are appropriate, but risks from a long period of negative policy rates are rising. Although less buoyant than earlier, the housing market merits continued vigilance. Uncertainties remain regarding the implementation of the immigration quota decided in the 2014 referendum, even though some progress is being made. The ongoing reforms to corporate taxes are welcome. The ﬁscal position remains solid with the surplus expected to be maintained.

GDP growth 2016

Current prices EUR billion

1 025.6

2016

Current prices SEK billion

The Spanish economy has grown strongly in 2016, led by domestic demand spurred by easy monetary policy in the euro area and a ﬁscal stimulus. The expansionary phase is expected to continue in 2017 and 2018, with domestic demand leading the recovery, albeit at a slower pace as some factors that have contributed to boost consumption, such as low oil prices and lower taxes, will recede. Inﬂation will gradually pick up as the effects of low oil prices diminish, but pressures will remain moderate due to still high unemployment.

The current very expansionary monetary policy stance is a response to persistently below-target inﬂation, but has also fuelled a long housing boom which increasingly poses risks. Stronger macro-prudential policy, such as a debt-to-income cap, is called for to reduce ﬁnancial and macroeconomic vulnerabilities. Easing planning and rental regulations and reforming housing taxation would help stabilise house prices, increase labour market mobility and improve equality.

2017

2018

% real change

3.2

2.3

2013

2016

Current prices CHF billion

2.2

635.0

2017

2018

% real change

1.6

1.7

1.9

COUNTRY SNAPSHOTS 2017-18

Turkey

United States

Uncertainties are high

Stronger growth ahead

GDP growth is estimated to have slowed to under 3% in 2016, but is projected to pick up gradually to around 3.75% by 2018. The Turkish economy continues to face geopolitical headwinds and unsettled political conditions, after having weathered a coup attempt in July and engaged in military operations in Syria.

Economic growth is set to strengthen in 2017 and 2018, as an assumed ﬁscal stimulus boosts the economy and the effects of dollar appreciation, declines in energy investment and a substantial inventory correction abate. Employment has risen steadily, although the pace is expected to ease somewhat in 2017. A pick-up in wages will further support growth, offsetting somewhat sluggish external demand.

Uncertainties are high but ﬁscal, prudential and monetary policies are supportive and should spur household consumption from late 2016 onwards. New and generous incentives have been introduced to stimulate business investment, which, however, has stayed subdued so far. For private investment to pick up, it is important to durably restore conﬁdence by implementing highpriority structural and institutional reforms. GDP growth 2013

2016

Current prices TRY billion

1 567.3

2017

2018

% real change

2.9

3.3

3.8

OUTLOOK

ECONOMIC OUTLOOK

Monetary policy has remained very accommodative, consistent with inflation running below target. As economic slack is eliminated and pressure on resources emerges, policy rates will gradually increase. Monetary policy needs to tread a cautious path. Some measures of inflation expectations have edged down and persistently undershooting the inflation target could entrench lowered expectations. On the other hand, sustained low interest rates create financial market risks, which may require stronger macro-prudential action. More supportive fiscal policy eases the burden on monetary policy. GDP growth

United Kingdom

2015

Brexit reduces growth prospects

18 036.7

2016

2017

Current prices USD billion

The Brexit referendum vote has reduced growth prospects and increased volatility, as reflected by the large currency depreciation. Monetary policy has mitigated the immediate impact of the shock by stabilising financial markets and shoring up consumer confidence. This projection assumes the UK will operate with a most favoured nation status after 2019, but there is considerable uncertainty about this, which will increasingly weigh on growth, and in particular private investment, including foreign direct investment. Higher inflation is projected to hit households’ purchasing power and to reduce corporate margins, weakening private consumption and investment. As growth slows, the unemployment rate is projected to rise. Macroeconomic policies need to be expansionary. Inflation is set to exceed the target of 2%, but the monetary policy stance is expected to be unchanged as the inflationary impact of currency depreciation should be temporary. The latest government plans released in the Autumn Statement indicate a slower pace of fiscal consolidation and some increase in public investment. A more significant increase in public investment would support demand in the near term and boost supply in the longer term. With a weak economic outlook, further raises in the minimum wage should be considered prudently.

2018

% real change

1.5

2.3

3.0

Power of prognosis The OECD Economic Outlook

For forward-thinking decision makers

ISBN 978-92-64-26758-9

www.oecd.org/bookshop op GDP growth 2015

2016

Current prices GBP billion

1 870.7

2017

2018

% real change

2.0

1.2

1.0

OECD Observer No 308 Q4 2016

ECONOMY AND SOCIETY

Can Malaysia become a high-income country by 2020? Vincent Koen and Mohamed Rizwan Habeeb Rahuman, OECD Economics Department If you are scanning today’s uncertain global economy for stories of encouragement, then look no further than Malaysia. For just as the famous Petronas Towers shine above its capital, Kuala Lumpur, this diverse, federal Southeast Asian country of over 31 million people stands out for its resilient and robust economic performance. Can the country keep up this promising performance and achieve its ambitious goals? Indeed, since independence in 1957 Malaysia has not looked back. It has notched up nearly half a century of rapid and inclusive economic growth, with real GDP expanding by 6.4% per annum on average since 1970. Once dependent on agriculture and commodity exports, this growth has allowed it to become a more diversified, modern economy. It is open and competitive too, with strong links to global value chains, particularly in manufacturing electronic goods, machine equipment, medical goods and so on. These links helped Malaysia recover swiftly after the 1997-98 Asian financial crisis. The resilience of its economy was further demonstrated by a domestic demand-driven recovery following the global financial crisis in 2007-08. Recently, Malaysia has consistently outperformed most of its regional peers in the convergence race. Indeed, GDP per capita not only exceeds the ASEAN average but is now higher than in some OECD member countries. And as the OECD’s first ever Economic Assessment of Malaysia, issued in November, underlines, poverty and income inequality have declined markedly at the same time, to wit the emergence of a rather large and growing middle class. The Malaysian government’s 11th Malaysia Plan (2016-20) emphasises the need for greater inclusiveness. In particular, it seeks to raise the living standards of the bottom 40% of the population by income, to reduce the income and infrastructure gaps between richer and poorer states, and to

increase the participation of women in the economy. Another key objective is to continue with gradual fiscal consolidation, following the reduction of the headline fiscal deficit from a peak of 6.4% of GDP in 2009 to a projected 3.1% in 2016. This progress owes much to major structural reforms. On the revenue side, the government introduced a consumption-based goods and services tax (GST) in April 2015, which led to better and more transparent tax collection, and has helped broaden an overly narrow tax

The government’s 11th Malaysia Plan emphasises the need for greater inclusiveness base. Malaysia is one of Asia’s main oil and gas exporting countries, and GST implementation helped offset the sharp decline in oil prices, with the share of fiscal revenue from oil and gas halving between 2014 and 2016, to one sixth. On the expenditure side, the authorities embarked on a far-reaching energy and food subsidy rationalisation programme in 2009, which has now been largely completed. To cushion the political and economic impact of the GST and subsidy removals, especially on lower incomes, the government introduced an income support programme in 2012, called BR1M, which involves income transfers to households in the bottom 40%. In addition, the government has provided substantial (arguably too broad) GST exemptions on various items, such as fruits, vegetables, cooking oil and petrol, which these low income groups have a larger propensity to consume. On top of this inclusive strategy, Malaysia’s economic success story has also been underpinned by prudent monetary and financial policy, led by its independent and authoritative central bank. Malaysia has the third largest bond market in Asia and is a global proponent of Islamic finance. A salutary lesson the Malaysian

authorities drew from the 1997-98 Asian crisis was the need for macroprudential measures, such as stringent reserve requirements on financial institutions and leverage caps on residential purchases, and these have helped the country cope with the volatility of capital flows and asset prices in recent years. Nevertheless, a lacklustre and uncertain global environment means choppy waters remain ahead, with subdued global trade growth, spillovers from rebalancing efforts in China and low commodity prices. Clearly, for convergence towards higher income countries to be achieved by 2020 as is the government’s aspiration, Malaysia will have to engage in tough reforms, particularly in two areas. First, productivity growth needs to be reinvigorated, and durably so. One lever to bring this about would be to step up efforts in improving education levels, not least proficiency in English, and to increase the supply of job-ready graduates, especially through technical vocational education and training. Though an open economy, further liberalisation of trade and investment would help Malaysia, backed by stronger competition policies, particularly in telecommunications. Meanwhile, the antiquated bankruptcy law needs to be revamped, to align it with international best practice, as this would spur service sector activity and bolster

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small and medium enterprises. Productivity in the public sector also has room to improve, in particular by reducing duplication among government agencies, decentralising more functions, and overhauling public procurement policies to improve transparency and encourage competitive bidding. The second area of focus is for Malaysia to foster more inclusive growth. This chieﬂy means addressing informal employment and the absence of an integrated and targeted social safety net. A more comprehensive social protection system is needed, especially the long-delayed implementation of an employment insurance scheme. Labour participation rates of women and older people could be raised too, through more ﬂexible work arrangements and investment in early childcare, as well as lifelong learning and reskilling programmes. Boosting digital connectivity, especially broadband access, would also help reduce the gaps between the richer and poorer Malaysian states.

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Ageing is another challenge that Malaysia must address. The retirement age has been raised, but at 60 remains low by OECD standards. A higher retirement age, reductions in withdrawal exemptions in the Employees Provident Fund for private sector employees, and a move towards deﬁned contributions for future public sector hires, should be considered to help the country prepare for rising pension costs.

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OECD Observer Roundtable A rural trip through time ideas Innovating agriculture: Growing small ers into game-chang o nothingg Water: It’s alll or acccyy mocracy mo emocr em eemo democr dem dde democ demo Financingg democracy ies ies riie wor wo wo ries Naannnoo worries Nan Na Nano

Agriculture

ucch much much muc so mu aake akkkee so mak make ma Why top earners m

Spotlight on the digital economy y Building trust, openness, connectivit Robots, jobs, Internet of Things Measuring GDP in the digital age

Shaping our future

Tax and digital disruption No 307 Q3 2016

Ministers’ roundtable: What policies? Cities for development Interviews: Volker Türk, UNHCR; Ugo Rossi, Trento region Italy Crossword; Economic indicators; New books; OECD calendar

nnected

Digital economy

Securing the future Inclusive

Open

References OECD (2016), Economic Surveys: Malaysia Economic Assessment, OECD Publishing

Open

Connected ©Cultura RM/Alamy

OECD (2016), Economic Outlook for Southeast Asia, China and India 2016, January, with June update and country notes; http://dx.doi.org/10.1787/saeo-2016-en

www.oecdobserver.org

Trustworthy

Malaysia has achieved much, and has set itself ambitious objectives as well. By pushing ahead with structural reforms to boost productivity and foster more inclusive growth, those goals could, like the Petronas Towers, become a shining reality.

No 306 Q2 2016

Rizwan, Mohamed (2016), “Successful macro transformation in Malaysia, but challenges remain”, OECD Ecoscope blog, http://oe.cd/1GM OECD Observer (2009), “Islamic ﬁnance: An asset of promise?”, Issue No 272, April, http://oe.cd/1H3

OECD Observer No 308 Q4 2016

Africa: Towards comprehensive revenue data Michelle Harding and Emmanuelle Modica, OECD Centre for Tax Policy and Administration, and Sébastien Markley and Henri-Bernard Solignac-Lecomte, OECD Development Centre The African Union has made harmonising economic statistics across Africa a key objective of Agenda 2063, which is its 50-year pan-African economic development strategy. Better data is also relevant to the UN Sustainable Development Goals, of which goal 17 aims to improve domestic tax revenues and collection to strengthen resources. Revenue Statistics in Africa, first published in April 2016, is a step towards the African Union’s goal. It is a pan-African project that provides comprehensive and accessible revenue data for African countries. The project is made possible through a partnership between the OECD, the African Union and the African Tax Administration Forum (ATAF), with European Union support, and includes detailed data on government revenues for eight African countries: Cameroon, Côte d’Ivoire, Mauritius, Rwanda, Senegal, Morocco, South Africa and Tunisia. Future editions will cover an increasing number of African countries. Revenue Statistics in Africa is tailored to African countries, and the needs of tax officials are at the heart of shaping the publication. Participation in the publication is free and the statistics are prepared as part of a transparent and collaborative process. This means countries and OECD statisticians work together to harmonise their data using well-established OECD classifications. This close co-operation ensures the accuracy and comparability of the data at a high level of detail, and allows countries to resolve common classification and data availability problems. The final statistics are readily accessible in the Revenue Statistics in Africa publication through the OECD online (http://oe.cd/1ES) and form part of the OECD’s global revenue statistics covering 66 countries. The first edition of Revenue Statistics in Africa revealed the wide divergence in African tax systems. Differences in the level, structure and volatility of revenues are notable across the eight countries included. Morocco, South Africa and Tunisia, which have the most diversified economies, displayed tax to GDP ratios ranging from 28% to 31% of GDP in 2014. In contrast, Cameroon, Côte d’Ivoire, Mauritius, Rwanda and Senegal had tax revenues between 16% and 20% of GDP. The differences between total non-tax

revenues collected as a percentage of GDP were even greater: these ranged from 0.6% of GDP in South Africa to 9.5% of GDP in Rwanda, and for all countries, varied greatly from year to year. Despite these differences, all eight countries have increased their tax-to-GDP ratios since 2000, with increases of more than ﬁve percentage points recorded over this period in Morocco, Rwanda, South Africa and Tunisia. These changes resulted from a combination of tax reforms and the modernisation of tax systems and administrations.

In June 2016 experts from 20 African countries and partners met in Pretoria, South Africa, to discuss the findings from the report and how to improve further the collection and harmonisation of revenue statistics. Several new countries have expressed interest in Revenue Statistics in Africa, and the number of countries covered in the second edition is set to rise. The importance of the data in asking and answering the right questions is a highlight. For instance, what impact does the informal sector have on tax pressures and the reporting of tax expenditures? What are the reasons for different tax structures in neighbouring countries? What has the effect of tax reforms in African countries been? The true measure of Revenue Statistics in Africa will be its influence on tax policy and, ultimately, its contribution to inclusive growth and the development goals of African countries. More analysts in African governments will need to be made aware of the data and use them for their analysis and communications with stakeholders. More user-friendly tools are being prepared to help them, such as instruction manuals, country notes and pamphlets. Over the next few years, the aim is to continue building a network of African experts to help improve the comparability and availability of revenue data across the continent. Officials in Africa and in the rest of the world will be watching to see how these collaborative efforts can inspire new developments in tax policy, and foster positive economic and social outcomes, too. References AfDB, OECD, UNDP (2016), African Economic Outlook 2016: Sustainable Cities and Structural Transformation, OECD Publishing DOI: http://dx.doi.org/10.1787/aeo-2016-en OECD, ATAF, AUC (2016), Revenue Statistics in Africa, OECD Publishing. DOI: http://dx.doi.org/10.1787/9789264253308-en-fr

Total tax and non-tax revenue by country as % of GDP, 2014 Non-tax revenue

Tax revenue

31.3%

28.5%

20.1% 16.1%

27.3% 20.0%

17.8%

16.1%

9.5% 5.7%

Rwanda

Senegal

4.2% Cameroon

Source: OECD, ATAF, AUC (2016), Revenue Statistics in Africa, OECD Publishing

2.2% Côte d’Ivoire

3.5% Morocco

2.2% Tunisia

2.4%

0.6% South Africa

Mauritius

http://dx.doi.org/10.1787/888933343863

ECONOMY AND SOCIETY

Climate, inequality and cities: How the world’s mayors can make a diﬀerence

©Alamy

Lamia Kamal-Chaoui, Director, Centre for Entrepreneurship, SMEs, Local Development and Tourism, OECD, and Mark Watts, Executive Director, C40 Cities Climate Leadership Group

Cities around the world are taking impressive initiatives to tackle climate change and reduce inequalities, but more can be achieved by aligning these policy agendas in mutually beneficial ways. Poorer populations suffer disproportionately from the effects of environmental degradation and the impacts of climate change. They are more likely to live in highly polluted, insalubrious neighbourhoods and to be more exposed to the likes of heat waves, mudslides and flooding, the risks of which will rise with climate change. Clearly policies that tackle poverty and inequality on the one hand and climate change on the other should go hand in hand. Yet well-intended policies to address climate change can unwittingly undermine measures to promote more social equity. For instance, restrictive land-use regulations that are intended to reduce sprawl and the carbon footprint of the built environment can actually drive up housing costs. On the flip side, policies to promote inner city mobility can boost greenhouse gas emissions. Cities are on the frontline of

dealing with these twin challenges, and fortunately, there are potential “win-win” strategies that local authorities can pursue to deliver on both the climate and equity fronts. Well-planned public transit investments can open up new job

Entrepreneurship in green economic activities can equip disadvantaged social groups opportunities for lower-income workers, just as local job strategies to promote skills and entrepreneurship in green economic activities can equip disadvantaged social groups with the skills needed for a greener economy. Similarly, measures to promote entrepreneurship and start-ups that tap into local public markets and resources can be devised not only in climate-friendly ways, but provide a channel for economic and social integration for everyone, not least marginalised groups. In short, climate and equity policies must go hand in hand, and there are several exemplary cases to prove that such approaches work, from mobility projects

in Rio de Janeiro to eco-friendly “circular economy” programmes in Paris. In fact, as well as being the venue of the historic UN Climate Change Conference (COP21) in December 2015 (in which mayors played a prominent role), Paris has been playing a leading role in advancing a more integrated approach to addressing climate and equity challenges. On 21 November the city’s mayor, Anne Hidalgo, hosted the second meeting of OECD Champion Mayors for Inclusive Growth, in which she was joined by OECD Secretary-General Angel Gurría, Ford Foundation President Darren Walker as well as mayors from around the world, from cities such as Dakar, Rotterdam, Cape Town, Medellín and Brussels, to launch the Paris Action Plan for Inclusive Growth in Cities. Under the action plan, participants have committed to work together to advance a comprehensive inclusive growth agenda based on four pillars: education; labour markets; housing and urban environments; and infrastructure and public services. The initiative is also supported by a number of institutional

OECD Observer No 308 Q4 2016

Gender equality: Let’s bring the men to the table partners, including C40, Cities Alliance, Brookings Institution, ICLEI, National League of Cities, UCLG and United Way Worldwide.

Anne Fulwood, W20 Representative for Australia the gender participation gap in G20 economies by 25% by 2025 (see references).

The Paris meeting is no isolated event but part of a wave in which cities are well and truly taking a lead. In fact, just a fortnight after Paris, 50 mayors and 27 deputy mayors from the world’s largest cities met in Mexico City for the sixth biennial C40 Mayors Summit: Cities Leading Climate Action, with the aim of advancing efforts towards a low-carbon, resilient urban future.

Keep in mind that the G20 is an economic forum and, as my Australian colleague, Susan Harris Rimmer, has argued, it will look decidedly old fashioned if the 2017 German presidency does not take “womenomics” just as seriously by further unlocking the potential of women as drivers of inclusive growth. I don’t think we need to convince anyone anymore that economies which invest in equality of opportunity–and diversity–will

It is a rich and promising venture, but our cities, however determined to work alongside each other, need all levels of government–national, regional and international–to double-down on their efforts and work coherently in the pursuit of climate and equity objectives. National governments in particular must do more to create a strong enabling environment, for instance, by ﬁnally putting a price on carbon and taking measures to promote skills and entrepreneurship, and underpin this cross-cutting agenda, which so many mayors from around the world now champion. When it comes to tackling inequality and climate change, better policies will come from working better together. OECD (2016), “Paris Action Plan for Inclusive Growth in Cities”, see http://oe.cd/1Ff OECD (2014), All on Board for Inclusive Growth, OECD Publishing OECD (2010), Cities and Climate Change, OECD Publishing “Fighting climate change: What city mayors are doing”, OECD Observer Roundtable of City Mayors, 2015, http://oe.cd/1Fe Visit www.oecd.org/inclusive-growth/about/inclusive-citiescampaign and www.c40.org www.oecdobserver.org/cities

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The trouble is that while many cities have put climate change and rising inequalities at the top of their policy agendas, policy makers still need more tools to help them. This is why the OECD and C40, a network of cities that addresses climate change, are now joining forces to identify knowledge gaps, advance research, and ultimately promote best practices and policy solutions for achieving more inclusive, sustainable cities. Women 20 (W20) was launched by the G20 in 2015 as a step forward for gender equality. Including men in the challenge could make a telling difference in 2017. What we have seen in 2016 may have been unimaginable to some but, undoubtedly, it is all part of a global recalibration. A new president for the US; a new, female, prime minister in the UK following Brexit; and many more political, social and economic shifts, amid deepening concerns about global inequality, conﬂict and climate change. It is quite a list! But even if the world seems to some to be, as one Financial Times columnist described it, “lurching towards the extremities,” the stage is also set for a year of opportunity in 2017. Looking ahead to the third Women 20 (W20) Summit, in Berlin in April 2017, I feel at once both privileged and restless about our opportunities. Privileged, as Australia’s representative, to build on the great work done by the Brisbane G20 Summit in 2014, which made history by including a speciﬁc target to reduce

We must not become trapped in our own ever-diminishing circle of inﬂuence see huge and sustainable growth across all business segments. In fact, according to a much quoted McKinsey report, simply giving more women the same opportunities as men would add $12 trillion extra to global growth by 2025. Clearly, we must, at the 2017 W20 summit in April, put the numbers on the table, show the results of quantiﬁable measurements and reveal the successes and failures or, more importantly, the underlying trend to highlight the direction in which we are heading. The trend will surely signal our own recalibration. Which brings me to why I’m restless: what about the men? The W20 is a progressive initiative, which has the capacity to break new ground where the United Nations, or the World Economic Forum, or even ASEAN cannot. We are here to push for the economic empowerment of women in the G20 economies and throughout the world. There is co-operation with other organisations like the UN and we have strong support from Chancellor Angela Merkel, of course, as chair of the G20 in 2017. True to the charter of the W20,

ECONOMY AND SOCIETY

Germany is inviting business women to organise the event, and the National Council of German Women’s Organisations and the Association of German Women Entrepreneurs will be our hosts at the April summit.

rose to his feet and asked why there was no man on the panel.

The trouble is, our summit will be overwhelmingly made up of women, talking to other women of the world. In my view, we at the W20 are not going to realise our full potential unless we involve men in our conversations and engagement. How can we possibly make progress if we don’t have a diverse and relevant representation?

The light switched on! It is so obvious that men need to be included, not excluded, when it comes to economic progress. We talk about diversity, collaboration, and co-operation, but these are all hollow words unless we walk our talk to achieve our goals. Without involving men, we’ll become trapped in our own ever-diminishing circle of inﬂuence, nodding in furious agreement but frustrated by not making faster progress. By recalibrating, we can achieve more.

This bout of restlessness was triggered while on a panel with six women, at the annual OECD Forum in Paris in June 2016, at which we discussed the G20 goal to reduce the gap between male and female workplace participation by 25% by 2025. It was encouraging to see the OECD so committed to this very important target, and raising awareness that it must be measured. However, I often thank, in my mind, the man in the audience who

There is plenty to work with as we advance the agenda for 2017. The previous two W20 summits called on G20 Leaders to: • support entrepreneurship and launch programmes speciﬁcally to help women; • improve women’s access to credit, training, information services and technical support; • put in place measures for governments

•

and big business to include more women as suppliers; and most importantly, set targets and report on progress in all areas.

Let’s bring the men to the table and hold them accountable as well to these goals and more. After all, 17 of the 20 leaders of the G20 in Brisbane in 2014, all of whom agreed to the 2025 target, were men. If we can recalibrate in 2017, we will make even more progress at our summit in Germany and that, too, will ease my restlessness. References www.fulworks.com.au/ Clarke, R (2014), “Forging a gender-balanced economy” in OECD Observer No 300 (G20 Brisbane edition), Q3, see http://oe.cd/Ms McKinsey (2015), “How advancing women’s equality can add $12 trillion to global growth”, available at www.mckinsey.com/global-themes/employment-andgrowth/how-advancing-womens-equality-can-add-12trillion-to-global-growth @annefulwood www.oecd.org/gender

©David Rooney

www.oecd.org/gender The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. Our website at www.oecd.org/gender monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and promotes good practices based on analytical tools, reliable data and discussion.

OECD Observer No 308 Q4 2016

The PISA 2015 scorecard: Must do better on inequality Which country does best at reading and science? Are young students well equipped with the 21st-century skills they will need to face tomorrow’s challenges? The OECD’s Programme for International Student Assessment (PISA), which tests the skills and knowledge of 15-year-old students in science, reading and mathematics, intends to answer these questions. The 2015 survey covered some 540,000 students in 72 countries and economies. This time, the main focus was on science, an increasingly important part of today’s economy. PISA is about a lot more than ranking though: its aim is not to encourage competition but to highlight the many social, economic and cultural factors that determine school performance, in order to improve education systems. While spending per student in primary and secondary education increased by almost 20% since 2006 in OECD countries alone, only 12 of the 72 countries and economies assessed in PISA have seen their science performance improve over this period. These include highperforming education systems, such as Singapore and Macao (China), and low performers, such as Peru and Colombia. Singapore leads the field this time, with one in four students performing at the highest level in science, compared with one in ten in the OECD. In second place was Japan, which was the top OECD country, followed by Estonia in third, Finland in fifth behind Chinese Taipei, and Canada in seventh after Macao (China) and just ahead of Viet Nam. The OECD PISA 2015 Survey focused on students’ performance in and attitudes towards science. As OECD director of education and skills, Andreas Schleicher, put it on his blog, only 20 short years ago, there was no such thing as a blog, or indeed any of the countless other gadgets, medicines, fibres and other tools that have become so central in our lives. Science and technology are therefore fundamental to people’s futures,

including for quite ordinary situations. As Mr Schleicher points out, “obviously, we don’t all have to be scientists to live in the 21st century. But an understanding of some basic principles of science– like the importance of experiments in building a body of scientific knowledge– is essential if we want to make informed decisions about the most pressing issues of our time (or even if we just want to choose the “healthiest” option for lunch).” In short, PISA 2015 shows that in the context of massive information flows and rapid digital change, everyone needs at least to be able to think like a scientist, that is: to be able to weigh evidence and come to a conclusion; to understand that scientific truth may change over time, as new discoveries are made, and as humans develop a greater understanding of natural forces and of technology’s capacities and limitations. Compared with previous surveys, gender differences in science tend to be smaller than in reading and mathematics but, on average, in 33 countries and economies, the share of top performers in science is larger among boys than among girls. Only in Finland are girls more likely to be top performers than boys. Gender differences in science self-efficacy are particularly large in Denmark, France, Germany, Iceland and Sweden. In Australia, the Czech Republic, Finland, Greece, Hungary, New Zealand and the Slovak Republic, the share of students performing at the highest levels fell as the share of low performers rose. The problem of widening inequality remains striking in developed countries: although Canada, Denmark, Estonia, Hong Kong (China) and Macao (China) achieve high levels of equity in education outcomes, and while equity has improved in the US, poorer students are still three times more likely to be low performers than wealthier students. As for immigrant students, they are more than twice as likely as non-immigrants to be low achievers. In the Czech Republic and France, the impact of

socio-economic status on performance is particularly large. But looked at the other way around, investing in education can also improve social outcomes. As OECD Chief of Staff and G20 Sherpa Gabriela Ramos writes, reconciling educational excellence and success for all is one of the best ways to tackle social inequalities at the root. Take France, for instance, where the number of high-performing students is higher than the OECD average, but also higher is the proportion of 15-year-olds having difﬁculty in science. In fact, students from the most disadvantaged backgrounds are three times less likely to succeed than advantaged students. Where people live in relation to good schools is a factor, and Ms Ramos urges current reforms to be persevered with and strengthened, and to ensure that success at school is no longer the result of a “postcode lottery”. France is not alone, and PISA 2015 underlines the challenge that all countries, including some of the wealthiest ones, face in meeting the UN Sustainable Development Goal by 2030 of achieving “inclusive and equitable quality education and promote lifelong learning opportunities for all”. According to the report, policies that successful countries share include: having high and universal expectations for all students; focusing on great teaching; targeting struggling students and schools; and committing to coherent, long-term strategies. Rory Clarke For more on OECD PISA, contact Andreas Schleicher at the OECD For more on PISA 2015, including country-related content and video streams, visit www.oecd.org/pisa Schleicher, Andreas (2016), “Today’s the day”, on http://oecdeducationtoday.blogspot.fr/2016/12/ todays-day.html Ramos, Gabriela (2016), “Lessons for France from PISA 2015,” on http://oecdeducationtoday.blogspot. fr/2016/12/lessons-for-france-from-pisa-2015.html

ECONOMY AND SOCIETY

PISA 2015 results Snapshot of performance in science, reading and mathematics Mean score: Science Reading Mathematics

Singapore Japan Estonia Chinese Taipei Finland Macao (China) Canada Viet Nam Hong Kong (China) B-S-J-G (China) Korea New Zealand Slovenia Australia UK Germany Netherlands Switzerland Ireland Belgium Denmark Poland Portugal Norway US Austria France Sweden OECD average Czech Republic Spain Latvia Russia Luxembourg Italy Hungary Lithuania Croatia CABA (Argentina) Iceland Israel Malta Slovak Republic Greece Chile Bulgaria United Arab Emirates Uruguay Romania Cyprus Moldova Albania Turkey Trinidad and Tobago Thailand Costa Rica Qatar Colombia Mexico Montenegro Georgia Jordan Indonesia Brazil Peru Lebanon Tunisia FYROM Kosovo Algeria Dominican Republic

Countries and economies are ranked in descending order of the mean science score in PISA 2015.

Source: OECD, PISA 2015 Database

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OECD Observer No 308 Q4 2016

The OECD: New wings or still the same old club? become increasingly inﬂuenced by emerging economies, the organisation is still often seen as a well-off group of developed countries (the Londonbased weekly The Economist frequently refers to it as a “club of mostly rich countries”). However, over the last decade, the organisation has changed course and is trying to shed this rather haughty image. Its membership has shifted in proﬁle by taking on countries such as Chile, Estonia and Israel. Colombia, Costa Rica and Lithuania are in the process of accession, following Latvia’s joining in 2016. In June Argentina signalled its desire to apply for membership–which many consider as a game-changer for both sides.

Philip Pierros, Minister-Counsellor and Deputy Permanent Representative, EU Delegation to the OECD, and Philip Wegmann, Master’s Student of Political Theory, Goethe University Frankfurt, Germany, former Assistant, EU Delegation to the OECD and UNESCO*

The political landscape of global governance is changing profoundly. This is posing great challenges to policy makers and organisations such as the OECD. The world is changing fundamentally and so is the architecture of global governance. Rising inequalities, a lingering crisis, disruptive digitalisation, and an array of cross-border geopolitical challenges, to give but a few examples, have put into question not only globalisation but the trustworthiness of international organisations and the reliability of their traditional policy prescriptions. Luckily, those organisations are listening. For instance, to judge by a recent article by three of its top researchers (“Neoliberalism: Oversold?”, see references), even the mighty, though much derided, IMF seems to be making a historical shift in discourse by casting doubt on what is generally seen as its core doctrine of economic neoliberalism. This is not an isolated case. Another body which had long been associated with the

same “market fundamentalism” is the Paris-based Organisation for Economic Co-operation and Development (OECD), and it too has been undergoing change. Founded in 1961, to replace a European entity that oversaw the implementation of the Marshall Plan, the OECD’s role is sometimes seen as one of churning out data and evidence-based policy advice for its member and partner countries around the world. But at the same time, it is a platform where policy makers come together to exchange best practices and set common standards for each other to meet. This history, the path of its recent development and the present state of the world economy call for an analysis of exactly why it is we should pay attention to the OECD. The change in proﬁle of the OECD comes at a critical juncture concerning its legitimacy. While global affairs have

Beyond its membership, the organisation has reached out to form partnerships with key global players among developing countries, notably Brazil, China, India, Indonesia, and South Africa. The organisation is an active contributor to international fora like the G20, where it provides policy analysis and broadens the reach of its standards. Its work in South-East Asia has become a priority, and co-operation has been strengthened with South-East Europe, Central Asia, the MENA region and sub-Saharan Africa. In 2016 a regional programme for Latin America and the Caribbean was launched. Other countries (Kazakhstan, Morocco, Peru) benefit from individually-tailored co-operation programmes. True, the OECD has always been a hub for aid donor countries–its members account for 90% of bilateral official development assistance– and has driven thinking in development co-operation through its OECD Development Centre and Sahel and West Africa Club. Nevertheless, this new global reorientation gives the organisation new wings. It not only confirms the OECD’s “convening power” by bringing together experts, policy makers and stakeholders from across the globe to develop shared standards and policy tools, but should no doubt enhance its legitimacy in our rapidly evolving world. No wonder this new global reach has the support of OECD

Illustration ©David Rooney

OECD.ORG

countries, as the 2016 Ministerial Council Meeting showed (see the Chair’s summary, paras 36-37). All about people This new departure is reflected in the OECD’s work programme, too, for the organisation has also been implementing a remarkable transition in terms of substance. It has successively broadened its agenda to pressing new issues, such as climate change, and has turned to address a variety of emerging challenges of global scope, such as combating tax evasion, with its Base Erosion and Profit Shifting (BEPS) project, and stepping up its work on migration and corruption. In a departure from orthodoxy, it now promotes economic growth as a means rather than an end, and was ahead of the IMF in “putting people’s well-being at the centre of the analysis”. Indeed, rising inequalities has been a policy concern at the OECD for several years already. The need to strengthen economic and social data by moving “beyond GDP” has become more than a battle cry, as witness the launch in 2011 of its Better Life Index, which is a first attempt by any major organisation to complement the old growth paradigm with a new, multi-dimensional indicator of living standards and well-being. On the face of it, this people-oriented shift in the OECD’s work makes perfect sense in light of today’s complex challenges and new public demands, but it brings with it other tricky institutional challenges. For a start, the organisation is a member-driven body, and it is perhaps inevitable that its 35 member countries, which together set the agenda and programme for the organisation’s 250 technical committees and working bodies, do not always agree on the priorities or the push led by OECD Secretary-General Angel Gurría, now on his third term, to keep the organisation at the cutting edge. Some are concerned that a wider portfolio and reach could increase rivalry and competition for resources with respect to other international organisations in which OECD countries are also members, such as the IMF and World Bank.

Value-added In response to these concerns, three general reasons tend to be cited to support a prominent role for the OECD within the international architecture. Firstly, even if other international organisations do work on similar issues, such as economic analysis and corruption, the OECD has a number of unique and valuable tools at its disposal. Its peer reviews in particular are a prime example, whereby policy makers from one member country submit their country’s performance to an uncompromising examination by experts from fellow member countries, with the expectation that this peer pressure will encourage progress. There may even be a dose of “naming and shaming” if implementation of key agreed standards is found to be lagging, as has happened in respect of the OECD Anti-Bribery Convention, for instance. Secondly, even if there is some duplication of work among major organisations, this does not necessarily mean producing the same results and, therefore, the outcome can be used for validation. Thirdly, unlike other organisations with a far broader membership, the OECD is in a position to undertake its analysis in a more focused manner. As such, in the ideal case, it can serve as a laboratory where solutions to common problems are tested among like-minded countries before being shared with others outside the club. And as the OECD does not disburse ﬁnance, its analysis comes without strings attached.

New ground Despite all this, one should not gloss over criticisms of the OECD. For example, a fundamental lesson of evidence-based analysis is that it should produce useful policy recommendations, and for this, the right questions and assumptions matter. In other words, if you are wrong on what the problem is to begin with, even the best analysis will lead you astray. Could this help explain why the OECD, as well as the IMF and others, failed to foresee the 2008 ﬁnancial crisis, and if so,

can lessons be drawn to prevent another crisis from happening again? It was to probe these questions that the OECD set up the New Approaches to Economic Challenges (NAEC) initiative in 2012, just a year after its 50th anniversary. The aim is to break down intellectual silos within its own organisational structures so that, for example, environment experts, social policy specialists and economists work together to produce more useful, and more reliable, cross-cutting analysis. NAEC has become a platform where a broad range of scholars, including many from outside of mainstream market economics, are invited. In conjunction with this, the organisation increasingly tries to take on board insights from other disciplines such as psychology, history, geography and sociology– all this ultimately with the goal of establishing a spirit of constant selfchallenging. Together with the new people-centred march beyond GDP, this is an impressive change. Interesting times In a time of political polarisation and populism, it is refreshing to have an organisation that is trying to learn from its past, be critical of itself and take brave steps to improve the future. It is particularly in such times that a levelheaded, evidence-based approach has appeal. For example, the OECD’s renowned analysis of the real costs and beneﬁts of integrating migrants can provide useful guidance for policy-makers trying to cope with what will remain a major task for years to come. But at the same time, this very model of evidence-based policy-making is under ﬁre. As recent elections across a range of OECD countries have shown, “experts” have an image problem, as their efforts to debunk myths and misinformation with plain facts and sober analysis do not reach citizens or are ignored. In fact, public trust in “institutions” is alarmingly low in many countries and many citizens are disenchanted. Not only have some people had enough of experts, but politicians are now

OECD Observer No 308 Q4 2016

Putting people’s well-being at the core of its analysis and addressing inequalities are a good start, but it seems that more audacity will be needed. This means not only challenging orthodoxy–after all, the classic view that a rising tide of growth would lift all boats now looks decidedly leaky–but building on the likes of OECD Forum to further strengthen its social dialogue and citizen consultation, as well as producing eye-catching narratives via this magazine, its blogs, and so on, as these are essential means for increasing legitimacy.

so we need our public organisations to perform. It is the spirit of projects such as the OECD’s NAEC which gives us optimism that effective solutions will be found both for our countries and the architecture of global governance, too.

©David Rooney

becoming wary of holding public consultations through referenda at all. Could the OECD, in the self-challenging spirit of NAEC, help counteract such detrimental trends by developing bold new policy approaches that our countries can use to win back conﬁdence?

All this may not convince everyone, but probably nothing ever will. Such steps are important if the OECD is to succeed

* The views expressed in this article are those of the authors only.

in ﬁnding a new paradigm that policy makers will subscribe to and help the organisation deliver on its motto of “better policies for better lives”. In short, countries also have a role to play in this hunt for legitimacy, by giving the OECD the time and support it needs to develop a satisfactory and coherent framework for addressing economic challenges beyond GDP and acknowledging the major paradigm change this involves.

References For the Chair’s Summary of the OECD Ministerial Council Meeting 2016 (reference C/MIN(2016)9, visit http://oe. cd/1wo Gass, Ron (2013) “Speaking truth to power: Reﬂections on the future of the OECD”, in OECD Observer No 294, January Clarke, Rory, and Lyndon Thompson (2011), “A Majestic Start: How the OECD was won”, OECD Yearbook Ostry,Jonathan D, Prakash Loungani and Davide Furceri (2016), “Neoliberalism: Oversold?”, IMF Finance & Development, June, Vol 53, No 2, Washington DC

At the end of the day, policy makers will cling on to failed old approaches if no convincing alternatives are found,

20th anniversaries

Hungary, 7 May 2016

Poland, 22 November 2016

The OECD has accompanied and supported Poland every step of the way. OECD analysis and policy advice have contributed to shaping this successful economic and social transformation. Since 1990, under the Partners in Transition Programme, the OECD accompanied Poland in its key reforms. We have been supporting Poland’s efforts to foster competition and trade, fight corruption, adopt responsible business conduct and find solutions to social challenges such as ageing. We have also been working with Poland on education, governance, innovation and fostering local development. [...] Ours is a true partnership. All OECD member and candidate countries can learn from Poland’s rapid economic development and its resilience to international shocks like the financial crisis. […] Extract from a speech by OECD Secretary-General Angel Gurría, delivered in Warsaw, Poland, 25 November 2016. Read the full speech: http://oe.cd/1Hy

©OECD

The past 20 years have been a success story for Poland: the country has grown faster than any other European economy. Poland has made impressive progress in raising living standards. Between 1990 and 2015, the GDP per capita gap with the OECD average was closed by more than 25 percentage points, from 38% in 1990 to 65% in 2015. Remarkable! […]

Hungary marks 20: OECD Secretary-General Angel Gurría with Viktor Orbán, prime minister of Hungary, which celebrated its 20th anniversary at the OECD on 7 May 2016. See speech: http://oe.cd/1HB

OECD.ORG

Recent speeches by Angel Gurría Putting business at the heart of inclusive growth Speech at the launch of OECD Dialogue on Inclusive Business in Paris, France, 15 November 2016

Ambassadors Mr Paul Dühr, Luxembourg Mr Pavel Rozsypal, Czech Republic Mr Paulo Vizeu Pinheiro, Portugal

Innovation for sustainable growth in the Americas Remarks at the Institute of the Americas in San Diego, US, 11 November 2016

Mr Dionisio Pérez-Jácome Friscione, Mexico Ms Marlies Stubits-Weidinger, Austria Mr Klavs A. Holm, Denmark Mr Noé Van Hulst, Netherlands

Getting Austria back on the inclusive growth track: Key OECD Recommendations

Speech at press conference with Federal Chancellor Christian Kern in Vienna, Austria, 7 November 2016

Mr Iztok Jarc, Slovenia Ms Annika Markovic, Sweden Ms Claudia Serrano, Chile Mr Daniel Yohannes, US Ms Elin Østebø Johansen, Norway

Launch of International Regulatory Co-operation: The Role of International Organisations Presentation in Paris, France, 2 November 2016

For a complete list of the speeches and statements, including those in French and other languages, go to: http://www.oecd.org/about/ secretary-general/

Mr Ulrich Lehner, Switzerland Mr Carmel Shama-Hacohen, Israel Mr Zoltán Cséfalvay, Hungary

1st edition of the International Award on Investor Climate-Related Disclosure

Mr Pierre Duquesne, France

Remarks delivered in Paris, France, 28 October 2016

Ms Michelle d’Auray, Canada

France-Ukraine Business Forum

Mr George Krimpas, Greece

Speech delivered in Paris, France, 28 October 2016

Mr Matei Hoffmann, Germany

Mr James Kember, New Zealand

Mr Brian Pontifex, Australia

Mr José Ignacio Wert, Spain Mr Jean-Noël Schittecatte, Belgium

Launch of Health at a Glance: Europe 2016

Growing stronger together in Seoul

Presentation in Brussels, Belgium, 23 November 2016

Conference on economic democratisation in Seoul, Korea, 25 October 2016

Ford Foundation President Darren Walker at OECD Council

Korea in the OECD: 20 years of progress

Ms Ivita Burmistre, Latvia Mr Aleksander Surdej, Poland

Introductory remarks in Paris, France, 22 November 2016

Seminar on the 20th anniversary of Korea’s OECD membership in Seoul, Korea, 25 October 2016

Eurasia Week 2016

“Friends of the OECD in Indonesia” breakfast

Mr Kristjan Andri Stéfansson, Iceland

Opening remarks in Paris, France, 22 November 2016

Remarks delivered in Jakarta, Indonesia, 24 October 2016

Mr Alessandro Busacca, Italy

From ambition to action: The Paris Action Plan for Inclusive Growth in Cities

OECD-Indonesia Launch Event: Joint Programme of Work 2017-2018

Keynote address in Paris, France, 21 November 2016

Speech in Jakarta, Indonesia, 24 October 2016

Mr Andrus Säälik, Estonia Chargé d’Affaires a.i.

Implementing the new urban agenda through national urban policy: Ministerial perspectives

Mr Ryotaro Suzuki, Japan Chargé d’Affaires a.i.

Remarks delivered in Quito, Ecuador, 17 October 2016

European Union Mr Rupert Schlegelmilch

Council discussion with H.E. Peter Thomson, President of the 71st Session of the UN General Assembly Remarks in Paris, France, 18 November 2016

Mr Jong-Won Yoon, Korea Mr Christopher Sharrock, UK Mr Erdem Bas¸çi, Turkey

Mr Pekka Puustinen, Finland Mr Dermot Nolan, Ireland

—— Mr Juraj Tomáš, Slovak Republic Chargé d’Affaires a.i.

——

November 2016

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OECD.ORG

Calendar highlights Please note that many of the OECD meetings mentioned are not open to the public or the media and are listed as a guide only. All meetings are in Paris unless otherwise stated. For a comprehensive list, see the OECD website at www.oecd.org/newsroom/upcomingevents

DECEMBER 1-2

15th OECD Global Forum on Competition, Paris, France

4-17

COP13 Convention on Biological Diversity, Cancun, Mexico

Launch of OECD Pensions Outlook 2016

5-6

Ministerial meeting on productivity and inclusive growth in Latin America, Santiago, Chile

Global Forum on Migration and Development, Dhaka, Bangladesh

New World Forum 2016, Paris, France

Launch of Economic Outlook for Southeast Asia, China and India 2017

16-17

OECD Policy Forum on the Future of Health; OECD Health Ministerial, Paris, France

17-20

Launch of Government at a Glance in Latin America and the Caribbean 2017

FEBRUARY

6-9

OECD Global Forum on Public Governance, Paris, France Launch of the 2016’s OECD Science, Technology and Innovation Outlook

Roundtable on Corporate Liability for Foreign Bribery, Paris, France

4-7

World Investment Forum 2017, Newport Coast, US

OECD Week

OECD Forum 6-7 June; OECD Ministerial Council Meeting 7-8 June

12-16

World Summit on the Information Society Forum, Geneva, Switzerland

JANUARY

Launch of PISA 2015 Results Volume I: Student performance in science, reading and mathematics

JUNE

9-10

World Economic Forum Annual Meeting, Davos-Klosters, Switzerland

JULY 7-8

G20 Summit 2017, Hamburg, Germany

20-23

22nd Biennial World Conference: Global Perspectives in Gifted Education, Sydney, Australia

OECD Parliamentary Days, Paris, France DECEMBER

27 Feb- Mobile World Congress 2017, Barcelona, 2 Mar Spain

6-10

G200 Youth Forum 2017, Dubai, UAE

World Anti-corruption Day

MARCH 8

International Women’s Day

PEOPLE at the CENTRE OECD Policy Forum on the Future of Health 16 January 2017

THE NEXT GENERATION of HEALTH REFORMS OECD Health Ministerial 17 January 2017

BOOKS OECD iLibrary

Making mathematics accessible to all Do you know what an arithmetic mean is? Or a polygon? On average, fewer than 30% of students across OECD countries understand the concept of an arithmetic mean, while less than 50% are comfortable with elementary geometrical shapes known as polygons. Yet with numeracy skills needed more than ever in the work place, today’s students should be able to compute, engage in logical reasoning and use mathematics to tackle novel problems. However, only a minority of 15-year-old students in most countries grasp and can work with core mathematical concepts. To what extent

can teachers and schools break this pattern? Equations and Inequality: Making Mathematics Accessible to All suggests that one way forward is to ensure that all students spend more quality or “engaged” time learning core mathematics concepts and solving challenging mathematics tasks. According to the report, based on results from PISA 2012, education systems have done well in providing equitable access to the quantity of mathematics education, but differences in quality remain. While well-off students are taught to think like mathematicians, disadvantaged pupils tend to be exposed to simple facts and ﬁgures only.

different study programmes, that have larger percentages of students in selective schools, and that transfer less-able students to other schools. Over 95% of students in Australia, Ireland, Israel and the UK attend schools where students are grouped by ability for mathematics classes. Policy makers could develop more ambitious and coherent mathematics standards that cover core mathematical ideas in depth, the report suggests. Another path would be to reduce tracking and stratiﬁcation among schools. Teachers could also help by replacing routine tasks with challenging problems, support positive attitudes towards mathematics and offer tailored support to struggling students.

The relationship between content and socio-economic proﬁles is even stronger in countries that track students early into

OECD (2016), Equations and Inequalities: Making Mathematics Accessible to All, OECD Publishing Visit www.oecd.org/pisa and www.oecd.org/education

progress has been achieved over the last decade.

water governance on three fronts: policies, people and places. On the policies front, favouring inter-sectorial action is the key to efﬁcient response to water crises. The German city of Cologne, for instance, co-ordinates water and spatial planning for new building areas to prevent ﬂood damages due to heavy rainfalls. Technology also helps, and the report describes how it is used to display water quality and quantity data in Marseille, which citizens can consult. Communication campaigns such as “Max 100” in Copenhagen also raise public awareness and helped generate water savings as well.

Urban water Too much, too little, too polluted: these are three water risks facing many urban areas. By 2050, worldwide water demand will increase by 55%. This will mean fierce competition across different water users–farmers, industries, households, etc. Whether containing flooding in Paris, drought in San Francisco or groundwater contamination in Mexico City, cities everywhere are asking how to anticipate, avoid and overcome future water crises. Water Governance in Cities analyses the weakness of urban water governance systems. Building on a survey of 48 cities, the report finds that significant

Among cities surveyed, the average share of wastewater treated was 90% in 2012 compared to 82% in 1990, while per capita domestic water consumption decreased by 20% between 2000 and 2012. However, social and territorial inequalities in access to water services remain high in some urban areas: the lowest access rates to sanitation services are reported in the Brazilian city of Belo Horizonte–75%–and Veracruz in Mexico–79%. Although 75% of cities identify water pollution as a challenge, more than 90% cite ageing or a lack of infrastructure and support as the main challenge. This is a capacity issue: 65% of cities surveyed decried a lack of staff and managerial competencies as a challenge.

OECD (2016), Water Governance in Cities, OECD Studies on Water, OECD Publishing

Water Governance in Cities showcases best practices to foster good urban

OECD Observer No 308 Q4 2016

BOOKS OECD iLibrary

New publications OECD Economic Outlook, Volume 2016 Issue 2, No. 100, November 2016 The outlook puts forward a consistent set of projections for output, employment, prices, ﬁscal and current account balances. Coverage is provided for all OECD member countries as well as for selected non-member countries. ISBN 978-92-64-26758-9 November 2016, 237 pages €72 $105 £65 ¥8 700

Health at a Glance: Europe 2016–State of Health in the EU Cycle This fourth edition of Health at a Glance: Europe presents key indicators of health and health systems in the 28 EU countries, 5 candidate countries to the EU and 3 European Free Trade Association (EFTA) countries. Two thematic chapters analyse the links between population health and labour market outcomes, as well as the important challenge of strengthening primary care systems in European countries. ISBN 978-92-64-26558-5 November 2016, 200 pages €40 $48 £32 ¥5 200

Health at a Glance: Asia/ Pacific 2016– Measuring Progress towards Universal Health Coverage This publication presents key indicators of health status, the determinants of health, health care resources and utilisation, health care expenditure and financing, and health care quality across 27 Asia-Pacific countries and economies. ISBN 978-92-64-26472-4 November 2016, 120 pages €30 $42 £27 ¥3 900

All publications are available to read and share at www.oecd-ilibrary.org Job Creation and Local Economic Development 2016

This second edition examines how national and local actors can better work together to support economic development and job creation at the local level. It sheds light on a continuum of issues–from how skills policy can better meet the needs of local communities to how local actors can better engage employers in apprenticeships and improve the implementation of entrepreneurship policy. ISBN 978-92-64-26194-5 November 2016, 288 pages €75 $90 £60 ¥9 700

World Energy Outlook 2016 The landmark Paris Agreement on climate change will transform the global energy system for decades to come. The latest World Energy Outlook oﬀers the most comprehensive analysis of what this transformation of the energy sector might look like, thanks to its energy projections to 2040. ISBN 978-92-64-26494-6 November 2016, 684 pages €150 $180 £120 ¥19 500

Engaging Public Employees for a High-Performing Civil Service How can governments reduce workforce costs while ensuring civil servants remain engaged and productive? The report illustrates the complex challenges facing civil services, such as how to reduce size and cost while still attracting and retaining high-calibre professional talent. ISBN 978-92-64-26719-0 November 2016, 108 pages €21 $25 £16 ¥2 700

Climate and Disaster Resilience Financing in Small Island Developing States Storms, hurricanes, and cyclones have been a feature of life on Small Island Developing States (SIDS) for centuries. But climate change is now increasing the intensity of these disasters, as well as creating new developmental challenges, which challenge the development models of these countries and threaten their own existence. ISBN 978-92-64-26690-2 November 2016, 70 pages €24 $29 £19 ¥3 100

Latin American Economic Outlook 2017: Youth, Skills and Entrepreneurship The 2017 edition of the Latin American Economic Outlook explores youth, skills and entrepreneurship. Young Latin Americans embody the region’s promise and perils. They stand at the crossroads of a region whose once promising economy and social progress is now undergoing a slowdown. ISBN 978-92-64-26254-6 October 2016, 312 pages €60 $72 £48 ¥7 800

OECD-FAO Guidance for Responsible Agricultural Supply Chains OECD and FAO have developed this guidance to help enterprises observe standards of responsible business conduct and undertake due diligence along agricultural supply chains in order to ensure that their operations contribute to sustainable development. ISBN 978-92-64-25095-6 October 2016, 88 pages €24 $28 £19 ¥3 100

BOOKS OECD iLibrary

Focus on Korea Road Infrastructure, Inclusive Development and Traffic Safety in Korea This report combines empirical research on the l ti hi b t relationship between road infrastructure, inclusive economic development and traffic safety with an assessment of policies and governance structures to help Korea find ways to create effective, safe and inclusive transport infrastructures.

All publications available at www.oecd.org/bookshop and www.OECD-iLibrary.org The Korean Public Procurement Service: Innovating for Eﬀectiveness

This report on the Public Procurement Service of Korea examines the effectiveness of its system, identifying good practices that can inspire reform efforts in other countries.

ISBN 978-92-64-24941-7 January 2016, 116 pages €24 $29 £19 ¥3 100

Government at a Glance: How Korea Compares

ISBN 9-7892-64-25550-0 May 2016, 148 pages €30 $36 £24 ¥3 900 OECD Skills Strategy Diagnostic Report

Korea 2015

OECD Skills Strategy Diagnostic Report: Korea

This diagnostic report presents the main outcomes of Korea’s collaborative project with the OECD. It identiﬁes 12 skills challenges that need to be addressed to build a more effective skills system in Korea.

2015, 222 pages

Schools for 21st-Century Learners: Strong Leaders, Conﬁdent Teachers, Innovative Approaches (Korean version) This report summarises evidence from the OECD TALIS and PISA surveys that underpins the three themes of the 2015 International Summit on the Teaching Profession: school leadership, teachers’ self-efﬁcacy and innovation.

ISBN 978-92-64-25417-6 March 2016, 132 pages

This report provides a series of indicators on Korea’s policymaking practices and government performance compared to those of other OECD countries and of the G7 countries.

ISBN 978-92-64-25899-0 July 2016, 180 pages €33 $40 £26 ¥4 200

Compact City Policies: Korea This report examines Korea’s urban policies and offers customised policy recommendations based on the OECD publication, Compact City Policies (2012). Some Korean policies, such as urban regeneration, new town development or multi-modal transferring centres, have implicitly implemented compact city policies to a certain degree.

ISBN 978-92-64-22549-7 December 2014, 208 pages €62 $87 £56 ¥8 000

Employment and Skills Strategies in Korea With the rising economic importance of human resources and skills, employment and training agencies are now often expected to play a more important role in local strategies to support new creation, facilitate restructuring and increase productivity. This book examines the contribution of local labour market policy to boosting quality employment and enhancing productivity in Korea. It focuses on the Bucheon and Busan regions.

ISBN 978-92-64-21655-6 October 2014, 84 pages €33 $47 £30 ¥4 200

OECD Economic Surveys: Korea 2016 Korea has been one of the fastest growing OECD economies over the past 25 years, boosting its per capita income from 39% of the average of the top half of OECD countries in 1991 to 75% by 2014. The 2016 OECD Economic Survey of Korea examines Korea’s recent economic developments, policies and prospects.

ISBN 978-92-64-25718-4 June 2016, 168 pages €49 $59 £39 ¥6 300

Industry and Technology Policies in Korea The Korean innovation system is in many ways highly developed and has helped to underpin Korea’s rapid industrialisation. i d i li i However, H long-standing policy emphases on manufacturing and large ﬁrms are today in question. This review addresses Korea’s industry and technology policies and institutions, and provides policy recommendations.

ISBN 978-92-64-21321-0 June 2014, 208 pages €60 $84 £54 ¥7 800 OECD Observer No 308 Q4 2016

BOOKS OECD iLibrary

Tapping Latin America’s young potential A After years of strong o performance, p Latin America’s L economies are e ffacing a dimmer outlook. The o rregion’s GDP growth will be g negative for the n ssecond consecutive year in 2016, shrinking by between 0.9% and 1% in 2016, a contraction which has not been seen since the early 1980s. This slowdown has stalled the reduction of inequalities and the expansion of the middle class, with 25 to 30 million vulnerable Latin Americans at risk of falling back into poverty in the near future. Still, Latin America has plenty of untapped potential. The region is young, giving the continent an exceptional

demographic opportunity. One quarter of the Latin American population–163 million citizens–are aged between 15 and 29. Though education in the region has improved in recent decades, two out of three young Latin Americans are still not equipped to meet labour market needs for sophisticated technical, professional and management skills. Some 50% of formal firms in Latin America and the Caribbean report having difficulty filling jobs, compared to 36% in OECD countries. The region particularly lags behind in terms of science students. Tertiary education students in Latin America are heavily focused on social sciences, business and law, averaging 39% across countries–from 25% in Chile to almost half of all students in Colombia. More worrisome is the share of young individuals in the region that are neither working nor engaged in education or training (NEET), which represents 21% of

young people compared with 15% in the OECD area. Women are particularly disadvantaged, making up 76% of NEETS and occupying mainly unpaid jobs. No wonder the latest Latin American Economic Outlook, jointly produced by the OECD, the United Nations Commission for Latin American and the Caribbean (UN-ECLAC) and the Development Bank for Latin America (CAF), calls for investing in youth through better education, improved skills and entrepreneurship opportunities to foster economic growth. The report also focuses on linking young entrepreneurs with business networks, and expanding managerial and ﬁnancial training to allow Latin America’s young entrepreneurs to take advantage of global value chains. OECD/CAF/ECLAC (2016), Latin American Economic Outlook 2017: Youth, Skills and Entrepreneurship, OECD Publishing

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DATABANK

If there is one area where Korea has jostled to the front of the OECD field in 20 years, it is in education. Take school performance: according to the OECD’s Programme for International Student Assessment (PISA), a renowned global benchmark which surveys competence among 15-year-olds around the world, Korea’s young students perform better at school than most of their peers in other OECD countries. In the last test in 2012, Korea led the OECD field in mathematics, was second to Japan for reading (our chart), and was in the top seven for science. Some 64 countries and economies with comparable data took the tests. In the 2009 tests Korea had also commanded a top spot. Korea’s consistently high rankings reflect excellent performances of students in Asia more widely, with Japan, ShanghaiChina, Hong Kong-China and Singapore all performing strongly, which the OECD director for Education and Skills, Andreas Schleicher, puts down to a strong

PISA (Programme for International Student Assessment) reading score Mean score, 2012 540 520 500 480 460 440 420 400 Me xic Slo o va k R Chi ep le ub Tu lic rk Gr ey e Slo ece ve Ice nia la Sw nd ed e Isr n H a Lu ung el xe ary mb o Po urg rtu ga Sp l a Au in str Cz i ech It a Re aly pu b OE Den lic CD ma av rk era ge US No UK rw a Fr y Ge ance rm an y B Sw elgiu it m Ne zerla the nd rla A nd Ne ustr s w Ze alia ala Es nd ton Po ia la Ca nd na d Ire a la Fin nd lan Ko d rea Jap an

Korea’s young students excel–

Source: OECD PISA

commitment to 21st century learning and investment in teachers, rather than, say, computer use in the classroom, which in technology-savvy Korea, is actually below the OECD average. The main challenge for Korean school education is less a matter of achieving excellence than how to improve wellbeing among children by reducing study pressure and ﬁnding a better work-play balance.

–as women outsmart men Traditionally, men have tended to be more educated than women in Korea, especially when it comes to higher education. Only 34% of doctoral graduates or equivalent graduates are women which is among the lowest shares across G7 and OECD countries. However, women in Korea have made great strides in educational attainment over the past decade.

The OECD PISA 2015 survey of some 72 countries will be released in December. Visit www.oecd.org/pisa For a more complete ranking across mathematics, reading and science, see “Class progress”, in OECD Observer No 297, Q4 2013, see http://oe.cd/1wj Avvisati, Francesco (2014), “Digital learning in schools” in OECD Observer No 301, Q4, http://oe.cd/R1

Women graduates 24-35 year-olds who have attained tertiary education by gender, %, 2014 80

Men

Women

60 50 40 30 20 10 OE CD

Ge rm an y

Ita ly

an Jap

Fra nc e

Au str alia

na Ca

Ko rea

In the OECD PISA tests, for instance, 15 year-old girls now outperform boys in reading assessments. Among younger adults aged 25-34 years old, some 72% of women have obtained a tertiary education degree, compared with 64% of men. The gender gap between male and female doctoral graduates has also decreased due to national policies aimed at supporting female human resource development and social activities. Women accounted for 32% of doctoral graduates in 2011, 34% in 2013, and 36% in 2015. In addition, 63% of young Korean women reported achieving a higher educational

Note: France and Korea data are for 2013 rather than 2014 Source: OECD. Table A1.4b. See Annex 3 for notes (www.oecd.org/ education/education-at-a-glance-19991487.htm)

attainment than their parents, which suggests upward generational mobility in education. Despite these impressive educational achievements, female labour market outcomes remain poor compared with men, with the Korean gender pay gap remaining the highest among OECD

http://dx.doi.org/10.1787/888933384245

countries at 36.6%. Closing it will be a key policy challenge in the years ahead. See “Korea’s work-life balance policies for sustainable growth” in OECD Yearbook 2015, http://oe.cd/1wk Visit www.oecd.org/gender and www.oecd.org/pisa

OECD Observer No 308 Q4 2016

DATABANK % change from:

previous period

previous year

level: current period

same period last year

Australia

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.5 0.5 -0.4 -0.5 0.5 0.7

1.8 3.1 -0.1 4.7 3.0 1.3

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-12.8 -11.6 5.7 5.9 1.8 2.7

-16.5 -12.9 6.2 5.6 2.2 2.9

Austria

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.2 0.5 -0.9 0.5 -0.1 1.0

0.9 1.5 0.2 1.8 0.7 1.8

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

1.8 1.5 6.2 5.0 -0.3 0.3

2.4 3.1 5.7 4.7 0.0 0.2

Belgium

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.2 0.1 0.6 2.5 -0.3 0.2

1.0 1.3 3.4 5.7 0.4 2.1

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-0.3 -0.2 8.1 8.5 -0.3 0.3

1.1 -5.0 8.1 8.4 0.0 0.2

Canada

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.8 0.9 0.8 3.4 0.1 1.3

2.5 1.3 4.5 1.2 2.2 1.2

Current balance Unemployment rate Interest rate

Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-14.0 -10.9 7.0 7.0 0.8 1.2

-12.5 -15.0 7.0 7.1 0.7 1.2

Chile

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.6 0.2 -3.3 1.3 0.7 1.6

2.1 1.5 -0.3 -1.5 3.5 5.1

Current balance Unemployment rate Interest rate

Q3-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-1.6 -2.0 6.5 6.2 3.5 3.9

-1.7 -3.1 6.2 5.9 0.0 5.0

Czech Republic

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.3 0.2 -1.7 0.2 0.1

2.5 1.9 0.9 5.8 0.2 0.5

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

1.4 -1.9 3.9 6.2 0.3 0.4

-0.1 -1.0 4.8 6.9 0.3 0.5

Denmark

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.4 0.2 0.6 -1.2 -0.2 0.4

1.2 1.1 0.8 1.0 0.6 0.2

Current balance Unemployment rate Interest rate

Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

5.7 5.3 6.4 6.4 -0.2 0.3

7.5 5.8 6.1 6.9 -0.1 0.3

Estonia

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.2 1.1 3.3 0.3 0.4

2.9 1.3 3.0 2.5 0.0 0.4

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

0.1 -0.1 7.3 7.5 -0.3 0.3

0.2 0.0 5.5 8.3 0.0 0.2

Finland

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.4 0.2 0.4 0.5 0.0 0.2

-0.1 1.6 -1.9 2.0 0.9 0.4

Current balance Unemployment rate Interest rate

Q3-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-1.3 -0.4 8.7 8.6 -0.3 0.3

0.6 -0.5 9.4 8.1 0.0 0.2

France

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.0 0.2 -0.5 -0.1 0.0 0.4

0.1 1.1 -0.3 -2.1 0.6 0.3

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-4.7 -6.7 10.1 10.2 -0.3 0.3

1.1 -13.2 10.5 10.3 0.0 0.2

Germany

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.2 0.2 -0.9 0.0 0.2 0.5

1.3 1.7 0.9 1.5 0.5 1.1

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

89.5 68.6 4.2 5.0 -0.3 0.3

70.0 65.0 4.5 5.3 0.0 0.2

Greece

Gross domestic product Industrial production Consumer price index

Q3-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016

0.8.. 0.0 2.4 -0.9 1.2

1.8.. 0.5 1.8 -1.0 -1.5

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q2-2016 Q2-2014

-0.6 0.4 23.5 27.1 -0.3 0.3

-0.8 0.2 25.8 27.6 0.0 0.2

Hungary

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.8 0.3 -2.2 3.5 -0.2 0.2

3.7 1.6 10.3 -0.1 -0.2 0.0

Current balance Unemployment rate Interest rate

Q2-2016 Q4-2013 Q3-2016 Q2-2014 Q3-2016 Q2-2014

1.9 1.4 5.0 8.0 0.8 2.8

0.7 0.3 6.6 10.4 1.2 4.6

Iceland

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q2-2016 Q2-2014 Q3-2016

-1.2 4.7 -5.0 -1.1 0.9 0.3

2.2 7.6 -15.3 -1.7 2.3 1.3

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

0.3 0.0 2.9 5.1 6.3 6.1

0.2 0.1 3.9 6.1 6.2 6.2

Ireland

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q1-2014 Q3-2016 Q2-2014 Q3-2016

4.0 1.5 3.8 2.7 0.8 0.2

6.6 6.5 -0.8 2.8 0.4 0.1

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

5.2 3.0 7.9 11.7 -0.3 0.3

8.7 3.2 9.1 13.7 0.0 0.2

Israel

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.8 0.4 -3.9 -1.6 0.4 0.5

3.8 2.2 -0.6 1.2 -0.6 0.8

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

2.7 2.2 4.7 6.1 0.1 0.7

3.8 1.7 5.2 6.7 0.1 1.5

Italy

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.2 0.3 -0.5 1.2 0.4 0.2

-0.2 1.0 -0.1 1.8 0.0 0.4

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

13.0 7.9 11.6 12.5 -0.3 0.3

-0.1 5.4 11.5 12.2 0.0 0.2

Japan

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-1.8 0.3 -3.6 1.2 -0.2 2.5

0.0 1.0 0.3 2.4 -0.5 3.6

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

43.4 6.3 3.0 3.6 0.1 0.2

32.9 18.7 3.4 4.0 0.2 0.2

Korea

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.6 0.5 -0.9 0.6 0.3

2.6 3.5 0.2 1.2 0.8 1.6

Current balance Unemployment rate Interest rate

Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

20.9 23.6 3.8 3.7 1.4 2.7

27.6 19.4 3.6 3.1 1.6 2.7

Luxembourg Latvia

Gross domestic product Industrial production Consumer price index

Q3-2016 Q1-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.8 0.2 -0.1 -1.6 -0.4 0.5

0.3 3.8 8.8 1.9 0.9 0.2

Current balance Unemployment rate Interest rate

Q2-2016 Q1-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

0.0 0.6 9.8 6.1 -0.3 0.3

-0.1 0.6 10.0 5.8 0.0 0.2

Luxembourg Mexico

Gross domestic product Industrial production Consumer price index

Q2-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

1.0 1.6 -0.8 0.9 -0.1

4.4 2.7 -0.5.. 0.2 3.6

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014

-0.2 -7.1 6.3 5.0 -0.3 3.7

-5.7 1.2 6.6 5.1 0.0 4.3

Mexico

Gross domestic product Industrial production Consumer price index

Q3-2016 Q3-2016 Q3-2016

1.0 0.0 0.6

2.0 0.0 2.8

Current balance Unemployment rate Interest rate

Q3-2016 Q3-2016 Q3-2016

-9.3 3.8 4.7

-10.4 4.3 3.3

DATABANK level:

% change from: previous period

previous year

current period

same period last year

Netherlands

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.7 0.7 3.7 -0.1 0.8 0.3

1.1 2.4 -2.0 2.5 1.0 0.0

Current balance Unemployment rate Interest rate

Q4-2013 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

24.7 18.1 7.0 5.8 0.3 -0.3

25.619.1 6.66.8 0.20.0

New Zealand

Gross domestic product Industrial production Consumer price index

Q2-2014 Q2-2016 Q2-2014 Q2-2016 Q2-2014 Q3-2016

0.5 1.2 -1.1 0.5 0.3 0.3

3.3 3.8 2.7 1.2 1.6 0.4

Current balance Unemployment rate Interest rate

Q4-2013 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.7 -1.3 5.6 4.9 3.4 2.3

-1.8-1.7 6.45.5 2.63.0

Norway

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.9 -0.5 -1.1 -3.6 0.7 0.9

1.8 -1.0 0.2 -6.6 1.8 4.0

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

12.4 4.1 3.3 4.9 1.8 1.1

14.39.6 3.54.5 1.81.2

Poland

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.6 0.2 -0.2 -0.4 0.0 -0.3

3.3 2.2 3.4 3.2 0.3 -0.9

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.8 -0.2 9.2 5.9 2.7 1.7

-3.0 -0.8 10.57.4 2.91.7

Portugal

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.3 0.8 1.6 -1.0 1.0 -0.4

0.9 1.6 1.5 0.5 -0.3 0.7

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.1 -0.5 14.4 10.9 0.3 -0.3

1.0 -0.3 16.9 12.3 0.20.0

Slovak Republic

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.6 0.7 -0.8 -1.5 0.2 -0.4

2.4 3.2 4.9 1.9 -0.1 -0.8

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.5 0.3 13.4 9.5 0.3 -0.3

0.5 -0.2 14.311.3 0.20.0

Slovenia

Gross domestic product Industrial production Consumer price index

Q2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

1.0 1.0 1.8 1.9 1.5 -0.2

2.8 3.0 3.8 6.8 0.6 0.1

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.7 0.8 9.5 7.8 0.3 -0.3

0.70.6 10.59.0 0.20.0

Spain

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.6 0.7 0.6 0.6 1.0 -0.2

1.2 3.2 2.3 1.7 0.2 -0.2

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-5.6 7.9 24.7 19.4 0.3 -0.3

1.33.3 26.2 21.6 0.20.0

Sweden

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.7 0.5 -1.4 -0.4 0.6 0.2

2.6 2.8 -0.6 -0.7 0.0 1.0

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

7.5 6.0 8.0 7.0 0.6 -0.7

9.26.3 8.07.2 0.9 -0.5

Switzerland

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q4-2013 Q3-2016 Q2-2014 Q3-2016

0.0 0.0 -1.0 0.0 0.5 -0.3

1.1 1.4 -1.2 0.5 0.1 -0.2

Current balance Unemployment rate Interest rate

Q4-2013 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

14.3 18.2 4.4 4.8 0.0 -0.7

15.1 20.8 4.24.9 0.0 -0.7

Turkey

Gross domestic product Industrial production Consumer price index

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.5 0.3 -0.9 -6.0 2.6 1.5

2.5 3.1 2.6 -2.8 9.4 8.0

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q1-2014 Q2-2016

-9.3 -8.2 9.1.. 0.0..

-17.5 -8.7 8.5 .. .. 0.0

United Kingdom

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

0.9 0.5 0.3 -0.4 0.7 0.5

3.2 2.3 2.11.1 1.7 0.7

Current balance Unemployment rate Interest rate

Q1-2014 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q2-2016

-30.6 -41.1 6.3 4.9 0.5 0.5

-27.3 -33.7 7.75.5 0.50.6

United States

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

1.1 0.8 1.3 0.5 1.2 0.3

2.6 1.6 4.2 -1.0 2.11.1

Current balance Unemployment rate Interest rate

Q2-2014 Q2-2016 Q2-2014 Q3-2016 Q4-2013 Q3-2016

-98.5 -119.9 6.2 4.9 0.0 0.7

-106.1 -111.9 7.55.2 0.20.2

European Union

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q2-2016

0.2 0.4 0.0 0.2 ....

1.2 1.9 1.3 1.2 0.7 0.3

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2014 Q3-2016

58.2.. 10.3.. 0.0..

.. 51.8 10.9 .. .. 0.0

Euro area

Gross domestic product Industrial production Consumer price index

Q2-2014 Q3-2016 Q2-2014 Q3-2016 Q2-2014 Q2-2016

0.0 0.3 -0.1 0.4 ....

0.7 1.7 0.8 1.2 0.6 0.3

Current balance Unemployment rate Interest rate

Q4-2012 Q2-2016 Q2-2014 Q3-2016 Q2-2014 Q3-2016

51.7 111.8 11.6 10.0 0.3 -0.3

17.2 94.4 12.0 10.7 0.20.0

Brazil

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.8 -0.6 -1.9 -1.1 2.0 1.3

-0.8 -2.9 -4.2 -5.4 8.7 6.4

Current balance Unemployment rate Interest rate

Q3-2016 Q2-2014 .. ..

-19.6 -5.3 .. ..

-19.9 -11.4 .. .. .. ..

China

Gross domestic product Industrial production Consumer price index

.. .. Q2-2014 Q3-2016

.. .. -0.4 0.3

.. .. 2.2 1.7

Current balance Unemployment rate Interest rate

Q2-2016 Q2-2013 .. Q1-2016 Q2-2014

54.2 61.5 .... 4.6..

58.1 85.0 .. .. 4.7 5.2

India

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

1.8 1.2 -1.2 2.0 2.5 1.5

5.9 7.2 -0.9 4.3 6.9 5.3

Current balance Unemployment rate Interest rate

Q2-2016 .. ..

-1.2.. .. ..

-7.4 .. .. .. .. ..

Indonesia

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 .. Q2-2014 Q3-2016

1.2 .. 0.4 1.3

5.1 .. 3.0 7.1

Current balance Unemployment rate Interest rate

Russian Federation

Gross domestic product Industrial production Consumer price index

.. Q1-2014 Q2-2014 Q3-2016 Q2-2014 Q3-2016

-0.3.. -0.3 0.9 2.6 1.0

0.7.. 0.0 1.6 6.8 7.6

Current balance Unemployment rate Interest rate

Q3-2016 Q4-2013 .. Q3-2016 .. Q2-2014 Q2-2016

-3.5 -3.5 .. 6.9 .. 8.5 3.2

-7.3 -3.0 .. 8.0 5.7 18.4

Gross domestic product Industrial production Consumer price index

Q3-2016 Q2-2014 .. Q2-2014 Q3-2016

0.2 0.1 .. 2.0 1.3

0.7 1.1 .. 6.6 6.4

Current balance Unemployment rate Interest rate

Q2-2012.. Q3-2016 Q2-2014 Q2-2016

22.7.. 11.0.. 8.8 -2.3

23.4 .. 13.3 .. 7.4 -2.6

.. Q3-2016

.. 7.3..

.. .. 6.1 ..

Non-members

South Africa

Gross domestic product: Volume series; seasonally adjusted. Leading indicators: A composite indicator based on other indicators of economic activity, which signals cyclical movements in industrial production from six to nine months in advance. Consumer price index: Measures changes in average retail prices of a ﬁxed basket of goods and services. Current balance: Billion US$; seasonally adjusted. Unemployment rate: % of civilian labour force, standardised unemployment rate; national deﬁnitions for Iceland, Mexico and Turkey; seasonally adjusted apart from Turkey. Interest rate: Three months.

Current balance data are reported according to the BPM6 classiﬁcation except Mexico and non-members.

..=not available, 1 Key Partners. Source: Main Economic Indicators, December 2016.

OECD Observer No 308 Q4 2016

DATABANK

Korean-African trade techs up Korean trade with Africa has more than

Korea’s trade ﬂows with Africa, 1996-2014

quadrupled since the late 1990s. With imports and exports totalling US$26.5 billion in 2014, Korea is one of the fastest emerging

US$ billion

trade partners of the continent over the last

decade. By contrast with other “newcomers”

Korea, Exports to Africa

Korea, Imports from Africa

like China, India or Brazil, exports to the continent tend to dominate. Until 2011,

Korea’s exports to Africa have increased more than 2.5 times faster than its imports from the continent. Three-quarters of the

Korean exports are composed of electronic and electro-appliances equipment, phones and transport equipment, compared with

less than half of exports in the case of China, for instance. Korea has thus become an 20 13

20 14

20 12

20 11

20 10

07 20

06 20

01 20

00 20

technology, both for African consumers

important source of equipment and and companies. Bakary Traoré, OECD Development Centre

Source: OECD Development Centre (calculations based on Comtrade data)

OECD Observer Crossword

No 4, 2016 Across 1 Election veriﬁcation 5 Come what ____ 7 Famous Pope 8 UK process to leave the EU 11 Agenda point 12 Insect subject to colony collapse 13 Natural resource such as gold or silver 15 OECD monitors ____ inequality 18 Essential 19 Sphere 21 Wood for skis and bats 22 Coin with twelve stars on it 24 One in German 25 E-mail, e.g. 26 World problems must be approached on ___ not just national levels

For crossword solutions do the OECD crossword online. See www.oecdobserver.org/crossword

Down 1 Grand Old Party 2 OPEC concern 3 Group formed to maintain international peace and security, abbr. 4 WW II code cracker whose life was the subject of “The Imitation Game” 5 Social event 6 To this point 9 Parisian summer 10 “___ soul man” (Blues Brothers lyric) 13 India’s most populated city 14 Put down 16 Recently passed Hall of Fame singer, well-known for his song “Suzanne” 17 French for gold 18 OECD member now for 20 years 20 Cancel a parliamentary bill, say 23 Commodity whose price has been an international concern

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