 But everyone welcome to this session, I think it's going to be a very interesting session given what's been happening in recent events, obviously this was a topic of great interest already and judging from the attendance it still is. We'll be talking about rethinking economic growth. As you know, President Obama has called inequality the defining issue of our time. He was speaking I think mostly about America but it turns out this is an issue across the region and particularly in Southeast Asia and I would be remiss to say that events last night have underscored this issue to some extent. I think it's pretty obvious that the events in Thailand, if you look at the routes, have the routes in a growing income gap, both between urban and rural, a geographic divide and a divide between the rich and poor in an economy that until recently was doing very, very well and now seems to have stumbled upon the very limitations of its own growth model. This is unfortunately a problem that we have all across ASEAN. If you look at the Gini coefficients for the region, you'll find that Thailand is not exceptionally high compared to other countries. It is relatively high. It's actually on a par with the United States and Indonesia is actually better, I will say better or so than higher. It's a little less unequal and the Philippines country we're in now is actually the worst of them all. So this is a pretty germane issue. We want to talk a little bit about what's gone wrong with the model. Have we focused a little bit too much on GDP, gross domestic product as a measure of progress and success for Asia's fast growing economies or do we need a new, it's definitely clear we need a new approach and what we want to try to focus on is how to get there. So we have a very distinguished panel with us today. Let me introduce them. To my left we have Professor Phu Jun from Executive Dean and Professor of the School of Government at Peking University in Beijing. He's also co-chair of the Global Agenda Council on New Growth Models. And I want to point you all through the report that he helped write on the subject, which after this meeting if you want to go and read more on the subject, I can give you the URL. I'll read it out right now for those of you who want to have a pen and can write it. It's H-T-T-P colon double slash no, triple W, W-E-F dot C-H, backslash N-G-M for new growth models. Here on my right is Mr. Nandu Nankishor, the Executive Vice President for Asia, Oceania, Africa and Middle East at Nestle, coming to us from Switzerland. Here is Senior Vice Minister of the Cabinet Office of Japan, Mr. Yasutoshi Nishimura, Nishimura-san, welcome. To my right, Jeremy Sheldon, Managing Director of Markets in the Asia Pacific for Jones Langlasal. He is a fellow resident of Hong Kong. And to my immediate left, Mr. Naoyuki Shinohara, the Deputy Managing Director of the International Monetary Fund in Washington, D.C. Directly in front of me, Ms. Shinta Ujaya-Kamdani, the Chief Executive Officer of Sintessa Group in Jakarta and also a member of the Global Agenda Council for Southeast Asia. I'm Wayne Arnold, I'm the Asia Economics Correspondent at the Wall Street Journal in Hong Kong. So let's get started. We'll go around the room. I think we should start with Professor Fu-Jun. Professor, tell us what is wrong with your approach we've had. We put too much emphasis on GDP as an indicator of progress and how do we achieve a better, balanced and more sustainable growth model going forward? Thank you very much. And I'm very happy to have this opportunity to say a bit of the work that we've done for the new growth model. It's part of the Global Agenda Council of the World Economic Forum. The way we approach that question is we look at existing models. At the risk of oversimplification, we look at the standard text book model of growth. Growth is a function of land, labor, capital. It's a standard growth model. And under that model, you can think of two modes. One is extensive mode of development. The other is intensive mode of development. So we begin by identifying holes in the gaps in the existing model. And what we found is now, if you sort of go systematically by looking at that model in the variable of land, the practice of that model has not been sensitive enough to the carrying capacity of the earth. In other words, we need to have better mechanisms to better price resources, giving the economic principles of prices a function of scarcity. If we move on from that variable to labor, there you're talking about a human capital. It seems to us there are many labor-saving technologies instead of technology progress, but not enough earth-saving technologies. So there is a hole there under the gap there. And in the variable of capital, if not theoretically but in practice, if the return rates of capital is systematically higher than real economic growth rates, then the model cannot be sustained. Or if the growth rates of a highly leveraged investment is systematically higher than real return rates of capital, the model cannot be sustained. But either way, it's a case of inflation and in the case of inflation, it is a very secretive and a powerful way of transfer of wealth. And the result being, you see a widening gap between rich and poor. It's a question not just domestically but internationally. So another gap that we see is now if you look at the standard model, that model looks Einstein, very mechanical. It's not sensitive to the field. And there we are talking about institutions. Now if you have really level playing ground, you can gain in terms of allocative efficiency. So in that report, we have a spectral chapter on institutional learning and the institutional innovation. So this is the sort of diagnosis we have of the existing model. Now we come up with a new model, I quote new here. But as a tool of communication, effective communication, I would call our new model a give model, a model that gives. G stands for green, I stands for inclusiveness, V stands for value. We need to have a change of mindset. Growth is not only about efficiency, it's also about equity, fairness. And well, if you talk about human well-being, you're talking about health, education, employment, political freedom, social relationship, environmental quality and security. And E, give the last term, E stands for ecosystem. And we need to build a better ecosystem to promote entrepreneurship and innovation at the micro level. And more at the macro level, we need to better calibrate the role of state or global governance for the same matter, vis-a-vis the role of the marketplace. Because in terms of the environment, it's publicly good. And we need to have an hierarchy of better global governance to deal with the externalities. And this is what we have. But we have been reported out early this year in the annual Davos meeting there. So I guess I have to stop here. Please, come back to you. Shino Harasson, can I turn to you? Can you elaborate a little bit more on sustainability, both in terms of the inequities of incomes we've seen because of the environmental sustainability? How has GDP as a measure failed us? Well, as we all know, GDP is a very, how do I put it, wonderful, delicate set of the indexes that covers the whole range of economic indicators. But of course, it has its own limitations. For example, it doesn't measure the transactions that are knocked through the market mechanism, like household work, that doesn't go out of the house. It is not measured in the GDP. How the income is distributed? It's not the issue related to the GDP, that is not included. As Dr. Fujin says, environmental degradation, so-called externalities are not in the GDP. So GDP has its own limitations, but GDP is still a very elegant instrument to measure how the economy is working. From the IMF viewpoint, we work on GDP mainly, but if you look at programs in Europe after the European financial crisis, we have had several programs in Europe. And increasingly, the issue of social inclusion, the issue of unemployment, the issue of income inequality is a big issue in order to make the programs successful. When in the program, we talk about fiscal consolidation, we talk about monetary tightening, but it has certainly impacts on the people, especially on the poorer section of the society. And that is why there are huge demonstrations in Greece and the countries, and that makes it very difficult for the program to go through. And that is why the program design has to be very carefully calculated in order to measure the impacts of those macroeconomic policies on the poorer section of the economy. So the program includes lots of measures for social protection, things like that. So the issue of social inclusion, the issue of inequality, is part of our agenda now in order to make the economy grow sustainable. It is not just the GDP, but other measures that we need to take into account. Okay, activities as well. Let's come back to you on that issue as well. Nandu, let me ask you about this. You have often talked, and Nessia has often talked about the real costs that need to be factored of resources. Can you address this when it comes to sustainability and equitable growth? Sorry, would you repeat the question? Sure. You've often talked about the real cost of resources, particularly water. Can you talk about how that fits in with this debate about sustainability and equitable growth? Okay, I'll be happy to talk about that. Let's first start with some of the concepts that Fujun and Shinora-san already introduced. This whole conference is focused on the theme of inclusive growth, where we need to move GDP is elegant, but we need to move beyond that to other measures on longer health, education, employment, millennium development goals, and so on. Now, one of the fundamental, and this of course has responsibilities for all stakeholders, government, industry, and so on. One of the fundamental beliefs in Nestle of the way we approach business is that the only way we can sustainably create value for our shareholders, and the word sustainably is very important. The only way we can sustainably create value for our shareholders is if we simultaneously create value for the society in which we operate. And this includes all stakeholders. In the case of Nestle, if I refer back then to some of the themes that Fujun touched upon, and then I'll come to your sustainability point. Fujun touched upon the theme of employment, health, and education. Let's talk about these three themes. In the case of Nestle, we focus what we call our creating shared value efforts on rural development, on water, and on nutrition. Why these three? First, rural development. What people tend to overlook is when it comes to employment as a measure of inclusive growth, 90% of all employment in the world is created by the private sector. And one of the largest employers in the world is the rural agriculture sector. In ASEAN, something like 37% of people are employed in the agriculture sector. Nestle, as a food and beverage company, has a natural linkage back into the farm. We work directly with 700,000 farmers, directly who get paid on a daily basis and have cash transfers on a daily basis. And that's the best way to provide them a livelihood, provide them sustainability, education to make sure they improve productivity and income, and eventually the dignity that allows them to live a full life. So that's a huge pillar of how we work. Let me talk about nutrition, then I come to sustainability and water. Nutrition is core to Nestle, and it's part of our DNA. If I go to the measures of inclusive growth and health, for instance, one of the, a few facts. Today we have something like a billion and a half people, particularly in the subtropical belt who are malnourished, where you have stunting rates in children of the order of 35 to 40%. And this is a public health crisis that is shameful, which can be prevented simply by addressing micronutrient deficiencies and macronutrient deficiencies. And this is something we in Nestle are able to help governments address by fortification of our products, removing the bad stuff, the sugar, the salt, the trans fatty, saturated, and adding some of the good stuff, the micronutrient deficiencies that are really required by these populations. And we have, for instance, something like 200 million servings a day of fortified products sold only in West Africa, which help to alleviate some of the micronutrient deficiencies in population, whether it's iron or zinc or iodine or vitamin A. The other burden of disease is the obesity and non-communicable disease crisis. And again, it's ironical that you have a billion and a half people who are overweight or obese, and these numbers are rising. The fastest growing disease we have in society is diabetes. And this is a very important measure of inclusive growth. How do we cope with health? This requires science. It requires an understanding of nutrition science, human physiology. It requires educating stakeholders, governments, opinion leaders, civil society, and consumers. And it requires a complete reformulation of the kind of products that are offered to society. And that's a huge area that we work in. Then I come to water, which was the question that you raised. The world, I heard a startling statistic two days ago in the Groeschia Forum, which I was chairing. In the next 40 years, simply to cope with the increase in population, today 7 billion going to 9 and a half billion by 2050. We, in the next 40 years, the world has to produce as much food as we have produced in the last 4,000 years. Let's think about that. In the next 40 years, as much food as the last 4,000 years. For many reasons, we basically need to double our production of food on an annual basis between now and the year 2050. What do you need for food production? Well, I came to the economics model, the growth model that Fujian put forward. You need land. We aren't making any more of it. In fact, we are degrading it. We need sunshine, there's plenty of that around. We need people and we need water. And these are the two scarce resources. People, because children of farmers don't want to be farmers. Farmers don't want their children to follow them simply because of lack of sustainability and the high risk nature of the entire agricultural model, smallholder farm model that exists today. But water, 70% of all the fresh water used by mankind is used for agriculture to grow food. Today, already as mankind, we use fresh water which is 10% in excess of the replenishment level. So we're tapping into aquifers that have been built over millennia. The forecast is that by 2030, we as mankind to grow food will be using fresh water at a rate that is 60% higher than replenishment levels. So, man has survived for millennia without iron, without silicon and without oil and carbon. We can't survive more than two days without water. And yet we are looking at a scenario where over the next 30 years, the most precious commodity in the world will be water. So pricing and access will become huge political issues. They already are. To start with sustainability is the first issue. To make sure that water use is sustainable in order to produce the kind of food so we can feed the world. And we have food security, not only food security, to go back to the previous point of the double burden of disease, we have nutrient security in the right measure in the right place. And to produce that, we need really to very closely create a multi-stakeholder engagement platform to make sure that use of water resources is sustainable. And that's one of the key platforms, the three platforms I mentioned, Rural Development, Nutrition and Water that Nestle works on as part of our creating shared value program to make sure that we create value for society. And that's the only way we can sustainably create value for our channel. Let me come back to you then on how you can apply that in some of the countries in this region. Jeremy, let me turn to you. We're on the subject of sustainability. And you talked about some of the human rights of water and nutrients being one of them. You talked to mention land specifically. Jeremy, what's been happening in that space and how has that contributed to the increasing disparities of income and the unequal levels of growth we're seeing in the region. Access to property. Jones and Sal are a property advisory company. So we advise on various elements related to the built environment primarily. And I think that within the industry as a whole, what we have been endeavouring to do is to greenify, for want of a better word, the built environment. 30% of carbon emissions globally come from buildings. And therefore, from that perspective, we are, the development community are looking very closely at how to measure their impact. And so there is a significant push from governments as climate change is being acknowledged as being a big issue to work at. How can one can do that efficiently? How do we make sure that we take that carbon footprint down within the built environment? Within the workplace, you're finding a lot of individuals, especially the younger generation, are wanting a more productive workplace. So from their point of view, there's an interesting, I was at a conference last week where talking about wellness and very much related to the human capital piece, we're getting to a point now where obviously, sitting at work is perceived as one of the issues related to obesity and such like, people are now having deaths that you stand up. Well, actually in America, you've got deaths with treadmills and they are fixed at four kilometers an hour. This is where we're in the round here. Yeah, exactly. And as soon as we get up, so I think from that point of view, the real estate industry is endeavoring to make sure that both from a development standpoint and from an occupational standpoint that one is aware of it and it's being driven both from a government standpoint but also from an investor standpoint. The reality is as we go forward, as more regulation is provided in this area, the reality between those buildings that cannot provide that sort of sustainable measurement versus those that can, are gonna see, I think, in due course, a premium. And so that you start to find that those impositions are being put in and it's important that there's strong governments on that point of view at a political level. So that you understand exactly what you do and where you may be able to, let's say, get benefits as a consequence of that. Okay. Shinta, I have to turn to you on Indonesia then because this is obviously the largest country in our region, one of the most important and obviously one of the most challenging environmental problems and sustainability problems. And as I mentioned, even though it's genie coefficient is better than talent, by no means considered, I think, acceptable. How would you address this issue? First of all, I think the timing, right? If you see 2015 is last year of the UN MDG, as mentioned, and also at the same time we are approaching AAC, which is the Asian Economic Community. And if we look at all the work that has been done as far as the MDG's concern, of course we have half the extreme property level, we have increased significantly even in Asia in terms of attendance of primary school. So I think you have seen some progress in that area. Now, we understand that now we're moving from the MDG to the Sustainable Development Goal. So I think this is something that in Indonesia we're trying to put this as basic our aim. How Indonesia can be part in achieving these sustainable development goals. And when we look at the three basic components of sustainable development on the economic growth, on the social inclusion, as well on the environmental sustainability, we see that Indonesia is perhaps one of the country that is still far behind in this sense. But what we're trying to do is now having an alignment between the different component of stakeholders in achieving this. So when we think what kind of growth, of course we no longer focus on just economic growth. So we wanna focus on this, but how then we can align between the different stakeholders in Indonesia. So one area that I would like to share is now the government have the national development agenda and we realize that one area if we want to make this happen on a more concrete programs is how to bring this SDG inside of our national development agenda. So that's what we did. I represent, I'm actually the first chairman also of the Indonesian Chamber of Commerce Industry and I've been asked to champion sustainable development actions. And I think one of the area that is important is putting this as the national development agenda of Indonesia and then bringing in some of the programs that we can develop in achieving the SDG. So we are happy now to kind of aim the same goal. And then from the private sector side, we also have created what we call the Fation 2050 because we look at all this demography issue, we see the increase of, we will have a bonus demography and I think globally as mentioned, we will reach 9.5 billion people and that's a huge amount number. So what are we doing in anticipation of that? And I think it is very important because we've been talking a lot about how we want to go but I think it's important that this alignment is taking place. That when we talk about the government, private sector, NGO, academia, we're talking about the same language and we are driving to the same direction and I think this is where I feel is very important when we discuss education, when we talk about social security, this all will involve, it cannot be just a government driving it, it has to come from the multi-stakeholders and I think enough has been said and I think we really in Indonesia want to see how we can bring this forward and we are also integrating with the region and I think this is why I mentioned about the AAC because it's part of what we're doing in WEF and I'm part of the global council member of WEF in South Asia. We're trying to facilitate this process as well on the ASEAN integration aspect because we feel there's a big gap and where the government is sitting right now with thinking that they're achieving 70, 80% of KPI and where private sector is lying, thinking that we're only achieving like 10, 20%. So how can we then sit and see what is missing here? And I think definitely the role of WEF is very important in facilitating some of this integration process. Thanks. I'm interested in this issue of government KPIs and in your report, Professor Fujin, you mentioned several different alternative indicators that we could be looking at to sort of augment our understanding of how governments are doing at their job of trying to create not just growth, but quality growth. And one of the three of these I noticed were from the World Bank. There's an adjusted net savings indicator. There's a human opportunity index and there's a shared prosperity indicator. Now are these the silver bullets that we need to sort of reevaluate government progress on growth? Well, these certainly are the indicators that we have included in our report and our report actually start with a chapter on metrics first. And we think it's important because a change of mindset is very important. Growth should not be exclusively driven by efficiency. For a country or for a nation to move forward, they face simultaneously the goal of efficiency, the goal of justice or equity and the goal of freedom. So if you think of human development, human wellness, social dimensions, economic dimensions, and also be sensitive to environmental poverty and the security. Chinharasan, can we use these indicators in terms of evaluating? I mean, if you were to do your annual analysis of policy makers, would it be possible to incorporate these indexes into their progress in the, I mean, before consultations and various meeting? There are many indexes being developed by various institutions, so each of them has its own good features. Overall, I think it is very difficult at this moment to pick up some of the indexes to be used for policy purposes. We, I just want to emphasize the importance of income distribution in Asia. For example, Gini Coefficient, you talked about income inequality is rising in most of the countries in Asia, especially in countries with large populations. I don't want to pick up names here, but, and this is the issue that the countries in Asia need to deal with one way or another. Needless to say, this is not the issue particular to Asia. It is the global issue now, and it is at the center of the global public debate at this moment. But, and this debate applies to Asia as well. If you look at the countries in Asia, the size of the government is relatively small. That means that the role of the government that plays in allocation of income is relatively small compared to other regions. Why is that? I think it is partly the choice of the governments, the choice of the people to have smaller tax revenue, to have smaller size of the government. But at the same time, it has a lot to do with not enough tax revenues. Weak tax administration, huge amounts of tax exemptions. What else? Those things, and lots of red tapes, things that I think that I have discussed among us a very long time. But that is one area that the governments in this region has to deal with. The other issue that we need to take a look is that fiscal policy plays a big role in addressing the issue of income inequality. In case of advanced economies, we have enough data to do some empirical studies. But it shows that taxation and income transfer in the area of social programs would reduce the income inequality by one third. I don't know how it applies to developing countries but this moment, fiscal policy plays a big role in addressing the issue of inequality. And that is clearly related to the issue of sustainability. I just want to point out another empirical study that shows that if income inequality is high and that income inequality is associated with the shorter duration of high economic growth. That means that if you have a situation with high income inequality, you might be able to enjoy a very high growth for a short period of time but it is not sustainable. It doesn't last for a long period. And that issue is related to, for example, middle income trap and things like that. Can I add something to that? Before we do that, let me turn, this is a perfect opportunity to turn to Nishimura-san because I think Japan is undergoing a very important experiment. It reminds us that this is not a developing country issue. This is an issue that developed countries also face. Japan is undertaking a lot of policies that address exactly what I think you talked about. And what's interesting also to me is that Japan, which is for decades had a reputation for having one of the most egalitarian societies or homogeneous societies from an income base, it's also seen a rising income disparity. And now in April, Nishimura-san, I know you raised your value added tax I know is being considered by the Asian Development Bank and I believe also by your colleagues at the IMF is one way to try to increase the tax base and use that money to spread the wealth. So I wanna get your perspective on how that's working out, what you're thinking is, it was very unpopular and a lot of economists worry that this is going to upend your economic recovery. So is it justified from the point of view of sustainability and sustainable growth from Japan, for Japan going forward? Thank you. Thank you, Chairman. So let me talk about first efforts of our efforts towards inclusive and sustainable development and growth. So as you said, Japan is a traditionally very inclusive society with a low unemployment rate and small income gap and advanced environmental technology. So now we are, our government is working to enhance this advantage in the new growth strategy. And for example, unemployment rates currently stays at 3.6%, which is relatively low by international standard partly reflecting the efforts of companies to keep their employees in their own company. And the pharmaceutical efforts to keep the employees contribute to the stability of our society. But on the other hand, it tend to reduce their profitability, profitability, and I mean, yes. So now we are trying to, what we are trying to do is to facilitate the transfer of our labor force to new growing industries. Although, one billion US dollars have been spent for supporting companies to keep their employees. We will, now we are changing this allocation of resources to, so to spend one billion US dollars for supporting job creation and labor mobility in the future. And now the, we are facing the big challenge we are facing is demography. So population is decreasing in the world, but our population is decreasing, increasing in the world, but our population is decreasing. And now we, our population is 125 million people. But in 2060, naturally it will be 86 million. So it's a big decrease. So we are now thinking how to manage and overcome this challenge. And so what we have to do is, increase their female participation in labor force, which is relatively low by the international standard. So we are increasing social childcare services and also supporting the women who want to work and who want to work. So that's a big challenge for us. And also we have to implement physical consolidation. So we need to increase, I mean, consumer tax, relatively low in the international standard. We added the tax 3% to 8% in the last month, April. Now the 8% and we are trying, we are planning to add two more next year, October next year to 10%. But it depends on whether we increase this additional 2% depends on the economic situations, because we are trying to get out of the deflation which has been continuing the last 15 years in Japan. So our economic policy is trying to get out of deflation and also implement social, physical consolidation. So it's a tough, I mean, narrow pass. So we are doing three other policies. So as you know, we are about the economics. So it's a big challenge for us, but what I want to emphasize is, innovation, technology, and among them, the big strong resolution, strong intention to reform our society, reform our restructure of our economy. So Prime Minister Abe is showing a very strong leadership and Japanese people are now supporting our policy because we are in the deflation long time. So Japanese people understand we have to do new and we have to do challenge. So that's what we are trying to do. It's a fascinating problem that Japan faces and one that's very different than most of Southeast Asia where we have younger populations. Juno Haruson and Pujin, I want to get you to talk about this a little bit because you mentioned fiscal consolidation and we've just seen the Australian Parliament decide to take a path towards fiscal consolidation. But it seems that, and in your report you alluded to this, that there is a danger that in trying to maintain a balanced budget and to protect the savings of people my age and above who have saved for a long time and don't want to see that savings inflated away, that we neglect the needs of the growing younger population more of a problem that Indonesia has. How do we balance this emerging disparity between not just rich and poor but the old and the young? The needs of the young need inflation, nominal growth in Japan for example for faster growth in Indonesia versus the needs of savers who like in Japan once are looking now to sort of phase themselves out of the workforce and retire. Well, there is a long-term issue and a short-term issue. A long-term issue would be good to have a balanced sheet but short-term given the ups and the downs of an economy fiscal policy need to be counter-cyclical. We do not make an argument, it's cut, cut, cut. But the process should be nuanced, sensitive to the long-term goal that you have a balanced sheet. Long-term growth should be looked at as an asset management model. You do not look for cash returns by a deep discount on the underlying assets. Now this is very important. So the fiscal side, we should be sensitive it should be counter-cyclical. The investment side, good investment, is a highly leveraged investment that will have a reasonable return. I mentioned earlier if the growth rates of investment is higher than real growth rates, it's problematic. Now if you look at the case of China, we probably are suffering from that case. Isn't that what every single fund manager wants to achieve? Well, we need to build a... That has to do with the term I give you, it's give model, green, inclusive, value, ecosystem. And in that ecosystem, I talk about at the macro level, there should be a better calibration of the role of the state vis-a-vis the role of the market. To elaborate on that side is now even when we look at the market, if there is a case where you only have markets for goods and services without a market for factors of production, including capital, factors of production, land-label capital, and the political power continue to control factors of production. So this is the institutional environment. In that institutional environment, it would be very easy for someone to get rich very quickly. But that won't allow the whole population to have what we call shared prosperity. So with those kind of skewed institutional environments, it will give two issues. One is the issue of inequality. The other issue is the issue of corruption. So in that E, give model, ecosystem, we need to be sensitive to both the micro-ecosystem as well as what I call the micro-ecosystem to promote entrepreneurship and innovation. Is it just a question of having longer time horizons on your return on investment? Is that what we need to focus on? We've talked about that a lot in different meetings. My concern is that most of the things that we're thinking are good for raising equality are issues that we've talked about for a very long time. It seems like the issue is pulling those into standard policymaking agendas, not just talking about improving the environment and getting stakeholder support, but actually making it part of the evaluation of policymaker's progress. The other question, and it's a very scary one, I realize for a lot of people, is it sounds like what you're saying is what we really need is a much more redistributive system. So is the answer just raising taxes, you know, Hanson? I can talk about this for an hour. I'll give you two minutes. Redistribution of income can have positive contribution to growth if the design is right. I think that is the conclusion. Redistribution means lots of things. Tax system can be designed to be more progressive in order to make redistribution of income. Expenditure on social programs, cash transfer mechanism, things like that will contribute to the distribution of income. The problem is if the design is not right, it could harm the efficiency of the economy. We have to find a good balance between the efficiency based on the market mechanism and whatever the social value that we have to protect. So in order to do that, it seems to us that fiscal policy plays a very important role. Not just fiscal policy, there are labor market policies and other things, but for example, in this country, in the Philippines, they have introduced the so-called conditional cash transfer mechanism. They will transfer cash to the poor people conditional upon their children's attendance in school or they pay regular visit to healthcare services and things like that. It has been very popular in Mexico and Brazil and the Philippines have introduced that. It is still in the process of expanding the program. There are measures like that. If the design is good, that is not harmful to the development of the economy and things like that. The same applies to consumption tax that Mr. Nishimuna talked about, value added tax. Value added tax is very friendly to economic growth. I want to stop you there and ask you to explain that in two sentences to the room. Why, if you talk about the need for progressive taxes, we think of a VAT, a value added tax as being a regressive tax by its very nature. Why would you recommend that Asia have more value added tax? Does that mean we should be paying less income tax? I hope so. Actually, if you look at the tax structure here in Asia, they rely more on value added tax than direct tax. So if you look at the countries in this region, especially in ASEAN countries, you might want to recommend that you should rely more on income taxation rather than consumption taxation. But besides that, what I want to talk about is that of course value added tax or consumption tax is regressive, right? It hits the poor more than the rich. But if it is combined with the appropriate social transfer mechanisms, it should be okay. For example, in case of Japan, what they are trying to do is to raise tax revenues by raising the consumption tax and use that revenue for social security programs, right? That has a redistributive impact. So how can you combine the tax issue and the spending issue? That is another issue that you have to look into very carefully. Jeremy, you mentioned that there is an aspect of this. In terms of property rights, there is a very potent issue in Asia too that has contributed to inequality. Can you address that a little bit, the very thorny issue of land title across Asia? The fact of the matter is property rights should be, in most cases, an inalienable right. The reality is that in a lot of cases people can have their land ex-appropriated and therefore they can't build any security for themselves and for their future. These things have got to be protected. I think the other piece of it is that if you look around the region, there are your ability to own real estate as either a resident or a foreigner is very different depending on where you are, and that has an impact on your ability to provide FDI into that country. There was a conversation last night about the relationship of the Philippines and Indonesia, which was interesting because the amount of FDI going into real estate in Indonesia is far greater than the amount of FDI coming into the Philippines because of the nature of the land title and what you're able to achieve. At the same time, when you've got very open property rights, the likes of Hong Kong and such, when everybody's looking to invest in real estate, all of a sudden you create bubbles and that's what's happened recently with Hong Kong and Singapore and they've provided taxes, which in theory is to stymie speculation and actually interestingly it's had and the idea of that is to then bring down the price but actually it's had a different impact which is that it's pretty much stopped any sort of transactions in that space because the entry price is too great. So those two, I think, go hand in hand and it's important that in order to create stability in a property market those sorts of things are very, very clear and the more open one can be the greater chance one has both from investors and developers because they get security but also from an occupied base where you can bring to our whole issue around sustainability and inclusion best practices from elsewhere in the world into this part of the world and ultimately the whole issue of then better built environments comes about. I think the other piece of it is also a lot of Asian cities, Singapore's a great example which have done as a consequence of planning and those best practices have managed to densify themselves in such a way that actually they're a more sustainable city than a lot of others because densification. You don't want the urban sprawl that exists because ultimately that uses resources it takes up time and energy that ultimately if you densify and plan properly that can be advantageous both to society to the individuals living in it and also resources as whole. We want to open up for questions I meant to do that a lot earlier actually I encourage you to put your hand up and Mike will be sent to you and just inject yourself into this conversation otherwise we would just dominate it. There's a hand over there would you like to ask a question or make a comment? Please identify yourself before you do. Thank you very much for the insights. My name is Lauren Anderson I'm a Sydney global shaper and I work in the space of collaborative consumption or the sharing economy of goods, businesses like Airbnb or car sharing and essentially is about increased efficiency of the assets rather than the production of new assets. So I'm wondering and perhaps the question is mainly to Professor Bujuan and Mr. Shinahara how can we actually look at growth you know maximizing the efficiency of existing assets as a stronger contributor to growth as opposed to the production of new assets and potentially for everyone in the East Asian region obviously there is an aspirational wealth mindset can a model lack collaborative consumption actually overcome this mindset to increase access to things that are needed. Thank you. Which of you would like to handle that one? Certainly though Bujuan certainly these are steps in the right direction if I say the gift model these can be categorized under the G green I mentioned many labor saving technologies vis-a-vis Earth Earth saving technologies so the way I look at what you do is Earth saving institutional technology we also come up with the term called institutional technology that's the kind of method that we human beings coordinate our behavior our shape our value coordinate behavior more towards the green economy more of a welcome in a way I think it's interesting the problem that we face with sustainability and equality or income inequality challenges so much of the fundamentals that we've all taken for granted when we're talking about economics for the last 20 years and one of them is this notion of trade being beneficial for everyone we probably all remember that I think it was not even 10 years ago most of these meetings were met with great protest because there was a movement against globalization and its impact and yet now we're looking at trade as an aspect that could actually improve or reduce income inequality this is in your report but it seems that there's a problem between the way the trade can improve the equality between nations and within nations it can become a great disrupter and the way it's perceived and so I actually think you're considering this now the TPP do you think that this has the potential to apply a sort of a pressure for reform in Japan that could transform industries and make business more open and egalitarian? I think the TPP is a good momentum for reform and restructure and I think trade will increase for each country the wealth so and also we develop new rules of integrity property rights IPR and investment protection or government procurement so it's transparent to new rules so and if some country is not in this kind of a global supply chain made by TPP it will be excluded it may be excluded of this supply chain so this country needs to I mean keep this accept this new rule IPR and investment protection and so on so this TPP is I think the driving force for developing new rules all over the world especially Asia and Pacific regions True but it faces great opposition among your domestic constituents now how do you better sell the idea that free trade is actually good for you each country has kind of sensitive issues so we have to we need to accept some sensitive issues from each country so we don't want free and complete framework we need 80% or 85% is fine so we are now negotiating in the last stage please look at the EU EU is integrated I mean economically one area region but each country has each culture and each I mean so we need economic integration but we have each country has sensitive issues so yes it's sometimes hard to keep your mind around this concept of free trade not sort of leaving people behind that are already disenfranchised or on the wrong side of the income disparity what is the rationale for free trade would help this the benefits we get from free trade is based on the idea of specialization a more concrete expression of that is comparative advantage of different nations but one way to look at markets is to look at domestic markets then you look at global markets what's wrong with the concept of comparative advantage is previously we tend to take that advantage as a static comparative advantage but static has a beauty of elegance sort of see a static picture but what is important is for us to understand that concept as a dynamic comparative advantage so do you have a comparative advantage you say yes tomorrow will you have a comparative advantage you say yes but less so but you gain time so that you can learn new tricks the economy the marketplace continue to move forward so if the thinking is correct what is important is to have the concept of opening up of market not open market right away so that you gain time to adjust your labor skill sets your better position to have for jobs that have higher value added Shinta what are your thoughts on that yeah I have to say that this issue of nationalism versus regionalism versus globalization as is definitely very apparent and when we talk about in the ASEAN context we're looking into how to do more trade creation rather than trade diversion you know and I think we're managing in terms of each of the country as a center of excellence of certain sectors but how then we can create the single market and I think when we talk about opening market there is still a very big dilemma in terms of the nationalism itself that Indonesia for example at the moment we're going through where foreign investors start looking into Indonesia as more protectionist regulation trade regulation coming out our negative list has just been an issue in which we are closing some of the sectors although opening up and this is a big issue at the moment that we're facing and on one side we want to open up we're negotiating right now SIPA Comprehensive Economic Partnership Agreement with different countries South Korea EU we are launching with EU with Australia and yet we're not ready for that right where are we? TPP is very far off of course from the agenda but I think this is a big dilemma that country like Indonesia is facing we don't have that kind of concept of what is really the positive impact if we open our market Do you think it would have a catalyzing impact in a country like Indonesia? I know Japan and China have often looked at China would be very interested to get into TPP which is welcomed and I think it has an alternative agreement as a result but they've looked at these agreements as ways that they can say we had to sign this and now we have to implement reforms that would otherwise be domestically, politically impossible I'm thinking about the land acquisition situation in Indonesia has been talked about often as a deterrent to foreign investment, to infrastructure investment you have a sense of this as a business person and entrepreneur what's the situation there? Is that getting better do you think that there's a way to increase foreign investment by sign on to trade agreements that would help catalyze, get more legislation through parliament than otherwise would happen? Yeah, I think of course as you know our election is coming up in July so at the moment everything seems to be on hold we are very optimistic that the new government hopefully can really bring us to a new direction of Indonesia but I think what is crucial to say is it seems like there's a number of homework that Indonesia needs to fulfill before we even can look at more opening up of Indonesia and I think this is really reflected in the regulatory framework aspect decentralization is a very big issue so while we are talking about globalization this is a major iframe front of us which is decentralization which impact like the land acquisition and so forth is still a big issue till today so I think unless we kind of address those challenges that we face internally I think we will continue struggling to want to be a player in this global arena and I think this obviously the timing is very important and that's why we are looking how this effort can apparently be done simultaneously and address the home issue as well as the global issue and I think we need to really I think Indonesia, the new government has a very big assignment in their head so they really have to move forward with this. Let's take a little more questions, I see a couple of hands going up anyone from the other sections and I have a whole bunch of people behind me I can't see so you just have to throw something at me in the back. My question is for Nishimura and in articles that I read about the TPP content there are extraordinary shareholder rights to ignore laws in member countries related to environmental regulation to bring lawsuits if regulations are more severe in their home country to recover lost profits to challenge labor laws that they don't like and I don't hear much about that in the debates I'm wondering if those issues have been addressed and taken out of the TPP or if Japan with its incredible history of environmental protection of strong labor laws is accepting those parts of the TPP agenda that I read about in some of the underground press that we don't talk about publicly I'm wondering is TPP really something that you should be moving toward to address or how might it impact Japan's environmental record Japan's labor law is going forward Can you identify yourself My name is Alan Minor I'm a venture capitalist What I can say here is so limited and also it is a sensitive issue sensitive matter so let me talk a little bit about this but may I speak in Japanese so please put your headphones ready you can understand Japanese okay um TPP TPP is a 21st century framework so there is no communication between the environment and the labor laws so that is why the time is taking place so because we do not have any president so this is not the 21st century because we do not have any president so this is not the 21st century because we do not have any president so you know, in the 21st century rules and all the equipment we are proceeding with specialization. Therefore, there will be a set of rules in trade and investment covering environment and labor as well, and that would be a common shared rules to our member countries would comply with. But then, when it comes to specific rules, what would be the distributed settlement mechanism? And then, how much time is allowed for the actual introduction of such set of rules? We are in the middle stop negotiation right now. And recently, there was a ministerial meeting in Singapore, and to an extent a discussion has been sorted out. And then, there will be chief negotiators meeting in July. And by then, all these items would be sorted out. And when the chief negotiators meeting is held in July, all these will be worked on and lead on to the ministerial meeting scheduled to be held in July. I have a complete message. And there was another question there, and I agree. Thank you. I'm Vivienne La from Junior Achievement Asia Pacific, nonprofit organization in 120 countries focused on supporting young people. On the topic of sustainable and inclusive growth, I think Professor Fu, you call for a change of mindset. I think sometimes it's more than just the change of mindset. We need to have the enabling system and process to support that. Now, on the real cost of resources, I think what we are seeing right now is that our current generation is actually getting a discount. Our future generation is going to pay a premium. So I know I have this wild concept that I think would terrify politicians and economists in this room. Is there a chance that we can look at real cost of pricing with a different perspective? Really long-term pricing? So maybe it's a new form of GST, but the G and the S stand for global sustainability. Maybe we shouldn't call it tax because tax is a dirty word. So maybe it's global sustainability fund or something, which means that we should really pay for the true cost so that by the year 2060, future generation, when they look at us in this room, they know that we've done something to support them. I know it's a wild card and I like to hear comments. Is it a wild card? I think this may be wrong, but I think this is the concept behind the carbon tax, behind carbon trading. In Indonesia, please go ahead. May I comment on this one? I kind of get where you're going with this. And let's take the issue of water, which is where Wayne started and you referred to that. Water has many dimensions beyond the economic. There's political dimensions. There's even spiritual dimensions, environmental dimensions. And we see indeed water use is unsustainable. We see water tables. You look at the state of Punjab, for instance, in India and Pakistan. Water tables have depleted to a level. The farmers know what's happening. They know this is unsustainable. And we go and talk to them. They tell you, listen, we know beyond the next 10, 15 years it won't last. But if I don't do this, all my neighbors are going to take the water anyway. The depleting groundwater levels in Bangladesh have led to levels of arsenic in the water supply system that entered the food chain and have a huge health care cost for humanity. So there is no doubt that there has to be some way of appropriately recognizing this cost that this resource has. Unfortunately, the moment you talk of cost is allocated to a resource like that. The first reaction is always emotional. And there's no doubt that water access to clean, safe drinking water is a fundamental human right. But that usage of water for drinking, for cooking, for personal hygiene is not more than a couple of percent of the total freshwater resources we have. The bulk of the freshwater resources we have are actually used in agriculture, 70%. And the research seems to indicate that the amount of water used in agriculture is two to two and a half times the physiological requirement of the plants themselves because of losses due to transpiration, losses because of percolation, and simply overuse of water. So a proper pricing mechanism in some way with communities participating, because they see the cost. Communities and the farmers know the cost. Participating in this will definitely go a long way. But it's politically a very difficult transition to make. Nando, I think the issue of pricing these commodities would take us about six hours to even cover the basic issues. But very quickly, I wanted to try to drive you back to something you referred to earlier, which is, Pujoon talked about, and Sheena Harzons talked about wealth transfers. Is there a way, in the context of your investment, you talked about investment in the rural sector and the agricultural sector, is there a way to get the private sector involved more directly in looking at a longer time horizon for returns and in getting engaged with governments in trying to create these wealth transfers on a commercial level? Let me give you a simple example. And then you tell me. And this is an example from our business in Pakistan. We have a business that's about 80 billion rupees, Pakistani rupees. Of this 80 billion rupees, where does the revenue go? 80 billion rupees, cash. 20 billion goes to farmers directly, wealth transfer. Form of cash that is transferred on a daily basis for the milk and raw materials that supply. Another 20 billion goes for other raw materials and packaging materials. 20 billion goes to indirect taxes, transportation, interest costs, et cetera. And 20 billion that's left over is split three ways between employee salaries, direct taxes, and shareholder profits. Now if I look at that as a model, as a capitalist, and I put this equation about the wealth transfer that's happening into the rural economy, into the hands of individual small farmers, and the money that's actually being split between direct taxes and profits and employees, this is a sustainable business model because you have wealth transfers integrated into the way you operate. And that is a sustainable business model that we need to work with. Chintu, what do you think, I want to get your opinion because you're from a country that is still largely rural. Do you think that that resonates with you in terms of a workable business model in Indonesia? Well, actually the government has tried, as you know, a few years ago they're reducing, they're trying to reduce subsidy and then creating a program of what we call the wealth transfer, I mean, a cash transfer program for more for the poor. Unfortunately, it didn't really work very well. And I think this concept of wealth transfer as a model seems to be good, but in actual implementation it's not as simple as what it's apparent to say. And I think coming back again on what the government is doing, these policies, I think it has to be clear that, for example, we're at the moment we're negotiating in terms of the social security for labor and for employees. And where does the cost go? And they wanna say, this is all employer responsibility. So basically 5%, all employer's responsibility. And so they wanna try, basically the cost will lies on the employer, it's not the employees. And this is always, this is an ongoing problem in Indonesia because you're trying to create policies and that is really pro, of course, the major population in where the labor is. And then yet, it's impacting that to the employer side, which is a certain segment of the side. So I think, how can you create this balance when we look at the wealth transfer, how can this be implemented properly? And how can you can have a fairness in terms of, yes, of course, certain cost needs to go here, but how do you actually execute it, I think it's the problem. So let me stop there and open up for what we have time for, just one more question and I wanna make sure we do get a couple of those in. And then we'll all be heading off for that. I know everyone's eager to get to the lunch. Over in the back. Thank you, my name is Yosef from Delfin Hub Global Shapers Community. We're talking about ecosystems and ecosystems come from a natural world, sort of our understanding of a natural world. And ecosystems work towards equilibrium. When you think about growth, how we become overly obsessed with growth that it's affecting us negatively? Can you, is the question, how do we become so obsessed with growth that it's affecting us negatively? Is our obsession with growth affecting us negatively? Okay. Julie. Eugene, you wanna take that one? Well, that's when we look at the existing model of growth. We do not make a very strong argument against the existing model, but in practice of the existing model, land, labor, capital, land, of course, stands for. It's a more concrete term for the celestial, celestial constraints we all face, it's land, including water. In the practice of the existing model, we have not been sensitive enough to what we call the caring capacity of earth. Now consistent with the economic principles, if resources are limited, there must be better mechanisms for better pricing of those resources. But now we are probably conceptually more clear. The next challenge for us is to communicate that message to governments, to business, to every sector of society so that we have a better chance for the growth to be more sustainable. Of course, it will be a challenge, but the better to start talking about what we call give model. Green, inclusive, new value, a better ecosystem for entrepreneurship and innovation so that we have a better chance to survive all together. All right, why don't we try to wrap it up there and I'll try to sum up before we all head out. I think, I'm not sure if your acronym will necessarily take up, but I think the spirit behind it definitely will. There needs to be a clearer alignment and a recognition. I think these kind of conversations will help that to some extent. The government's realized it's not just enough to come up with a positive growth figure because for years we thought, if you can produce the growth, you can stay in power. That's clearly no longer the case. I think every government in the region from Japan to China to Southeast Asia recognizes that. Obviously, we get more serious about trying to create a more realistic pricing model for scarce resources, a smarter tax structure, some kind of conditional wealth transfers should be explored that can help mitigate the impact of freer trade and developed capital markets. Property rights I think is a paramount issue for Southeast Asia and most of Asia. Land reform was never really fully implemented in much of the region. I think in this country, in particularly, it's a process and hasn't been fully completed. Japan, I think, politicians there will also have to engage others in the region about trying to create a better awareness and understanding of why free trade is good. And as our audience suggested, I think that more has to be done to try to not only just explain this to the public, but to find ways to create those opportunities so they can move and adapt and benefit fully from those agreements. So why don't I leave it there? And I'm sorry we had to run out of time, but I know there's a big motion to go to the Indonesian lunch, run across me, and I'll thank the panelists for their time and taking part in their insights. And I'll thank all of you for coming and sharing with us today. Thank you.