## ASEAN PROGRESS TOWARDS THE SUSTAINABLE DEVELOPMENT GOALS

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### Executive summary — progress, outlook, and challenges
- MDGs helped secure significant progress since 2000 in poverty reduction, health, and education in ASEAN developing countries.
- By 2015, in four lower-middle-income ASEAN countries:
  - absolute poverty declined to between 2 and 17 percent,
  - child mortality declined to between 22 and 66 (per 1,000),
  - most countries achieved universal primary education completion.
- The 17 SDGs (adopted in 2015 to be met by 2030) broaden objectives to inclusion and environmental sustainability for all ASEAN members.
- Economic context and outlook:
  - ASEAN exhibits strong income growth, structural transformation, and infrastructure improvements supporting sustainable development.
  - With continued income growth and strong policy efforts, most ASEAN countries are on track to eradicate absolute poverty by 2030.
  - Economic welfare in ASEAN countries is expected to continue converging towards advanced Asia levels given continued income gains.
- Key challenges:
  - Income inequality remains relatively high in several countries.
  - Shift toward manufacturing strains environmental sustainability.
  - Lower-middle-income ASEAN countries face larger development needs for improved infrastructure, health, and education.
- Financing to meet needs requires a combination of:
  - improvements in spending efficiency,
  - increased tax capacity,
  - greater private sector support,
  - concessional financing from development partners for developing ASEAN countries.
- Measurement and approach:
  - Progress assessed via selected indicators on poverty, health, education, inclusion, and environmental sustainability.
  - Projections to 2030 use Spring 2018 WEO macroeconomic projections and linear extrapolations of past trends.
  - Benchmarking against an advanced Asia aggregate (Japan, Australia, and Korea).
- IMF engagement:
  - Support areas include strengthening revenue mobilization; building state capacity for infrastructure; pursuing economic and financial inclusion; addressing climate change; strengthening institutions for good governance; building statistical capacity.
  - IMF commitments since 2015 target revenue mobilization, effective use of resource flows, inclusion and environmental sustainability, and support to fragile states.

### Poverty, education, and health — trends and projections to 2030
- Poverty:
  - Absolute poverty: about 3 percent in the median ASEAN country; about 10 percent for the median lower-middle-income ASEAN country.
  - At current trends, absolute poverty is expected to be nearly eradicated in most ASEAN countries by 2030.
- Education:
  - Median lower secondary enrollment: 78 percent.
  - Median pupil-to-teacher ratio: 18 pupils to teacher.
  - Projections: enrollment would rise moderately; pupil-to-teacher ratio would decline; lower-middle-income ASEAN projected to catch up with overall ASEAN median by 2030.
- Health:
  - Median under-five mortality: 24.5 per 1,000 live births (below global SDG of 25 per 1,000).
  - Maternal mortality for lower-middle-income ASEAN: 143.5 maternal deaths per 100,000 live births (global SDG: 70 per 100,000).
  - Projections: significant improvements if recent positive trends continue; life expectancy gap with advanced Asia is substantial and projected to persist through 2030.

### Inclusion, labor, infrastructure, gender, inequality, environment
- Labor and inclusion:
  - Manufacturing employment increased; ASEAN median projected to exceed advanced Asia median by 2030 under current trends.
  - Youth unemployment: 11 percent for the median lower-middle-income ASEAN country.
- Infrastructure:
  - Electricity penetration: most ASEAN countries above 97 percent; by 2030 only one country expected to have less than full electricity penetration.
  - Broader infrastructure gaps remain in several lower-middle-income countries.
- Gender:
  - Female managerial representation: 30 percent median.
  - Women in parliament: close to 20 percent median (advanced Asia at 13 percent).
- Inequality:
  - Gini coefficient: about 38 for the median ASEAN country; 32 for advanced Asia.
  - No expected improvement in income inequality up to 2030 for the ASEAN median country.
- Environment:
  - CO2 emissions per capita currently lower in all ASEAN countries than advanced Asia.
  - Some countries expected to significantly increase CO2 emissions as they industrialize.
  - Environmental challenges: increasing air pollution, rising economic losses from natural disasters, deforestation, and land erosion.

### Welfare index, scenarios, and potential gains
- Welfare index methodology: consumption per capita, life expectancy, Gini coefficient, ratio of consumption to income, and cost of greenhouse gas emissions integrated in a theoretically consistent index.
- Income per capita:
  - Median ASEAN country at about 20 percent of advanced Asia level (about 28 percent using a population weighted average).
  - Past-trends/WEO scenario: median ASEAN income per capita growing to around 35 percent of advanced Asia level by 2030.
- Welfare levels:
  - ASEAN welfare about 12 percent for the median ASEAN country relative to advanced Asia (about 15 percent population weighted).
  - Under past trends, welfare expected to improve to about 20 percent of advanced Asia level by 2030.
- Active scenario (2030 targets based on commitments/best performers):
  - Median ASEAN country would see a 9 percentage point improvement in welfare, bringing it close to 30 percent of the advanced Asia level.
  - Drivers: higher consumption share, higher life expectancy, lower GHG emissions, lower income inequality.

### Spending needs: case studies — Indonesia and Vietnam
- Overview:
  - Focus on additional spending for education, health, water and sanitation, road infrastructure, and electricity access.
  - These sectors represent about a third of government budgets; estimates are lower bounds.
  - Case studies cover Indonesia and Vietnam; spending needs generally larger in lower-middle-income economies.
- Costing methodology (summary):
  1. Identify relatively good performers using sector SDG indices (example SDG education index threshold: >80 out of 100).
  2. Calculate median values of main costing items among good-performing peers.
  3. Using medians and country-specific projections, estimate additional spending needs for 2030 by comparing objectives with baseline current total spending.
- Indonesia key estimates:
  - Government education expenditure: 3.6 percent of GDP ($516 per student).
  - Total education expenditure: about 7 percent of GDP.
  - Closing gap with best performers requires an increase of less than a half percentage point in government education spending.
  - Health SDG index: 62 as of 2018; emerging market median: 78.
  - Current total health expenditure: about 3.5 percent of GDP; public expenditure: 1.5 percent of GDP.
  - Target total health expenditure close to 6½ percent of GDP by 2030; public share about 60 percent implies government expenditure almost 4 percent of GDP in 2030 (an increase of almost 2½ percentage points).
  - Infrastructure needs by 2030:
    - Roads: build about 173,000 km during 2018–2030 to raise rural access from 94 percent to 100 percent; annual road investment almost 1 percent of GDP.
    - Water: achieve universal safe access by 2030 — annual total new investment ½ percent of GDP through 2030, mostly public.
    - Electricity: 97 percent access; per capita consumption about 900 kwh per year (emerging market median: 2,679 kwh); to reach universal access and emerging market per capita consumption, additional investment almost 1½ percent of GDP per year.
  - Aggregate Indonesia additional spending to achieve health, education, and infrastructure goals: about 5½ percent of GDP per year; additional public spending close to 4 percent of GDP.
  - If additional infrastructure areas included (train, SEZ, non-electricity energy, ports), additional total spending would be 7.7 percentage points of GDP, with 4½ percentage points public.
  - Selected benchmarks (Table 1 context): Countries with SDG4>80 — GDP per capita: 4,986 (latest); Estimated 2030 GDP per capita: 6,642; Enrollment rate (primary–tertiary): Latest 69%; 2030 Estimated 73%; Student-to-teacher ratio: Latest 13.3; 2030 Estimated 13.3; Teacher salary (current USD): Latest 8,684; 2030 Estimated 12,323; Education spending to GDP (%): Latest 4.1; 2030 Estimated 5.5; Additional total spending to GDP (%): (1.4); Additional public spending to GDP (%): 0.3; Spending per student (current USD): Latest 990; 2030 Estimated 1,446; SDG4 score: Latest 85; Indonesia 77.
- Vietnam key estimates:
  - SDG education index: above 80; average enrollment rate (preprimary to tertiary): close to 70 percent.
  - Spending: almost 8 percent of GDP ($630 per student).
  - Emphasis on addressing spending inefficiencies rather than raising spending; reducing pupil-to-teacher ratio from 18 to 12 could be achieved within current spending if efficiency improved.
  - Health: additional public spending needs by 2030 estimated at less than 2 percent of GDP; additional total health spending about 1 percent of GDP.
  - Public share of health spending: 42 percent; raising public share to best-performer levels would require more than 1½ percent of GDP increase.
  - Infrastructure:
    - Roads: increasing rural access index by 5 percent (additional 83,000 km) including maintenance would require an additional 2 percent of GDP per year.
    - Water: additional ½ percent of 2017 GDP per year to provide safe water to all households and end open defecation.
    - Electricity: full coverage nearly reached; accommodating increased per capita consumption (estimated average 8 percent annual growth) would require resources up to 3 percent of GDP per year.
  - Aggregate Vietnam additional spending needs to achieve health, education, and infrastructure goals: almost 6½ percent of GDP per year; estimated additional government spending needed: around 5 percentage points of GDP.
  - Estimates subject to uncertainties: public spending plans absence, sector target uncertainties, data gaps, private participation assumptions.

### Financing strategies, MTRS, and fiscal management
- Medium-term revenue strategy (MTRS):
  - Public resource identification for additional public spending should be anchored in an MTRS reflecting tax capacity and room to enhance spending efficiency.
  - Example country estimates:
    - Myanmar: additional 2½ percent of GDP a year in both education and public health; estimated total additional spending at 5 percent of GDP a year.
    - Vietnam and Indonesia: comparable estimates of about 2 and 3 percent of GDP, respectively.
  - Indonesia: general government revenue less than 15 percent; tax revenue around 11 percent of GDP. An MTRS identified additional potential revenue of about 5 percent of GDP (3.5 percent from tax policy reform and 1.5 percent from revenue administration reform).
  - Vietnam: revenue ratio at 23½ percent of GDP (19 percent tax revenue), limiting room to further increase revenue-to-GDP; focus on spending efficiency gains recommended.
- Enhancing spending efficiency and rationalizing spending:
  - Policies include increasing spending efficiency, rationalizing nonpriority spending (example: eliminating energy subsidies), and implementing carbon pricing.
- Fiscal sustainability, fiscal rules, and borrowing:
  - Additional government borrowing can finance part of the needed increase if it does not endanger market access and debt sustainability.
  - Fiscal rules constrain borrowing: Indonesia has mandatory 3 percent government deficit ceiling; Vietnam public debt at 58 percent of GDP in 2017, close to statutory limit of 65 percent.
- Institutional and delivery capacity; digitalization:
  - Medium-term budget planning, capacity development, and governance are critical.
  - Digital tools can strengthen tax compliance, reduce leakages, and improve service delivery (examples: electronic tax filing, biometric identification, e-payments).
  - Country examples: Philippines digital registry covers 75 percent of population; Singapore Elderly Monitoring System; revenue administration digitalization in Singapore, Malaysia, Vietnam, Indonesia, Thailand.
  - Digitalization challenges: limited internet access in Lao P.D.R., Myanmar, Indonesia, and Cambodia (less than one-third of population); privacy, fraud, cybersecurity concerns.
- Private sector participation and PPPs:
  - PPPs can help fill financing gaps; Vietnam developing a new PPP law.
  - Preprimary education likely to remain largely privately funded; hospitals increasingly reliant on fees; PPPs require value-for-money assurance to minimize fiscal risks.
- Role for international community and concessional financing:
  - Lower-middle-income ASEAN countries with large needs and low revenue capacity likely require additional external concessional financing from development partners.

### IMF engagement, capacity development, and tools
- IMF support and capacity development:
  - Regional office engagement, regional training institutes, capacity development offices, and resident representative offices.
  - Collaboration with AMRO formalized with an MoU in October 2017.
  - Support areas include resource mobilization, infrastructure capacity, inclusion, climate change, institutions, corruption vulnerabilities, and statistical capacity (e-GDDS).
- Tax capacity strengthening:
  - Since 2015, heightened engagement through MTRS and the Platform for Collaboration on Tax (PCT).
  - Technical assistance and application of toolkits increased by about 30 percent since 2014 (examples: TADAT, RA-GAP, RA-FIT/ISORA, TPAF).
  - Country TA and reform examples: Philippines VAT reforms; Vietnam tax management information system and anti-smuggling reforms; Myanmar institutional strengthening and new IT systems; Lao PDR VAT and tax law reforms; MTRS developed in Indonesia and Thailand.
- Infrastructure tools and analytical findings:
  - Global Infrastructure Hub estimate: ASEAN needs to invest an additional US$35 billion per year through 2030 to attain the SDGs.
  - Infrastructure investment gap particularly large for Cambodia and Myanmar at 78 and 186 percent of current investment levels; Singapore gap at 0.3 percent.
  - IMF IPSI tools: PIMA, P-FRAM, macro-fiscal implications analysis, DSA, MTDS.
  - PIMA/P-FRAM findings: Thailand institutional weaknesses led to measures to reduce procurement delays; Malaysia requested further TA; Cambodia created a Central PPP Unit and plans to include contingent liability risks in debt strategy.
  - DIG and DIGNAR applications (Cambodia, Myanmar, Thailand, Vietnam): public investment boosts growth, but overly ambitious scaling-up may threaten public finances; gradual scaling-up financed by borrowing and fiscal adjustment with higher revenue collection efficiency yields best outcomes; enhancing public investment efficiency magnifies growth effects and improves debt dynamics.
- Capacity building in debt and risk analysis:
  - DSA and MTDS widely used in ICD courses; about 270 government officials trained in DSA during 2014–17; online courses introduced; five-day technical workshops provided to Cambodia, Lao PDR, and Myanmar since 2014.

### Inclusion, gender, financial deepening, and climate policy
- Inclusion:
  - IMF work links lower inequality with faster growth; fiscal policy is main tool for redistribution.
  - Country examples and engagement: Singapore Smart Nation Initiative; Thailand social transfer scheme; Malaysia female labor force participation target of 59 percent by 2020 with tax incentives; Philippines aims to raise female labor force participation by 2 percent by 2022.
  - Ongoing work on gender budgeting and analysis in Lao PDR, Vietnam, and Cambodia.
- Financial inclusion and stability:
  - Since 2015, 37 TA missions in ASEAN on crisis management, deposit insurance, supervision, macroprudential policy, FSIs, and balance sheet analysis.
  - Indonesia created National Council for financial inclusion; Myanmar regulated mobile financial services; Cambodia formulated financial inclusion strategy and payment infrastructure.
- Climate change and energy:
  - IMF energy/climate initiative provides tools to estimate carbon prices and fiscal/economic impacts; carbon pricing tools for G20 (including Indonesia) completed and to be finalized for all ASEAN by Fall 2018.
  - Country examples: Vietnam national climate resilience strategy; energy subsidy reforms in Thailand and Indonesia; carbon tax and emission trading under consideration in Singapore, Thailand, and Vietnam.

### Policy recommendations and implementation priorities
- Adopt comprehensive, country-specific SDG strategies integrated with national development plans and monitored through voluntary review.
- For lower-middle-income ASEAN countries, more determined policy efforts to improve infrastructure, health, and education outcomes are recommended.
- Mobilize financing through a mix of:
  - improved spending efficiency,
  - strengthened tax capacity,
  - private sector participation,
  - concessional financing where appropriate.
- Strengthen state capacity to plan, prioritize, and implement sizeable public spending programs required to meet SDG targets.
- Environmental sustainability policies could include reducing fuel pricing distortions, reducing energy subsidies, and introducing carbon taxation.
- Policies to reduce income inequality could include increasing progressive direct taxes and targeted social spending to improve safety nets.
- Anchor additional public spending in an MTRS reflecting tax capacity, spending efficiency, and supportive institutional environment; fill remaining gaps via private participation and concessional financing.
- Strengthen ASEAN cooperation and data-sharing to monitor and evaluate SDG progress and to share national action plan experiences.

*Source: ASEAN PROGRESS TOWARDS THE SUSTAINABLE DEVELOPMENT GOALS (International Monetary Fund).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Progress on SDGs and past achievements
- The Millennium Development Goals (MDGs) focused attention on poverty reduction, better health outcomes, and improvements in education in the ASEAN developing countries and helped secure significant progress since 2000.
- By 2015, in four lower-middle-income ASEAN countries:
  - absolute poverty declined to between 2 and 17 percent,
  - child mortality declined to between 22 and 66 (per 1,000),
  - most countries achieved universal primary education completion.
- The 17 Sustainable Development Goals (SDGs), adopted in 2015 and to be met by 2030, cover a broader, interlinked set of objectives including inclusion and environmental sustainability, relevant to all ASEAN member countries.

### Economic context and outlook
- ASEAN exhibits strong income growth, structural transformation, and infrastructure improvements that continue to support sustainable development.
- With continued income growth and strong policy efforts, most ASEAN countries are on track to eradicate absolute poverty by 2030.
- Given support from continued income gains, economic welfare in ASEAN countries is expected to continue converging towards advanced Asia levels.

### Key challenges to inclusive and sustainable growth
- Income inequality remains relatively high in several countries.
- The region’s shift toward manufacturing strains environmental sustainability.
- These challenges hamper ASEAN welfare convergence relative to advanced Asia.
- Lower-middle-income ASEAN countries face larger development needs, especially for:
  - improved infrastructure,
  - better health outcomes,
  - better education outcomes.

### Spending needs and financing
- Case studies for Indonesia and Vietnam indicate that reaching the level of best performers in their income group in infrastructure, health, and education by 2030 could entail an additional cost of 5½–6½ percent of GDP per year.
- While development needs vary across countries, estimates suggest large spending needs for most ASEAN countries.
- Meeting these needs will require a combination of:
  - improvements in spending efficiency,
  - increased tax capacity,
  - greater support from the private sector,
  - concessional financing from development partners for developing ASEAN countries.

### Measurement and analytical approach
- Progress is assessed using a broad set of selected indicators focused on poverty, health, education, inclusion, and environmental sustainability.
- Projections to 2030 use Spring 2018 World Economic Outlook macroeconomic projections and linear extrapolations of past trends in the selected SDG indicators.
- Progress is benchmarked against an advanced Asia aggregate (Japan, Australia, and Korea).

### IMF engagement and support
- The IMF increased engagement with ASEAN countries through policy diagnostics, advice, and capacity development.
- IMF support areas include:
  - strengthening revenue mobilization,
  - building state capacity for infrastructure provision,
  - pursuing economic and financial inclusion,
  - addressing the challenges of climate change,
  - strengthening economic institutions for good governance,
  - building statistical capacity.
- The IMF committed in 2015 to initiatives to support developing countries in: (1) strengthening revenue mobilization capacity; (2) ensuring effective use of resource flows—particularly when addressing infrastructure gaps without imperiling public debt sustainability; (3) intensifying policy engagement on inclusion and environmental sustainability; and (4) providing more effective support to fragile and post-conflict states.
- There is evidence that these efforts have started to pay off, although fundamental reforms take time to bear fruit.

### Recommendations and policy implications
- Develop comprehensive, country-specific SDG strategies formulated in the context of national development plans and monitor progress through the voluntary review process.
- For lower-middle-income ASEAN countries, pursue more determined policy efforts to improve infrastructure, health, and education outcomes.
- Mobilize financing through a mix of:
  - improved spending efficiency,
  - strengthened tax capacity,
  - private sector participation,
  - concessional financing where appropriate.
- Strengthen state capacity to plan, prioritize, and implement the sizeable public spending programs required to meet SDG-related targets.

*Prepared by a staff team led by Jarkko Turunen (APD), Stefania Fabrizio (SPR), and Mercedes Garcia-Escribano (FAD) under the guidance of Nada Choueiri (APD).*

### 7.      Maintaining past good performance would help achieve significant declines in poverty

### 7.      Maintaining past good performance would help achieve significant declines in poverty

### Poverty
- The proportion of the population living below the international poverty line (absolute poverty) is currently about 3 percent in the median ASEAN country, albeit higher (at about 10 percent) for the median lower-middle-income ASEAN country.
- The same is true for other dimensions of poverty (including relative poverty based on national poverty lines).
- At current trends, absolute poverty would decline substantially and is expected to be nearly eradicated in most ASEAN countries by 2030.
- Outcomes are expected to improve the most in countries with the highest starting levels, while poverty reduction is likely to become more challenging as absolute poverty gets closer to zero.

### Education
- Many ASEAN countries perform well in terms of education outcomes, but the region trails advanced Asia on some metrics.
- Median indicators:
  - 78 percent enrollment rate in lower secondary school.
  - Ratio of 18 pupils to teacher.
- At current trends:
  - Enrollment would rise moderately.
  - The pupil-to-teacher ratio would decline.
  - Lower-middle-income ASEAN is projected to catch up with the overall ASEAN median by 2030.

### Health
- Basic health indicators show substantial gaps relative to advanced Asia, with some bright spots.
- Median indicators:
  - Mortality for children under the age of five: 24.5 per 1,000 live births (already below the global SDG at 25 per 1,000 live births).
  - Maternal mortality for lower-middle-income ASEAN countries: 143.5 maternal deaths per 100,000 live births (compared to the global SDG of 70 per 100,000 live births).
- Projections:
  - If recent positive trends continue, health outcomes measured by these indicators are projected to improve significantly.
  - The life expectancy gap between the median ASEAN country and advanced Asia remains substantial and is projected to persist through 2030, indicating gaps in other health dimensions not captured by the analyzed indicators.

### Inclusion, Labor, and Infrastructure
- Structural transformation and income growth have broadened opportunities but inclusion challenges remain.
- Manufacturing employment has increased; under current trends the ASEAN median is projected to exceed the advanced Asia median by 2030.
- Unemployment is low in ASEAN relative to advanced Asia, but youth unemployment is much higher in ASEAN, particularly in lower-middle-income ASEAN countries: 11 percent for the median.
- Infrastructure:
  - Access to electricity is a major achievement: most ASEAN countries currently have electricity penetration above 97 percent.
  - Past trends suggest that by 2030 only one country in the region is expected to have less than full electricity penetration.
  - Broader infrastructure gaps remain in several lower-middle-income ASEAN countries.

### Gender and Inequality
- Gender:
  - Female representation in managerial positions: 30 percent for the median ASEAN country.
  - Proportion of women in parliament: close to 20 percent in the median ASEAN country (higher than the share in advanced Asia at 13 percent).
  - Lower-middle-income countries do at least as well as the median ASEAN country on women in parliament.
- Inequality:
  - Income inequality (Gini coefficient) is about 38 for the median ASEAN country, compared with 32 for advanced Asia.
  - Other indirect indicators of inequality, such as the proportion of the population living in slums, informal settlements, or inadequate housing, are also high.
  - Projected trends: for the ASEAN median country there is no expected improvement in income inequality up to 2030, while quality of housing is projected to improve gradually based on past trends.

### Environment and Sustainability
- Carbon dioxide emissions per capita are currently lower in all ASEAN countries than in advanced Asia.
- Despite commitments under the Paris Agreement, some countries are expected to significantly increase carbon dioxide emissions as they grow and industrialize over the next decade.
- Environmental challenges include increasing air pollution levels, rising economic losses from natural disasters, deforestation contributing to climate change mitigation concerns and land erosion.

### SDGs and Welfare — Summary Indicator Results
- Welfare index methodology: based on Jones and Klenow (2016), extended by Bannister and Mourmouras (2017); components used include income per capita and ratio of consumption to income (SDGs 1, 2, 8), life expectancy at birth (SDG 3), Gini coefficient (SDG 10), and the cost of greenhouse gas emissions (SDG 13).
- Income per capita:
  - Income per capita in the median ASEAN country has reached about 20 percent of the advanced Asia level (about 28 percent using a population weighted average for ASEAN).
  - Scenario based on past trends and WEO projections: income per capita in the median ASEAN country growing to around 35 percent of the advanced Asia level by 2030.
- Welfare index levels:
  - ASEAN welfare is about 12 percent for the median ASEAN country relative to the advanced Asia level (about 15 percent using a population weighted average for the ASEAN).
  - Under past trends, welfare is expected to improve to about 20 percent of the advanced Asia level by 2030.
- Drivers:
  - Improvements in income, consumption, and life expectancy support convergence, but gains are weighed down by environmental sustainability and inclusion challenges.
  - For the median ASEAN country, the cost of greenhouse gas emissions increases under current trends; trends in income inequality vary widely across countries.

### Active Scenario and Potential Gains
- An illustrative active scenario specifies 2030 target levels based on countries’ commitments under development plans or treaties or benchmarks against best performers in the next income category.
- Results:
  - By 2030 the median ASEAN country would see a 9 percentage point improvement in welfare, bringing it close to 30 percent of the advanced Asia level.
  - Projected improvement is driven by:
    - Higher share of consumption in income.
    - Higher life expectancy.
    - Lower greenhouse gas emissions.
    - Lower income inequality.

### Policy Recommendations and Implementation Priorities
- Policies should be comprehensive, country-specific, and formulated in the context of national development plans.
- Environmental sustainability:
  - Policies could include reducing energy subsidies.
  - Potential tax policy measures such as introducing carbon taxation (also contributing to higher revenues).
- Inclusion and inequality:
  - Measures to reduce income inequality could include increasing reliance on progressive direct taxes and increases in targeted social spending to improve safety nets.
- Health and education:
  - For many lower-middle-income ASEAN countries, further improving health and education outcomes calls for higher spending in these priority areas, continued improvements in revenue mobilization, and additional efficient fiscal expenditure.
- Financing and coordination:
  - Country-specific development plans need to account for the financing needs associated with policies to improve sustainable development.
  - ASEAN countries are in the process of incorporating SDG priorities in their national development plans; cooperation and formalized ASEAN-wide efforts on SDG implementation could strengthen outcomes.

*Source: INTERNATIONAL MONETARY FUND*

### Box 2. SDGs in National Development Plans (concluded)

### Box 2. SDGs in National Development Plans (concluded)

### Localization, data, and cooperation
- Countries face challenges in localizing the SDGs, generating and analyzing data to monitor SDG implementation, and developing detailed national action plans for SDG implementation.
- Cooperation on SDG-related data, monitoring, and evaluation issues may be helpful.
- Cooperation could extend to sharing experiences in developing detailed national action plans so that the SDGs can more easily be fully integrated into countries’ future national development plans.
- Lao PDR’s efforts to link indicators in its national development plan to the SDGs provide an example for the region of how to:
  - use the SDGs to help prioritize national development goals,
  - ensure that those goals are met in a measurable way, and
  - ultimately drive budget programs and allocations to meet priority goals.
- Footnotes and country notes:
  - 1/ https://sustainabledevelopment.un.org/hlpf.
  - 2/ Brunei (2018), Cambodia (2019) and Myanmar (first national sustainable development plan) are now preparing their next development plans.
  - 3/ Lao P.D.R. is the only country in the world to have adopted an 18th SDG: Lives Safe from UXO. This SDG commits to meet the challenges faced by its population from unexploded ordnance. Lao P.D.R. is the most heavily bombed country per capita in history due to the conflict in Indochina during the 1960s and 1970s.

### ASEAN spending needs for education, health and infrastructure — overview
- Focus: additional spending required for selected SDGs related to investments in human capital and physical infrastructure: education, health, water and sanitation, road infrastructure, and electricity access.
- These sectors typically represent a large share (about a third) of the government budget.
- Pursuing sustainable development in these areas requires additional financing; designing a medium-term financing strategy requires:
  - costing the needs,
  - identifying financing (public versus private participation),
  - building a strong revenue base, and
  - increasing public spending efficiency.
- Case studies: Indonesia and Vietnam. Estimates cover only a subset of the SDGs and should be considered a lower bound of total spending needs.
- Spending needs generally expected to be larger in the lower-middle-income ASEAN economies.
- Costing methodology (summary of steps; see Appendix III in source):
  1. Identify relatively good performers using sector SDG indices (for example, SDG education index threshold: >80 out of 100).
  2. Calculate median values of main costing items among good-performing peers (teacher salaries, pupils per teacher, allocation between noncompensation current spending and capital spending, etc.).
  3. Using medians and country-specific projections (economic growth, demographics), estimate additional spending needs for 2030 by comparing the objective (needs for 2030 consistent with achieving good performance) with the baseline (current total spending—public and private).

### A. Indonesia — key findings and estimates
- Government education expenditure: 3.6 percent of GDP ($516 per student).
- Total education expenditure: about 7 percent of GDP.
- Costing suggests an increase of less than a half percentage point in government education spending would allow Indonesia to close the gap with best performers (Table 1).
- Teachers’ compensation is higher than peers, partly due to constitutional requirement that at least 20 percent of government expenditure be spent on education.
- Health:
  - Indonesia’s health SDG index is 62 as of 2018; emerging market median is 78.
  - Current total health expenditure: about 3.5 percent of GDP per year, of which 1.5 percent of GDP corresponds to public expenditure.
  - Improving health outcomes calls for increasing total health expenditure to close to 6½ percent of GDP by 2030.
  - Reasonable 2030 breakdown (based on best peer performers): about 60 percent allocated to public expenditure, 25–30 percent for out-of-pocket payment, and the rest for private insurance.
  - Government expenditure implied: almost 4 percent of GDP in 2030, an increase of almost 2½ percentage points from the current level.
- Infrastructure additional needs by 2030:
  - Roads:
    - Need to build about 173,000 km of roads during 2018–2030 to raise rural access from 94 percent to 100 percent.
    - Annual road investment would need to reach almost 1 percent of GDP (construction and maintenance).
  - Water:
    - As of 2015, 86 percent of the urban population had hand-washing access; about two thirds of the rural population had such access.
    - 5.5 percent of the urban population and more than 20 percent of the rural population still used open defecation.
    - To achieve universal safe access by 2030, annual total new investment would need to be ½ percent of GDP through 2030, most of which would be covered by the public sector.
  - Electricity:
    - 97 percent of the population has access to electricity.
    - Per capita consumption: about 900 kwh per year; emerging market median: 2,679 kwh.
    - To achieve universal access and emerging market per capita consumption by 2030, additional investment spending would be almost 1½ percent of GDP per year.
    - Authorities have launched a medium-term project to increase generation capacity; note: this increase currently relies mainly on coal and attention should be given to increasing capacity while remaining in line with the Paris commitment.
- Aggregate Indonesia totals:
  - Overall additional spending needs to achieve health, education, and infrastructure goals amount to about 5½ percent of GDP per year.
  - This corresponds to additional public spending in these areas of close to 4 percent of GDP.
  - If additional infrastructure areas (train, Special Economic Zone, non-electricity energy, ports) are included, additional total spending would be 7.7 percentage points of GDP, with 4½ percentage points corresponding to the public sector.

- Selected benchmarking figures from Table 1 (Indonesia context):
  - Countries with SDG4>80 — GDP per capita: 4,986 (latest); Estimated 2030 GDP per capita (current USD): 6,642.
  - Enrollment rate (primary–tertiary): Latest 69%; 2030 Estimated 73%.
  - Student-age population (% of total pop): Latest 32%; 2030 Estimated 35%.
  - Student-to-teacher ratio: Latest 13.3; 2030 Estimated 13.3.
  - Teacher salary (current USD): Latest 8,684; 2030 Estimated 12,323.
  - Salary-to-GDP-per-capita ratio: Latest 1.9; 2030 Estimated 1.9.
  - Teacher compensation (% total spending): Latest 64.3; 2030 Estimated 64.3.
  - Other current and capital cost (% of total spending): Latest 35.7; 2030 Estimated 35.7.
  - Education spending to GDP (%): Latest 4.1; 2030 Estimated 5.5.
  - Public Spending Share (%): Latest 87 (peer median); Indonesia current 52; 2030 Assumed 70.
  - Public Education Spending to GDP (%): Latest 3.6; 2030 Estimated 3.9.
  - Additional total spending to GDP (%): (1.4).
  - Additional public spending to GDP (%): 0.3.
  - Spending per student (current USD): Latest 990; 2030 Estimated 1,446.
  - SDG4 score: Latest 85; Indonesia 77.

### B. Vietnam — key findings and estimates
- Policy context:
  - Vietnam mapped 17 global SDGs into 115 Vietnam-specific SDG goals in its “National Action Plan for Implementation of the 2030 Agenda for Sustainable Development.”
  - Focus on vulnerable groups: the poor, people with disabilities, women, children, and ethnic minorities.
- Education:
  - SDG education index: above 80.
  - Average enrollment rate (preprimary to tertiary): close to 70 percent.
  - Spending: almost 8 percent of GDP ($630 per student).
  - Rather than increasing spending, focus should be on addressing spending inefficiencies.
  - Reducing pupil-to-teacher ratio from 18 to 12 could be achieved within current spending if efficiency improved.
  - Further reforms (increase pre-school access, make lower secondary education universal and tuition free) would need additional resources if not accompanied by efficiency improvements.
- Health:
  - Additional public spending needs for health by 2030 estimated at less than 2 percent of GDP.
  - Additional total health spending estimated at about 1 percent of GDP to achieve better outcomes.
  - Public share of health spending is low at 42 percent; out-of-pocket spending is high.
  - If Vietnam aimed for a public-sector share similar to best-performing countries, public health spending would need to increase by more than 1½ percent of GDP, implying a proportional decline in out-of-pocket spending.
  - Plans to raise health spending more than overall government spending align with aims to achieve universal health insurance (currently heavily subsidized by government) and rising administered health-service fees.
- Infrastructure:
  - Roads:
    - Increasing the rural access index by 5 percent (additional 83,000 km of roads) including maintenance costs would require an additional 2 percent of GDP per year.
  - Water:
    - Based on World Bank WASH costing model, Vietnam would need an additional ½ percent of 2017 GDP per year to provide safe water to all households and end open defecation.
  - Electricity:
    - Full electricity coverage nearly reached; accommodating increased per capita electricity consumption (estimated average 8 percent annual growth) would require resources up to 3 percent of GDP per year.
- Aggregate Vietnam totals:
  - Overall additional spending needs to achieve health, education, and infrastructure goals amount to almost 6½ percent of GDP per year.
  - Estimated additional government spending needed: around 5 percentage points of GDP.
  - Estimates are subject to uncertainties: absence of public spending plans, sector target uncertainties, data gaps, and private sector participation assumptions.

### C. Approaches for financing
- Achieving the SDGs will require increases in total and public spending in ASEAN countries; increases could be sizeable in some countries.
- Key points for financing strategies:
  - Strategies will vary across countries and depend on size of spending needs.
  - Different sectors may lend themselves to different financing approaches, depending on availability of private sector financing.
  - Limited substitutability between public and private financing may exist for some areas such as education.
  - Realistic achievement of development goals requires identifying and mobilizing required financing.

*International Monetary Fund (excerpt).*

### 30.      When the additional spending is undertaken by the public sector, the identification of

### 101118-asean-progress-towads-sustainable-development-goals - 30.      When the additional spending is undertaken by the public sector, the identification of

### Medium-term revenue strategy and tax capacity
- Public resource identification for additional public spending should be anchored in a medium-term revenue strategy (MTRS).
- MTRS should reflect tax capacity and room available to enhance spending efficiency.
- Example estimates:
  - Myanmar: additional 2½ percent of GDP a year in both education and public health to achieve SDGs in these two areas; estimated total additional spending at 5 percent of GDP a year.
  - Vietnam and Indonesia: comparable estimates of about 2 and 3 percent of GDP, respectively.
- Tax capacity observations:
  - Indonesia: general government revenue is less than 15 percent and tax revenue around 11 percent of GDP.
  - An MTRS for Indonesia identified additional potential revenue of about 5 percent of GDP (3.5 percent from tax policy reform and 1.5 percent from revenue administration reform).
  - Vietnam: revenue ratio at 23½ percent of GDP (19 percent for tax revenue), limiting room to further increase revenue-to-GDP; focus recommended on spending efficiency gains.

### Enhancing spending efficiency and rationalizing spending
- Policies to create fiscal room include:
  - Increasing spending efficiency.
  - Rationalizing nonpriority spending (example: eliminating energy subsidies).
  - Implementing carbon pricing.
- Assessment of expenditures is warranted amid competing demands and prioritization of development needs.

### Fiscal sustainability, fiscal rules, and borrowing
- Additional government borrowing could finance part of the needed increase in spending if it does not endanger market access and debt sustainability.
- Fiscal rules and limits constrain borrowing options:
  - Indonesia: mandatory 3 percent government deficit ceiling, leaving little fiscal space within the fiscal rule.
  - Vietnam: public debt at 58 percent of GDP in 2017, relatively close to statutory debt limit of 65 percent.

### Institutional and delivery capacity; digitalization (Box 3)
- Institutional and delivery capacity elements critical for SDG outcomes:
  - Medium-term budget planning, capacity development, and adequate governance.
- Digitalization opportunities:
  - Electronic tax filing, digital payments, verification of customs and business activity to strengthen tax compliance.
  - Biometric identification and authentication to reduce leakages in social spending and improve targeting.
  - Online applications to improve public service delivery and public procurement efficiency.
- Applications and country examples:
  - Singapore, Thailand, Malaysia, and Indonesia moving towards forms of digital ID.
  - Philippines: digital registry covers 75 percent of the population and is used to determine eligibility for 52 social programs.
  - Electronic benefit transfer cards used in Thailand and Indonesia.
  - Singapore: Elderly Monitoring System uses wireless sensors and text-to-speech apps to monitor older citizens’ daily activities at home.
  - Revenue administration digitalization allowing e-filing, e-payments (Singapore, Malaysia, Vietnam, Indonesia, Thailand) and e-customs (Singapore, Vietnam).
- Digital adoption indicators:
  - Singapore and Malaysia among top 10 performers according to the World Bank’s Digital Adoption Index (Government).
  - Brunei, Indonesia, and Thailand score higher on government digitalization than the emerging market average.
  - Adoption in Vietnam and Cambodia is higher than the average of developing countries.
- Digitalization challenges:
  - Access to digital tools remains limited in some countries (example: in Lao P.D.R., Myanmar, Indonesia, and Cambodia less than one-third of the population has access to the internet).
  - New challenges for privacy, fraud prevention, and cybersecurity.
  - April 2018: ASEAN countries reaffirmed need for close cooperation on cybersecurity policy development and capacity building initiatives.

### Private sector participation and PPPs
- Private sector participation, including public-private partnerships (PPPs), could help fill financing gaps.
- Vietnam developing a new PPP law to increase private sector participation, particularly for infrastructure.
- Preprimary education likely to remain largely privately funded.
- Hospitals increasingly reliant on fees and charges; out-of-pocket spending on health projected to remain high.
- PPPs require assurance of value for money vis-a-vis traditional procurement to minimize fiscal costs and risks.

### Role for international community and concessional financing
- In some lower-middle-income ASEAN countries with large sustainable development needs and low revenue-generating capacity, additional external concessional financing from development partners would likely be required.
- Significant increases in public spending, resource mobilization, spending efficiency, and private provision may still be insufficient to close financing gaps in those cases.

### IMF support and capacity development
- The IMF engages ASEAN countries through policy advice and national capacity-building efforts to support SDG achievement, including:
  - Regional office engagement, regional training institutes, capacity development offices, and resident representative offices.
  - Collaboration with ASEAN +3 Macroeconomic Research Office (AMRO) formalized with a Memorandum of Understanding in October 2017.
- IMF initiatives and priorities:
  - Strengthening resource mobilization, building state capacity for infrastructure provision, pursuing economic and financial inclusion, addressing climate change, building strong economic institutions, and limiting vulnerabilities to corruption.
  - Support to improve statistical capacity and implement the enhanced General Data Dissemination System (e-GDDS).
- Tax capacity strengthening:
  - Since 2015, heightened engagement through Medium-term Revenue Strategies (MTRS) and the Platform for Collaboration on Tax (PCT).
  - Technical assistance (TA) and application of toolkits increased by about 30 percent since 2014 (examples: TADAT, RA-GAP, RA-FIT/ISORA, TPAF).
- Country TA and reform examples:
  - Philippines: new law mobilizing revenue for infrastructure; VAT exemptions reduced and VAT revenue-to-GDP ratio increased.
  - Vietnam: new tax management information system, risk management board, centralized call center, reforms in audits and anti-smuggling/anti-tax evasion.
  - Myanmar: institutional strengthening, new taxpayer services, reinforced tax filing processes; implementing new IT system and tax administration law; new income tax legislation under consideration.
  - Lao PDR: revised VAT law approved; plans to replace General Tax Law; Planning and International Cooperation committee established.
  - MTRS developed in Indonesia and Thailand; underway in Lao PDR.
- Some reform results:
  - Cambodia and Myanmar have seen significant increases in tax collection following strengthened tax and customs administration.

### Infrastructure needs, IMF tools, and analytical findings
- Infrastructure investment gap:
  - Global Infrastructure Hub estimate: ASEAN countries need to invest an additional US$35 billion per year through 2030 in infrastructure to attain the SDGs.
  - Infrastructure investment gap is particularly large for Cambodia and Myanmar at 78 and 186 percent of the current investment level, respectively; Singapore gap at 0.3 percent.
- IMF Infrastructure Policy Support Initiative (IPSI) tools:
  - Public Investment Management Assessment (PIMA).
  - Public-Private Partnerships Fiscal Risk Assessment Model (P-FRAM).
  - Macroeconomic and fiscal implications analysis of public investment scaling-up.
  - Debt Sustainability Analysis (DSA).
  - Medium-Term Debt Management Strategy (MTDS).
- PIMA and P-FRAM findings and policy responses:
  - Thailand: PIMA showed institutional weaknesses in planning, budgeting, and transparency of budget execution; measures taken to reduce procurement delays.
  - Malaysia: PIMA identified weaknesses in project programming, appraisal, and selection; authorities requested further TA.
  - Cambodia: P-FRAM indicated institutional framework insufficient to control fiscal costs and risks from PPPs; authorities created a Central PPP Unit and plan to include contingent liability risks in next Public Debt Management Strategy.
- DIG and DIGNAR model applications and findings:
  - DIG and DIGNAR applied to Cambodia, Myanmar, Thailand, and Vietnam.
  - Main finding: public investment boosts growth, but overly ambitious scaling-up plans may threaten public finances.
  - DIG applications (Cambodia and Vietnam): gradual public investment scaling-up financed by borrowing and fiscal adjustment with higher revenue collection efficiency yields best macroeconomic outcomes.
  - Enhancing public investment efficiency magnifies positive growth effects and improves debt dynamics.
  - DIGNAR applications: necessity to delink government expenditures from commodity price booms and busts and to build fiscal buffers.
  - Myanmar DIGNAR application: suggests future gas revenue streams should finance a gradual scaling up in public investment while building fiscal space and maintaining a stable macroeconomic environment.

*International Monetary Fund — ASEAN Progress Towards the Sustainable Development Goals (excerpts provided)*

### 43.        DSA and MTDS are widely used in capacity development. DSA and MTDS are important

### ASEAN PROGRESS TOWARDS THE SUSTAINABLE DEVELOPMENT GOALS

### Capacity Development: DSA and MTDS
- DSA and MTDS are important components of several courses offered by the Fund’s Institute for Capacity Development (ICD) and regional training institutes.
- About 270 government officials from the ASEAN countries have been trained in DSA during 2014–17.
- ICD has introduced two online courses on DSA in recent years.
- Since 2014, the Fund has provided a five-day technical workshop on DSA to Cambodia, Lao PDR, and Myanmar as part of the Fund’s annual regional training program.
- The Fund provides considerable hands-on technical assistance beyond classroom and online training.

### Pursuing Economic and Financial Inclusion
- Since 2015 the IMF has adopted a more systematic and structured approach to inclusion.
- Recent IMF empirical work finds that lower inequality is correlated with faster and more robust growth (Ostry, Berg, and Tsangarides, 2014; Dabla-Norris and others, 2015).
- Macroeconomic policies and reforms key for growth may have adverse distributional implications, which can undermine public support for reforms (Fabrizio and others, 2017).
- Fiscal policy is the main policy tool for redistribution and can help address inequality (IMF, 2017a).
- Promoting economic and financial inclusion involves addressing income inequality, women’s economic empowerment, and inequality in access to, and use of, financial services.

Findings and country engagement
- Inequality:
  - Under the inequality pilot initiative (Appendix IV), an analysis of inter-generational issues was conducted for Singapore.
  - Staff analyzed macroeconomic and distributional impact of financial reforms in Myanmar using a model-based framework; finding that gradual financial liberalization would boost growth while reducing inequality and poverty.
  - Inequality-related issues will be analyzed in Cambodia and Lao PDR in the next Article IV cycle as part of the pilot initiative on inequality.
- Gender:
  - Work on gender-related issues is ongoing in Lao PDR and Vietnam.
  - Technical assistance on implementing gender budgeting provided to Cambodia in the context of public financial management reforms.
  - A regional seminar on gender budgeting was recently offered and attended by representatives from Indonesia, Thailand and Philippines.
- Examples of national actions:
  - Myanmar has developed the Myanmar’s Sustainable Development Plan for achieving the SDGs, including inclusive growth.
  - Singapore introduced a “Smart Nation Initiative” with targeted transfers, worker retooling, and lifelong learning.
  - Thailand is implementing a new social transfer scheme.
  - Malaysia aims to raise female labor force participation to 59 percent by 2020 and has measures including tax incentives for companies to set childcare facilities and encourage flexible work arrangements.
  - The Philippines aims at raising female labor force participation by 2 percent by 2022, including by improving access to affordable childcare; various legislative measures to amend discriminatory provisions are under consideration by Congress.

### Promoting Deeper, More Inclusive and Stable Financial Systems
- Since 2015, the IMF has provided 37 TA missions in ASEAN countries covering crisis management and deposit insurance, supervision and regulation, macroprudential policy, financial soundness indicators (FSIs), and balance sheet analysis.
- Beneficiary countries include Brunei, Cambodia, Indonesia, Lao PDR, Myanmar, Philippines, Thailand, and Vietnam.
- Two workshops on FSIs were conducted in Thailand in 2016 and 2017.
- In 2017, the IMF developed the Financial Sector Stability Review (FSSR) targeted to low- and middle-income countries; an FSSR is scheduled for Cambodia in the 2018–19 fiscal year.
- The IMF has developed the Financial Access Survey dataset and is the official custodian of the SDG financial inclusion indicators.
- Country-level developments:
  - Indonesia: created a high-level joint forum for financial deepening and the National Council for financial inclusion; increasing use of digital financial services.
  - Myanmar: central bank established regulatory framework for mobile financial services and passed regulations to facilitate microfinance development.
  - Cambodia: formulated a financial inclusion strategy, developing financial infrastructure including a new electronic payment system for riel transactions; central bank and Ministry of Education taking steps to improve financial literacy.

### Addressing the Challenges of Climate Change
- The IMF’s energy/climate initiative supports policies to reduce macroeconomic risks from climate change and help build resilience and adaptation.
- The IMF has helped member countries implement mitigation pledges for the Paris Agreement and strengthened dialogue on climate resilience and energy price reform in surveillance (Appendix IV).
- Under the initiative, studies for Myanmar, Thailand, and Vietnam have been completed.
- The initiative’s centerpiece is spreadsheet tools for estimating carbon prices needed to meet mitigation commitments and their environmental, fiscal, and economic impacts, and tradeoffs with other instruments.
- Carbon pricing tools have been completed for G20 countries (including Indonesia) and will be finalized for all ASEAN countries by Fall 2018.
- Country examples:
  - Vietnam developed a national strategy to improve resilience to climate change, strengthen adaptability, and adopt a more sustainable growth model; levied higher taxes on natural resource use.
  - Energy subsidy reforms were undertaken in Thailand and Indonesia.
  - Carbon tax and emission trading systems are under consideration in Singapore, Thailand and Vietnam.

### Strengthening Institutions for Good Governance
- IMF work finds corruption and weak governance are associated with lower growth, investment, and tax revenue collection and with higher inequality and social exclusion (IMF, 2016, 2017d, 2017e, 2018b).
- Successful anti-corruption initiatives are built on institutional reforms emphasizing transparency and accountability.
- In April 2018, the IMF adopted an enhanced framework to assess corruption vulnerabilities across its membership (see Appendix III). The new framework covers:
  - (i) fiscal governance;
  - (ii) financial sector oversight;
  - (iii) central bank governance;
  - (iv) market regulation;
  - (v) rule of law;
  - (vi) anti-money laundering and combating the financial terrorism;
  - (vii) corruption.
- The framework calls for enhanced IMF engagement on governance and systematic coverage of corruption issues across its membership.
- Since adoption, the IMF has prepared governance assessments for a few countries to be discussed as part of the regular Article IV consultation process; the framework is expected to be rolled out to cover all IMF member countries, including ASEAN countries.

### Conclusions and Policy Recommendations
Findings
- Strong income and consumption growth in recent years has paved the way towards reduced poverty, improved health and education outcomes, and greater inclusion, to varying degrees across the ASEAN countries.
- Economic welfare has improved and, assuming past trends continue, is expected to continue converging towards advanced Asia levels.
- Most ASEAN countries are on track to eradicate absolute poverty by 2030.
- Despite progress, inequalities remain in several ASEAN countries and the shift towards manufacturing strains environmental sustainability.
- More determined efforts and additional fiscal spending are needed to improve education, health, and infrastructure outcomes.

Policy recommendations
- Policies: Adopt comprehensive, country-specific policy strategies to achieve balanced, inclusive, and environmentally sustainable development.
  - Environmental sustainability policies could include reducing distortions in fuel pricing, reducing energy subsidies, and potential tax measures such as introducing carbon taxation.
  - Policies to reduce income inequality could include increasing reliance on progressive direct taxes and strengthening targeted social spending to improve safety nets.
- Spending needs: Lower-middle-income ASEAN countries require higher spending to improve health, education, and infrastructure outcomes; this requires continued improvements in revenue mobilization and spending efficiency.
- Financing: Additional public spending should be anchored in a medium-term revenue strategy that reflects improving tax capacity and spending efficiency and a supportive institutional environment.
  - The remaining financing gap could be filled through private sector participation and, for developing ASEAN countries, concessional financing from development partners.
- ASEAN cooperation: Strengthen collaboration and economic integration as envisaged in the ASEAN Economic Community Blueprint 2025; enhance cooperation in using data to monitor and evaluate progress and sharing experiences in developing national action plans.

Final stance
- The IMF stands ready to continue engagement with ASEAN and its member countries in pursuit of the SDGs, drawing on a range of tools and expertise in accordance with its role and mandate.

*Source: ASEAN PROGRESS TOWARDS THE SUSTAINABLE DEVELOPMENT GOALS (International Monetary Fund).*

### Appendix II. Welfare Index Methodology

### Appendix II. Welfare Index Methodology

### What is consumption equivalent welfare?
- Consumption equivalent welfare is a measure of economic utility or satisfaction derived from consumption.
- The welfare index assumes welfare is proportional to consumption per capita that an economy can achieve or provide its citizens.
- The index asks: for a consumer with some standard set of preferences, what factor or proportion of consumption in country A would make him/her indifferent to living in country A or in country B.
- That proportion is a measure of the consumption equivalent welfare in country B relative to country A.

### Components of the index
- Consumption (per capita) — baseline measure of welfare.
- Life expectancy — longer life yields more years of consumption and thus higher welfare.
- Hours worked — higher hours worked for a given level of consumption reduce welfare.
- Inequality — greater inequality (in income and consumption) increases the chance of being stuck at the low end of the distribution, reducing expected welfare.
- Greenhouse gas emissions — higher emissions imply greater environmental costs assumed to come out of consumption, reducing welfare; the approach assumes the polluter internalizes the negative global externalities from greenhouse gas emissions through a tax on consumption.

### How elements are combined (index construction)
- The index is not a simple average of development indicators (unlike the SDG index or the Human Development Index).
- It is derived from a consistent theoretical model that captures how each component affects consumption equivalent welfare.
- Benefit: theoretically consistent treatment of economic dimensions of welfare not captured by GDP per capita.
- Cost: limited coverage — concentrates on economic dimensions and does not cover other SDG dimensions such as quality of life, peace and justice, gender equity, and environmental quality.
- For a technical discussion of the welfare index, see Bannister and Mourmouras (2017).

### Comparison with the Global SDG index (ASEAN context)
- The welfare index is highly correlated with the Global SDG index for ASEAN countries.
- Pearson correlation coefficient: 0.71
- Rank order correlation: 0.87
- Interpretation: both indexes are measuring a similar underlying variable related to the level of development and to consumption equivalent welfare.

*Source: Appendix II. Welfare Index Methodology*

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_Source: https://www.imf.org/-/media/files/publications/pp/2018/101118-asean-progress-towads-sustainable-development-goals.pdf_