Why Indonesia and Thailand's bid for OECD membership could be a game changer

 

• Indonesia and Thailand are bidding to become the first Southeast Asian countries to join the Organisation for Economic Cooperation and Development (OECD).
• Accession will require them to meet stringent standards across a range of areas from transparency to the environment.
• OECD Secretary-General Mathias Cormann said the "accession processes will benefit Indonesia and Thailand as well as the OECD."

Since its founding in the 1960s, the Organisation for Economic Cooperation and Development (OECD) has been associated with select middle- and high-income countries. 

In recent months, however, the OECD began accession talks with Indonesiaand Thailand, a historic move that could pave the way for the first southeast Asian countries to join the 38-country bloc.

What is the OECD?

The OECD is an international organization based in Paris, France, that aims to promote policies that improve the economic and social well-being of people around the world. It functions as a platform for governments to collaborate on social, economic and environmental challenges and to establish international standards and best practices.

The organization also shares data, analysis, and forecasts on global economic growth, as well as policy recommendations to foster growth. Together, its members make up just under half of the world’s GDP.

Beyond its core members – which span North and South America, Europe and Asia Pacific, but currently not Africa or Southeast Asia specifically – it collaborates with over 100 countries to help drive reform.

38 member countries make up the OECD. Image: Statista

Why Indonesia and Thailand's bid matters

The bids by Indonesia and Thailand to join the OECD represent not only a strategic move for the countries themselves but also a notable shift in the dynamics of global governance to be more inclusive and relevant.

In seeking to join the OECD, Indonesia and Thailand are signalling they want to align their policies with international best practices and governance standards. The bids may also boost investor confidence, helping to attract new investments and drive economic growth.

Indonesia has been an OECD Key Partner since 2007, alongside Brazil, China, India and South Africa. These countries participate in the OECD’s daily work and policy discussions. Thailand, meanwhile, has had a working relationship with the OECD for over two decades.

"The accession processes will benefit Indonesia and Thailand as well as the OECD," Mathias Cormann, the OECD Secretary-General, said in a statement. "Adherence to OECD standards and best practices will have a beneficial impact on development and growth for accession countries and the region more generally."

GDP growth in Indonesia is projected to be 5.1% in 2024 and 5.2% in 2025. Image: OECD

Joining the OECD, however, isn't easy. Indonesia and Thailand will need to make major reforms in various areas, from climate policy and digital transformation to anti-corruption efforts. The country will also need to align its political and economic systems with OECD standards, which can be a challenging and sometimes politically sensitive process.

But while these challenges are significant, they also represent a major opportunity. The reforms required for OECD accession can create a better business environment, reduce costs and increase efficiency.

"The accession process to the OECD will help anchor Thailand's reform agenda moving forward – further improving its attractiveness as an investment destination to help drive further growth and improvements in incomes and living standards," Cormann added.

Non-OECD members in Asia make a significant contribution to global trade growth. Image: OECD

Strategic and geopolitical implications

From the OECD's perspective, bringing in two major Southeast Asian economies would be a big win. 

Indonesia is the seventh largest economy in the world based on purchasing power parity and is the only Southeast Asian country in the G20. Meanwhile, Thailand is the second biggest economy in Southeast Asia and, alongside Indonesia, is a founding member of the Asia-Pacific Economic Cooperation Forum. Today, only two other Asian nations – Japan and South Korea – are OECD members.

Moreover, in recent decades, the global economy has changed dramatically. Non-OECD countries like China, Brazil, and India have significant influence on trade and international cooperation, increasing the need for the OECD to diversify its membership.

Experts note that the accession of Indonesia and Thailand to the OECD would help the organization stay relevant in a world where economic power is shifting towards Asia. It would also make the OECD more representative of the global economy, giving it greater legitimacy when it comes to setting international standards and policies.

This  article was published in weforum.org and is republished here under a Creative Commons licence