Asean Community in two or three parts

28 November, 2015
As appeared in TheStar.com.my

The region has come a long way and can point to many achievements

ASEAN is an association of states seeking to become a community of nations. There is no surrender of authority or sovereignty to any Asean supranational body. Asean works by consensus. Every member state in the association has to agree before any agreement can be said to have been concluded.

Yet Asean has come a long way and can point to many achievements. Many agreements on greater integration have been concluded. And there have been no major conflicts between or among Asean states since the association’s establishment in 1967 precisely to achieve peace and stability so that there can be economic and social progress.

The absence of war is a good sign of the ethic of cooperation which points to potential formation of community. While there can be debate over how much the existence of Asean contributed to the avoidance of conflict, it cannot be denied meeting regularly and working together towards regional cooperation provide strong incentives towards peaceable rather than conflictual relations.

In the economic sphere there is the Asean Free Trade Area whatever the non-tariff barriers that may be said to exist as indeed, they exist everywhere in the world. While much has been made of the unsatisfactory level of intra-Asean trade, since the AEC 2007 Blueprint it has increased by US$1 trillion, and at US$2.5 trillion the 24% share is well above that of second placed China at 14%.

The single market and production base is well on its way. With size and growth of Asean economies expected to achieve 7% above baseline by 2025 through greater integration, and the reshuffling of manufacturing and services base from economic development, a greater complementarity that is currently not the case will definitely boost intra-Asean trade further.

Just imagine if there was better progress in the flow of investment and capital and of skilled labour as well, Asean would surely be on the way towards becoming that fourth-sized global economy which even now attracts more FDI (foreign direct investment) than China, an 11% share of total global flows, when not too long ago it was the fear that Asean would fall between the two stools of China and India.

Another positive development not often credited, on the socio-cultural side, is the participation of social activists and NGOs in the Asean decision-making process who would otherwise not get the time of day in a number of national jurisdictions.

These groups and activists interact with leaders, ministers and officials at Asean summits – like the one a week ago – and also organise their own events and activities. As the Asean Business Advisory Council chair this past year, I have also been trying to accommodate them at private sector meetings, as there are many issues, such as treatment of migrant labour and responsible business practice, which have a bearing on the economy that need to be thrashed out. They are not political or purely social issues alone.

Of course no one is satisfied. Not the geopolitical strategist, the businessman or the social activist. When you call yourself a community, you raise expectations. You cannot expect to go round telling everyone to be grateful for small mercies. You have promised them big.

Whenever I am asked about the Asean community or the AEC, by local or foreign media representatives, the question is always framed in an skeptical manner. There is a lot of cynicism whatever the leaders and officials say.

Even when the numbers are thrown out, there is suggestion that they would have been attained without Asean integration which is characterised more by what has not than what has been achieved.

Even businessmen who have benefited by what has been achieved complain about all those barriers that remain. So do social activists who are dissatisfied particularly by human rights violations in the region which do not obtain Asean reprimand and by evident inability to work together to address transnational problems such as the smog (euphemistically called the haze).

There is no sense of being Asean, especially among the people the governments are supposed to serve. Simple things that can make them feel Asean have been outstanding for years. As usual, it is felt, it is big business that is getting the lion’s share of the integration attention.

If this distance between what the people feel – or not feel – and the high level integration process continues the Asean community will be nothing but hyperbole.

Simple things must be done. These have been outstanding for such a long time that people wonder if Asean leaders are bothered about them. Make it easier for them to travel. Make them recognise things they have in common such as with food. Teach Asean history. Organise internship programmes for university students and for vocational and technical trainees.

So many have been suggested so many times in so many reports. If by the end of its first year the Asean community does not see these simple things materialising, its future development will be bleak. No point talking about a milestone in a process if the process at the people level does not move.

The 27th Asean summit ended last Sunday with a lofty declaration full of many promises. The Asean 2025 document pushes out much of the unfinished business while being loaded with some highly qualitative objectives for the next 10 years.

If with the quantitative Asean falls short, how will it do with the qualitative?

There was a great sense of urgency running into the end of 2015. Now that’s over, however what has been achieved is felt and perceived, is there going to be a similar drive now that there are 10 years to play with?

Every Asean summit promises something. This last one of course the most. About community. After the song and dance, and the lofty declarations and linking of arms, Asean decamps. Everyone goes home. It feels like the morning after the night before.

But there is so much work to be done. There must be continued drive. Not just Laos, the next chair of Asean. All member states.

Association and community. High level and people-centric. Official and private. Relaxed and delirious.

Developed and much less developed. Politically stable and not so stable. Closer to China and closer to the US.

There are always two parts to Asean. Diversity is a challenge. Convergence does not come of itself. The community must not have a split personality.

Where the differences have been most pointed is with regard to China’s claim to almost all of the South China Sea. Asean foreign ministers failed to issue a joint communique for the first time in July 2012, exposing the fissures in the association on the matter. What will happen in 2016 when Laos takes the chair?

The most work has to be done where the greatest differences exist. The South China Sea is one such area. The foreign ministries have to work to fashion what can be a common position, and not just rush in and out of negotiations. Who is taking the lead, many people wonder.

So much work remains to be done. So many differences remain among member states.

Without drive and leadership Asean will not get anywhere just because the Asean community has been inaugurated. Asean can have no morning after the night before.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

Circles and cycles of cooperation

14 November, 2015
As appeared in TheStar.com.my

asean

IN the theory of functional integration, the premise is that the benefit of cooperation would encourage deeper and wider working together which in the ultimate analysis will establish a community of common interest.

With evident and discernible benefit the propensity towards peaceful co-existence becomes greater than dysfunctional tendencies like conflict and war.

However, in a world of nation-states there are other driving tendencies which can subsume rational benefit. Thus it is a struggle to tame nationalistic pride which political leaders often opportunistically exploit.

There is nothing wrong in nationalism as long as it is harnessed towards positive nationhood but it becomes a problem in the world of nation states when it is used to expand the writ of the state beyond its recognised borders. (We shall not comment on when nationalism is abused to legitimise internal abuse: Hitler did both the external and the internal, and many have to a lesser or greater extent done so since, particularly as the cover for internal abuse).

In the world of nation states there are many circles of cooperative endeavour, even if the order is only of a society or an association, as there is no surrender of national sovereignty to a higher or supranational authority.

Yet there are approximations of such surrender for the good that can be obtained from functional integration, whether in the political, social or economic sphere.

It is in the economic sphere that such association is most pronounced as the benefits are evident and tangible. Thus through the global trade system, despite all manner of dissatisfaction with rules of incongruent benefit, the whole world has been uplifted. And through financial flows, first official then private and massive, which have driven economies and markets, even if accompanied by not infrequent reverses caused by poor economic fundamentals and investor sentiment.

It is this system the world lives by, exclusively since China adopted what it called capitalism with Chinese characteristics from 1978 and following the collapse in 1989 of the alternative offered by the now disintegrated Soviet Union.

China joined the World Trade Organisation (WTO) in 2001 and its economy has been growing by leaps and bounds to the point now that it is the second largest economy in the world. Emerging markets too, especially in East and South-East Asia have benefited greatly from the global economic and financial system to the point now, for instance, we can say Asean is the seventh largest economy in the world if it was one, and the fourth largest by the middle of this century.

With the growth of the economy, especially in China with its great size and past, comes expression of power both hard and soft, in the manner expressed by the US which has been the dominant world economic and military power at least since 1945. The world has been carved in the American image, Pax Americana being largely benevolent, although not always the case everywhere.

Disruption is the buzzword these days, used largely in reference to the way technology is transforming how humankind exists and relates at the personal and organisational level, but a greater disruption is being caused by change in the global political economy effected by the shift in geoeconomic and geopolitical balances.

While primarily this has to do with the impact on American predominance of China’s rise, there are also transnational forces destructive on the one hand (global terrorism) and constructive on the other (regionalism), which challenge the efficacy of the nation-state that remains the foundation of the world community.

However, it is the disruption of the global power shift from the United States to China that could cause the greatest disturbance to the world system, as its management and outcome would determine how all other disruptive forces are addressed.

It is not evident that both are clear about the epochal consequence of their relationship, especially at the level of their internal political system and thinking. This failure could drive global disruption that would undermine all the force for good disruptions in the world and enhance all the force for evil actions. It is not clear, in other words, there is leadership in both the US and China to navigate disruptive forces in their relationship.

It would be a good thing therefore if there was even more and deeper functional integration between the two in conjunction with other states.

Thus it would be a positive development if China was able to join the the TPP (Trans-Pacific Partnership) and America the AIIB (Asian Infrastructure Investment Bank).

It is so important that in the relationship between China and the US that there be a deflection from the greater interest in the muscular stuff, such as the test of resolve in the South China Sea.

Recently an American warship passed close to an atoll claimed by China, within what would have been its 12-mile territorial sea if it was considered to be an actual island. Nothing happened.

The US was trying to find out how good was the word of President Xi Jinping when he stated during his America visit last month that China’s sea claims and reclamation works were not intended to interfere with international freedom of navigation and overflight.

Furthermore the American action was intended to assure and satisfy other claimant states, such as the Philippines, of the US commitment and real presence in the sea which China claims to be its ocean.

There is also of course the need to demonstrate that American global interests can and will be projected to the domestic constituency that condemns China’s South China Sea claims and actions.

However, because there was no Chinese reaction on this one occasion, it does not mean that it will always be the case. It would be far better to work on positive sum than on zero sum games.

Positive engagement will not solve outstanding differences but it would create greater mutual confidence and help build a condominium of regional stability.

When things have gone too far, further accentuation would only polarise opposing parties further, sometimes into positions of no return. Thus, while the South China Sea disputes are really serious, efforts at confidence-building measures should not be abandoned, particularly putting the code of conduct in place as soon as possible.

There is thus some merit in China’s repeated statements about working together in the South China Sea even if issues of sovereignty in the many disputes cannot be resolved. It would be a good start, therefore, if China were to stop all further activities designed to establish a fait accompli in its own interest.

And, if China stops dragging its feet in concluding the code of conduct.

Meanwhile other seemingly unrelated initiatives should be pursued. The TPP and the AIIB, initiatives by the US and China respectively, offer just such an opportunity.

Recently, the Chinese media mused on China becoming a member of the TPP, while the president-designate of the AIIB Jin Liqun, in an interview with the Financial Times, invited both the US and Japan to become members of the AIIB.

Without underestimating the many difficulties involved – not least US Congressional opposition and obduracy – it would do the world of good if China was in the TPP and the US in the AIIB.

Having the other in each organisation, while instilling cooperation between the two powers, will also help limit the extent of their domination of both the TPP and the AIIB, which would be of benefit to the other member states.

Asean, which always prides itself on its centrality, would do well to work more actively on proving its centrality by initiating more strategic discussion when holding these big summits, like the ones coming up on Nov 21-22.

It is not too late to instigate such a discussion at the coming summits, especially at the EAS (East Asia Summit). After all it would not be a one-shot thing. What is important is to start such an Asean-driven discussion and to pursue it assiduously – and not just at set piece occasions. Wisma Putra should provide the Asean chair with the main strategic talking points at this last summit under Malaysia’s chairmanship, to get the ball rolling.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

Press Release: ASEAN Business Club UK Visit

img-ukvisitASEAN Business Club held talks at Downing Street to explore ASEAN-UK two-way investments

KUALA LUMPUR, 13th Oct – The ASEAN Business Club (ABC) led a high-level delegation for a visit to London to explore two-way investment opportunities between ASEAN and the UK. The highlights of the visit included a roundtable meeting with the Right Honourable the Lord O’Neill of Gatley, Commercial Secretary to the Treasury at the UK Prime Minister’s office at No. 10, Downing Street.

Lord O’Neill chaired the roundtable with discussions centered on economic prospects and growth projections of the UK, and the UK’s views on global economy given the slowdown in China’s economy. The panel also addressed the EU referendum due to be held before end-2017. The delegation comprised leading corporations from ASEAN, particularly Malaysia, such as CIMB Group, AirAsia, AirAsia X, Ayala Corporation, YTL Corporation, Malaysian Resources Corp Berhad, Amcorp Properties, SapuraKencana Petroleum and Astro.

Lord O’Neill said, “We are committed to building the Northern Powerhouse, and securing overseas investment into some of our most ambitious Northern projects is a crucial part of our plans. That’s why we are encouraging leading ASEAN businesses to seize the exciting investment opportunities here in the UK to support our key infrastructure developments, and help grow the economy.”

Earlier in the morning, the UK Secretary of State for Business, Innovation and Skills, Sajid Javid addressed the delegation at Asia House, at the UK-ASEAN Dialogue organised by Asia House in collaboration with CIMB ASEAN Research Institute and the ABC.

“ASEAN, home to 600 million people, is one of the fastest growing markets in the world. Here in the UK, as part of the EU, we offer access to a market of over 500 million. Between us we share access to a vast market, which offers new and exciting business opportunities,” said Sajid Javid.

asean

Photo by Asia House

The conference debated on current topics such as “ASEAN Politics of Uncertainty: What’s Going to Happen to AEC 2015?” and “Developing ASEAN: Infrastructure Financing Opportunities”. Notable speakers at the conference included Tan Sri Dr. Munir Majid (Chairman of ASEAN Business Advisory Council), Tan Sri Tony Fernandes (Group CEO of AirAsia), Gregory Hodkinson (Chairman of Arup), David Sayer (Chairman of High Growth Markets, KPMG LLP UK), Lord Mandelson (Chairman of Global Counsel) and Donald P. Kanak (non-executive Chairman of Prudential Corporation Asia).

asean

Photo by Asia House

“ASEAN’s need in developing its infrastructure is enormous and unmistakable. The key to meeting this demand is for ASEAN to devise effective channels, either through debt or equity financing, for savings to flow to infrastructure projects. We should continue to explore the possibility of establishing Infrastructure Project Listing to meet the demand,” said Dr. Munir Majid while addressing the conference.

Also speaking at the conference, head of the visiting delegation, CIMB Group Chairman Dato’ Sri Nazir Razak believes the private sector can carve out a collective bottom-up approach towards integration to fill the gaps where government efforts fall short.

“Given considerable political uncertainties and economic headwinds, ASEAN must strengthen its resolve to continue with the economic integration. We believe the private sector should be encouraged to play a bigger role in the process, and this should include being entrusted with leadership roles in reviewing and reducing non-trade barriers in various sectors of the economy,” said Dato’ Sri Nazir.

The conference was attended by senior representatives from some of the largest UK corporations, including HSBC, Arup, Diageo, KPMG, BP, Liverpool FC, Lloyds, London Stock Exchange, BAE Systems, Pinsent Masons, Prudential, Kroll, Eversheds, Matheson & Co, Dyson, Bupa, Aon, Standard Chartered, Amec Foster Wheeler and The Royal Bank of Scotland.

asean

Photo by Asia House

The visit of the ABC ended on a high note with Dato’ Sri Nazir being honoured with the prestigious Asian Business Leaders Award by Asia House in recognition of his achievements over the course of his 26-year tenure at CIMB Group. UK Minister of State for Foreign Affairs, the Right Honourable Hugo Swire gave the keynote speech at the Asian Business Awards Dinner. Past recipients of the award include luminaries such as Ho Ching, Executive Director and CEO of Temasek; Jack Ma, Chairman and Founder of Alibaba.com; and Ratan Tata, Chairman of Tata Group.

Smog – enough is enough!

24 August, 2015
As appeared in TheStar.com.my

asean

THE first mistake made 18 years ago was to describe the acrid, terribly unhealthy and economically costly lead-ridden smoke that has been blanketing Malaysia, Singapore and Indonesia at least once a year since 1997 for weeks on end, as haze.

So we hazily tolerated this pestilence from Indonesia and in the typical Asean way treaded ever so softly on a matter that deeply affects lives and livelihoods.

It is no wonder that so many are so cynical about Asean and all this talk about a community. Each Asean country owes a duty of care to its citizens and to its neighbours. All three countries have to a lesser or greater extent violated this. Indonesia most so.

How can we even talk about a people-centric Asean with a straight face? Why did it take Indonesia just now to ratify the anti-smog agreement of 2002?

In Europe the Convention on Long Range Transboundary Air Pollution came into force in 1983 among 51 countries not many years after a public outcry over acid rain on the continent, with legally binding targets, periodic reports on compliance, and progressive introduction of new pollution concerns.

They respond and act responsibly. Here we talk and come up with heart-rending slogans, but do our governments really care?

They meet often enough at tax-payers’ cost. The last transboundary haze pollution ministerial meeting was held in Jakarta in August 2015 and they agreed to remain vigilant and to step up efforts to minimise transboundary haze..

What happens next? Black September!

For good measure they stressed the need to develop a road map for cooperation among members of Asean to achieve the goal of a haze-free region by 2020.

Another road map. Where do they all lead? And of course 2020, that magic year when everything will fall into place all over the place. This charade must really stop.

As usual, it is only Singapore that has tried to do something real about this choking pestilence. Last September its Parliament passed the Transboundary Haze Pollution Act giving the city state authority to prosecute local and foreign companies involved in illegal forest burning that causes severe air pollution in the country.

It is of course not a definitive solution. It depends on cooperation of the involved jurisdiction – Indonesia.

And Indonesia has been very equivocal. In the current crisis it has dragged its feet when Singapore offered firefighters to help put out some of the suffocating flames. In the past, the Indonesian vice-president had said Singapore should be grateful for the eleven months of clean air against one month of poison in the air. This is not acceptable.

Maps unavailable

In 2012 the Asean Haze Monitoring System was developed by Singapore. But it has yet to become operational “as concession maps from member countries are not available.”

Apparently companies do not generally share concession boundary data and there are laws banning certain governments from sharing concession maps.

Well, change the laws and make companies share the data. Are we interested in fighting the smog or not?

When Indonesia got tired with foreign fishing vessels violating Indonesian waters, it blew them up. Now with tens of thousands of Indonesians suffocating from the smog – even if Indonesia does not care about even more people in Malaysia and Singapore suffering – it should do something about it.

If he is really the people’s president, Jokowi must take action instead of just throwing words at the flames.

The Malaysian and Singapore leaders too must be prepared to snap out of words into action. When was the suffocating smog last discussed at the Asean summit? Or by the leaders of the three countries?

Surely they are not held back by the desire not to hurt any feelings. If anybody is hurt, it is the peoples of the three countries.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

Asean Economic Ministers Must Deliver

24 August, 2015
As appeared in TheStar.com.my

asean

AFTER the gathering of Asean foreign ministers earlier this month, including with their counterparts from farther afield, Asean economic ministers (AEMs) assemble in Kuala Lumpur from this weekend to concentrate on the establishment of the Asean Economic Community (AEC).

This will be their last big meeting before Asean leaders meet at the 27th summit to pronounce on the establishment of the Asean community. And, while there are three pillars to the Asean community idea – political and security, socio-cultural and economic – it is out of the AEC that there is the greatest expectation.

The AEC project is the most tangible. It is the most numerically determinable. The success of the AEC will spawn almost everything else. The extent of the other two pillars depends on how well the Asean economic engine is delivering good to businesses and the people.

The progress of communities at national, regional – like in the most developed European Union – and global level, as in trade and finance, is largely determined by functional integration in the economic field.

So as the AEMs meet this time, they are under the cosh to deliver. They will make or break the pronouncement of a credible Asean community.

They should not just focus on the post-2015 AEC, however necessary it may be to give it attention. There are still outstanding matters they can and should address before the end of 2015. I would classify these matters into three categories.

First, the low-hanging fruits that they can get done quickly to make the AEC something immediately real and experienced by businesses and people.

Those Asean lanes at airports which are points of entry and departure should be something seamlessly experienced right across Asean. Many member states have made the lanes available, but there are some significant laggards including Jakarta. Malaysia, as another example, should make these available at other airports as well, like Penang and Kota Kinabalu.

It is really quite simple to show this kind of commitment, with no issue of national interest involved.

The other simple initiative outstanding for so long is the Asean Business Travel Card (ABTC). There is already the Apec – of which most Asean countries are members – Business Travel Card. Just have a supplementary card, and call it the ABTC as between the Asean member states.

This way the AEMs can make the ABTC happen without having to reinvent the wheel and from there the ABTC can be expanded to Asean member countries, like Cambodia, which are not members of Apec. It is there to be done in two simple steps. AEMs can make it happen to facilitate business travel which surely will drive further the economic integration process.

There are a number of other “low-hanging fruits” proposals I have made to Asean ministers and leaders in my capacity as chairman of the Asean Business Advisory Council, but I will just highlight one more – the Asean internship programme which exists in Singapore and Malaysia.

Instead of waiting for similar programmes in other Asean countries, the two initiatives should be expanded and broadened to include students from universities in other interested Asean countries, and also to include not just university students to be placed in participating companies but also apprentices from technical and vocational institutes, which would be of interest to less developed Asean economies. Singapore and Malaysia, as more developed regional countries, should do this for the less advanced member economies.

Second, while there has been really significant decline of tariff levels in Asean trade, there has been a rise in non-tariff measures and barriers (NTMs/NTBs) which impairs trade activity.

The AEM meetings from this weekend will of course not be able to remove them all, or even a significant number. But the AEMs should come out with a clear roadmap to phase out NTMs/NTBs in time with the official launching of the AEC.

They should prioritise and focus on economic sectors close to the people, in line with the proclaimed people-centric Asean.

After the air tragedies of the recent past, one would have thought there would be a real commitment for Asean to act together as a community to improve the situation. While establishment of an Asean civil aviation regulator may take some time, there could be a clear policy decision to do so.

Meanwhile, specific steps can be taken: establish regional pilot training centres; establish regional air traffic control centres; and set up an “Airport Infrastructure Fund”.

There are three other sectors that could be focused on. The agri-food sector, which is close to the people and is one of Asean’s so-called Priority Integration Sectors, should be addressed to facilitate trade and availability. A couple of immediate steps can be taken: apply a mutual recognition agreement (MRA) on standards, additives and contaminants to ensure Agri-food products that comply with the requirements of one Asean country is compatible with the requirements of all others; and apply an MRA on nutrition labeling for minimum requirement on information provided for Asean-wide consumers, without the obligation to reprint or over-label.

The other critical sector is logistics to ensure goods reach the people without delay and at a reasonable price.

Some NTM/NTB practices in this sector work against this. A commitment by the AEMs to implement a system for an Asean-wide common certification of transport for usage in all member states will address the most inhibitive transport practices, such as requiring mandatory equipment change across borders. Some of the national transportation company concerns can also be addressed by forming transport logistics joint ventures.

The retail sector is the third sector that is close to the people which should be concentrated on, e-commerce particularly where Asean is lagging behind developed economies with total Internet sales of just 1% of total turnover when the number is well over 8% elsewhere.

Apart from the logistics, the main problem in this connection is e-payments – whereas the use of technology in this area in particular is critical to the promotion of integration. The AEMs should show they understand the modern economy and the needs of their society by taking prioritised action.

Finally – and most importantly – the AEMs must take concrete action to address the needs of the micro, small and medium enterprises (MSMEs).

There are three reasons why they must do so: they must be seen to be serious about doing something on the fourth leg (narrowing the development gap) of the AEC and avoid the accusation they are only interested in pushing for open markets implicit in the other three legs; a community cannot survive for long, let alone develop further, if there are unsustainable disparities within it (Singapore GDP per capita is over 50 times that of Cambodia); and the MSMEs are the backbone of the Asean economy in terms of employment particularly but also of output and exports – if the backbone breaks there has to be serious surgery, or worse.

There is one initiative – on access to finance for MSMEs – which the Asean Business Advisory Council is pursuing. Access to finance is the most serious and long-standing problem facing MSMEs. This initiative, which is fully private sector-driven, should get clear formal endorsement from the AEMs. After it, a hundred flowers could bloom and there will be real progress in MSMEs obtaining finance.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

Press Release: ASEAN Business Club: Launch of Lifting-The-Barriers Reports

img-abc15-image23.jpg

ASEAN Business Club to take up proposals of the Lifting-the-barriers reports with ASEAN decision-makers post 2015 to secure a more meaningful place for the private sector in the Asean economic integration process.

KUALA LUMPUR, 25 August – The ASEAN Business Club (ABC) and CIMB ASEAN Research Institute (CARI) jointly launched the third set of Lifting-The-Barriers (LTB) Reports today in Kuala Lumpur, held alongside the 47th ASEAN Economic Ministers Meeting.

The LTB reports were launched by the Chair of ASEAN Economic Ministers’ Meeting 2015, Dato’ Sri Mustapa Mohamed, the Minister of International Trade and Industry of Malaysia. Speaking at the launch, he said he welcomes the input from the private sector, as it is one of the priorities of ASEAN to push for the business sector to play a more proactive role in economic integration.

“For 3 years, ASEAN Business Club and CIMB ASEAN Research Institute have been producing the Lifting-The-Barriers reports with a structured approach to address the challenges in ASEAN economic integration. We, the policy makers, have found it to be a useful reference”, said Dato’ Sri Mustapa Mohamed.

Tan Sri Dr. Munir Majid, President of the ASEAN Business Club, said the proposals in the report are constructive but a number of the recommendations have become repetitive, which is a reflection of the slow progress in the process of lifting the barriers. ABC will continue to take up the proposals identified in the proposals with ASEAN officials post-2015 in order to establish a more meaningful place for the private sector in the Asean economic integration process.

“The ABC seeks optimality as well as strategic progress in the establishment of the AEC. These reports and the effort help to put our case forward. Some of the sectors covered in these reports – such as capital and financial markets – are critical to real economic integration. Finance is the lifeblood of the economy. It is the enabler. Therefore there is some concentration on this sector because it will drive all the other sectors as well in the integration of the Asean economy – making it that single economy with those great prospects of size and growth”, said Dr. Munir.

The launch marks the third set of white papers published by ABC and CARI. The six major sectors that are being highlighted this year were 1) Air Transportation, 2) Financial Services & Capital Markets, 3) Tourism, 4) Healthcare, 5) Retail and 6) Infrastructure.

 

Air transportation sector

The report noted that the ASEAN Single Aviation Market (ASAM) is unlikely to be fully achieved in time to meet the 2015 deadline. Much remains to be done for the economic and market integration of the aviation sector, while the work on technical and regulatory integration is still at its early stages. Therefore, it is likely that ASAM will have to be extended, or to have a second stage declared for the post-2015 period to tackle both unfinished and new goals.

The report identified ten recommendations, largely, for the governments to accelerate the integration agenda:

(1) Facilitate cost reduction and efficiencies for all airline operations; (2) Overcome infrastructural constraints as well as the shortage in skilled human capacity; (3) Establish a Joint Aviation Authorities (JAA)-type body to drive the adoption of “base” standards against which national standards can be compared for equivalence; (4) Adopt a formal legal agreement on mutual recognition for certifications, licenses, permits, approvals; (5) Establish procedures to ensure consistent implementation, monitoring implementation and taking corrective measures against non-compliance; (6) Initiate high-level industry meeting among ASEAN airline CEOs and IATA to identify airlines’ needs by way of technical integration that would benefit all of them; (7) Pursue market access liberalization beyond third, fourth and fifth freedom operations to include seventh freedom rights;( 8) Lift restrictions on “community carriers” (9) Negotiate with third countries as a unified bloc and to ensure that ASEAN community carriers are recognised for operations to those countries; (10) Recognise seventh freedom rights for fellow member states’ carriers to operate externally (i.e. extra-ASEAN) to third countries.

 

Financial services and capital market sector

The report recognises that policy-led integration initiatives are likely to continue its slow progress. Whereas industry-led initiatives have the potential to accelerate evolution towards an integrated ASEAN market at a nimbler pace, incorporate latest leading practices, market developments and technology.

Following the proposal tabled in 2014 to set up a Financial Services and Capital Markets (FSCM) Expert Group to ASEAN leaders by the ABC, the report focuses on exploring the industry led theme with three initiatives: (1) Push forward the ASEAN Trading Link (ATL) initiative by way of regional depository and clearing links to drive further integration and efficiency in regional capital markets; (2) Explore Peer-to-Peer (P2P) models, starting with crowd funding, explore alternative financing models to fulfill the needs of the underserved SME segment; (3) Enhance efficiency of regional payments leveraging new age digital technology developments.

 

Tourism sector

In the tourism sector, the report’s primary recommendation is to strengthen the private sector’s capacity to organise, advocate, and finance its stance to removing key barriers in the integration of ASEAN tourism sector.

It also aims to drive towards the full participation of the private sector as a driver of tourism economic integration, and in particular, in the ASEAN Tourism Strategic Plan (ATSP) 2016 – 2025 formulation and implementation process.

The report highlighted six recommendations to over the barriers: (1) Research and advocacy on the need for further reductions in barriers affecting transportation, cross border, and mutual recognition of certification standards (2) Strengthen the capability of the industry in ASEAN regional tourism affairs to echo a stronger voice (3) Prioritise the harmonization of inter and intra-regional transportation in the area of safety, security policies, regulations by the private sector as the main provider of transportation services in the region (4) Mutual Recognition Agreements (MRAs) need to be fully implemented to ensure supply of a quality pool of manpower in the region (5) Market ASEAN as a single destination by the private sector (vi) Further identify what is needed from the public sector to raise the competitiveness of ASEAN as a global destination.

 

Retail sector

The retail section of the report argues that driving innovation in ASEAN represents a unique opportunity to take the retail industry to the next level. It improves the retail experience for consumers, facilitates the emergence of regional players, homogenises the retail space across countries, and helps drive ASEAN markets integration. There are barriers to the development of retail innovation in ASEAN, including market readiness, cumbersome regulations, integration of talent, insufficient infrastructure capabilities and lack of access to financing for innovators.

The report identified four specific actions to overcome those barriers and to fully unleash the potential of retail innovation in ASEAN: (1) Reduce non-tariff barriers for new products by harmonising labeling & testing requirements and increasing the capacity and influence of the ASEAN secretariat; (2) Improve access to talent to drive innovation by encouraging the inclusion of the retail sector into the design and delivery of vocational training and harmonising the recognition of certificates across ASEAN; (3) Improve trade efficiency to ease the flow of new products and services across countries, thus further driving the implementation of the ASEAN Single Window and harmonising the payment eco-system; (4) Drive integration of ‘Retail Innovators’ by establishing a regional network of government agencies promoting innovation and fostering collaboration between innovation incubators and retailers.

 

Healthcare sector

ASEAN healthcare sector also faces obstacles to reach its full potential. In view of the broad scope of collaboration required by each country, a coordinated approach is required to achieve the vision of the ASEAN Economic Community Blueprint. The report proposed five broad suggestions to overcome the barriers: (1) Mutual Recognition Agreement for human resource exchange (2) ASEAN Innovative Healthcare Council to address public and private healthcare development (3) More public and private partnerships to increase and promote healthy lifestyle (4) Healthcare companies to balance societal needs and needed profits by government assistance (5) Certification of insurance companies to set a level of healthcare quality across ASEAN.

 

Infrastructure sector 

Projections show that ASEAN economies need to invest over US$60 billion a year in infrastructure until 2020 to support and maintain the region’s high economic growth. However, infrastructure supply in ASEAN economies remains low relative to the needs. With the rapidly rising demand the infrastructure deficit is expected to widen in most of the member countries. ASEAN faces the ‘infrastructure financing paradox’ – a gap between the need and supply of financing – even though both savings rates and foreign reserves are high in ASEAN. The majority of ASEAN member states, except Singapore and Malaysia, could only feed less than half of estimated demand. With inadequate financial sources from government and overseas development aids, private financing participation is expected to increase through Public Private Partnership (PPP) scheme, equity participation, and privatisation.

The report suggests for the public sector to (1) Provide or expand the market for long-term credit; (2) Widen the access for cross border financial flows especially for infrastructure financing; (3) Establish a dedicated unit in government (especially for the case of PPP) that functions to speed up and streamline the process, communicate with potential investors professionally, and address the underlying problems such as how to offer good projects. The private sector, on the other hand, has to actively participate in nurturing the market and supporting the public sector accordingly. Among crucial efforts are to: (1) maintain good communication with the host country’s government; (2) have the willingness to involve local partners; (3) recruit and transfer knowledge to local experts; and (4) value the environment.

The 2015 reports were jointly produced with the contribution of independent research partners namely Faculty of Law, National University of Singapore for Air Transportation; Accenture for Financial Services and Capital Market; ASEAN Tourism Association (ASEANTA) for Tourism; A.T. Kearney for Retail; Frost & Sullivan for Healthcare, and Economic Research Institute on ASEAN and East Asia (ERIA) for Infrastructure.

Since it was launched in 2013, the Lifting-the-barriers Initiative has yielded 19 reports to date, covering 12 clusters of key sectors in ASEAN.


img-abc15-image20.jpg

 
img-abc15-image21.jpg

 
img-abc15-image22.jpg

 

ASEAN Members Should Practice More ‘ASEAN Minus X’ Approaches

KUALA LUMPUR, Aug 25 (Bernama) — ASEAN member states should practice more “ASEAN minus X” approaches in overcoming certain issues regarding tariff barriers, says ASEAN Business Club president Tan Sri Dr Munir Majid.

He said it was not necessary to wait for all the 10 countries in ASEAN to agree on each issue before it could be implemented as there might be some constrains that could prevent that particular country from doing so at that time.

“For example, if you look now, the ASEAN trading links only have three (participating) countries, namely Singapore, Malaysia and Thailand.

“You just do something with whoever is willing to do it (at that time), and not wait for all the 10 countries to do it together,” he said.

He said this at the launch of the “Lifting-The-Barriers (LTB) Reports 2015,” held in conjunction with the 47th ASEAN Economic Ministers (AEM) Meetings’ and Related Meetings here Tuesday.

In the report, he said the committee had decided on a three-month period, which is until November, for a possible implementation to lift some non-tariff measures of four sectors, namely, aviation, retail, agri-food and logistics.

“Among the main problems inhibiting the growth of e-commerce is e-payment. Every nation has its own e-payment system. So, to go through that system, to get clearance and payment, is sometimes hard as it is different in each country.

“We can try to solve this e-payment problem on “ASEAN minus X” basis. You can’t do it ASEAN-wide, forcing every ASEAN country to join,” he said.

He said Vietnam and Myanmar were among the countries that might have a problem in implementing non-tariff on the e-payment system, but that should not prevent other member countries from doing so.

“There are countries (in ASEAN) that can do it. So, let’s start and demonstrate the benefit of their cooperation to other countries to attract them to join in.

“Nowadays, we have to think of “ASEAN minus X” to jump-start things,” he added.

LTB Reports : Set Up Regional Joint Aviation Authority To Harmonise Standards

KUALA LUMPUR, Aug 25 (Bernama) — The ASEAN Business Club (ABC) and CIMB ASEAN Research Institute (CARI) call for the setting up of a regional joint aviation authority (JAA)-type body to drive harmonisation of standards.

The recommendation was one of the 10 made by ABC and CARI in its Lifting-The-Barriers (LTB) Reports 2015 for the aviation sector, launched by International Trade and Industry Minister Datuk Seri Mustapa Mohamed here today and witnessed by ABC President Tan Sri Dr Mohd Munir Abdul Majid.

AirAsia Chief Executive Officer Aireen Omar, who was also present today, said the set of recommendations was a good start in developing the ASEAN Single Aviation Market.

“The report is a good study to share with ASEAN governments on what needs to be done to shape the regional aviation market and allow it to grow in the manner of how you see it in the European Union and the United States.

“To optimise the open skies policy, which will hopefully happen soon, we need the ASEAN Single Aviation Market,” she told Bernama on the sidelines of the event.

Among other notable recommendations by the report was to initiate a high-level industry meeting among ASEAN airline chiefs with International Air Transport Association (IATA) to identify airlines’ needs by way of technical integration that would benefit all of them.

According to the LTB Reports, the ASEAN Single Aviation Market was unlikely to be fully achieved in time to meet the 2015 deadline as much remained to be done for the economic and market integration of the sector, while the work on technical and regulatory integration was still at its early stages.

The report noted that there was a possibility for the ASEAN Single Aviation Market to be extended, or to have a second stage declared for the post-2015 period to tackle both unfinished and new goals.

Besides air transportation, the Reports also highlighted recommendations in the financial services and capital markets, tourism, healthcare, retail and infrastructure.

LTB Reports: ASEAN Faces Infrastructure Financing Paradox

KUALA LUMPUR, Aug 25 (Bernama) — ASEAN faces the paradox of infrastructure financing – a gap between financing need and supply – even though both savings rates and foreign reserves are high in ASEAN.

According to the Lifting-The-Barriers (LTB) Reports 2015 by the ASEAN Business Club (ABC) and CIMB ASEAN Research Institute (CARI), the majority of ASEAN member states, except Singapore and Malaysia, could only feed less than half of the estimated demand.

Projections show that ASEAN economies need to invest over US$60 billion a year in infrastructure until 2020 to support and maintain the region’s high economic growth.

However, infrastructure supply in ASEAN economies remains low relative to the needs.

According to the Reports, with inadequate financial sources from the government and overseas development aids, private financing participation is expected to increase through Public Private Partnership (PPP) scheme, equity participation, and privatisation.

The LTB Reports suggested that the public sector provide or expand the market for long-term credit and widen access for cross border financial flows, especially for infrastructure financing.

It said the private sector, on the other hand, has to actively participate in nurturing the market and supporting the public sector accordingly, whereby among crucial efforts were maintaining good communication with the host country’s government, recruiting local talents and transferring knowledge to local experts.

The Reports were launched Tuesday by International Trade and Industry Minister Datuk Seri Mustapa Mohamed and witnessed by ABC President Tan Sri Dr Mohd Munir Abdul Majid.

Besides infrastructure, the Reports covered other sectors, including transportation, financial services and capital markets, tourism, healthcare and retail.

ASEAN – need to step up

08 August, 2015
As appeared in TheStar.com.my

asean

Can’t go on with full plate, glass half empty approach

THE meaningful measure of Malaysia’s performance as Asean chair this year will be how the process of regional community-building is set for the years to come.

Not the scorecards, which will all come in at 90% plus achievement, that only the officials passionately believe in. Not how well Malaysia organised the many Asean and Asean Plus meetings, a series of which just took place this past week.

They do matter, but not in direct proportion to the time and energy expended. In Asean, the full plate of meetings often assumes greater significance than the half empty glass of actual achievement. Or the problems that need structural solutions to begin to fill that glass.

Already, Malaysia’s time as chair of Asean has an indelible mark in the minds of Asean member states (AMS). Malaysia’s severe and serious domestic political problems have consumed attention better extended to Asean matters. AMS – and other commentators – will quickly put it down to this factor that the Asean community to be pronounced at the end of this year, is half-baked.

It becomes critical, therefore, for Malaysia to lead a charge in forming a meaningful post-2015 Asean community agenda. It cannot be more of the same.

Here are just three structural issues that could be addressed:

1. Well over 10 Asean ministers are involved in the meeting and decision-making process. They do not seem to talk sufficiently to one another, not even in their home jurisdictions. The foreign ministries which carry this convergence responsibility are either not sufficiently equipped or do not have the time to do so. There should be a special high level body with capable representation from each Asean country to integrate decisions to move forward.

From actual experience and knowledge, I can say there is a disconnect between what economic ministers and finance ministers do and decide which does not promote achievable progress. As we know in management, a deep and vertical organisational set-up with no horizontal connecting lines results in silos and sub-optimal performance.

2. There are hundreds and hundred of committees, working groups, task forces, special task forces, study groups etc which take up plenty of travel and meeting time. While they may be the stuff of the life of Asean officials, the private sector and non-governmental bodies have other things to do as well. Their dialogues and engagement with officials, ministers and leaders become disparate and unrelated to the decision-making process.

To be meaningful, there must be a careful review of where such involvements should be located to make a difference to the speed and quality of decision-making. For example, the Asean Business Advisory Council (Asean-BAC), which is the body mandated by Asean leaders to be the representative of the private sector since 2003, has in the past had absolutely no interaction with the Asean finance ministers and central banks – and all those committees etc under them – whereas financial integration is vital to economic integration. This is just one huge gap. If one goes down the line in the maze of committees and meetings, one will discover how meetings of Asean customs heads are not sufficiently challenged on non-tariff measures or industry expert groups such as in health products are not brought in to help make progress over issues such as contaminants and calorific value.

3. The non-governmental representation itself, including in Asean-BAC, should be reviewed to ensure their more effective contribution. Again, to make a difference, there has to be a required level of organisation and commitment. Given that involvement of members, particularly with business sector bodies, is not full time, the secretariats have to be strong, professional and well-funded. Having said this, there is no substitute for committed members of the bodies they represent. They are there not to have pictures taken with leaders to adorn their offices. They have a responsibility which calls for performance. Just like the officials, it would be good to have KPIs to measure organisational performance at the Asean and individual performance at the national levels.

Of course other proposals for the post-2015 Asean are important, such as enhancing the Asean secretariat, addressing sustainable development and decent work principles, but the progress towards attaining set goals will take even longer than they already would if the structure of the work process is not improved.

And of course the plethora of meetings and summits will continue to renew Asean commitment and to address contemporary issues – or even to ensure Asean centrality if only by playing host to heavyweight states like the US, China and Japan – but they cannot be a substitute for better thought out and organised work.

At the same time, specific rather then generalised targets should be prioritised.

In terms of regional security and stability, perhaps the hardest bit because Asean is a minnow in the company of the great powers of the 27-member Asean Regional Forum (ARF), a more united Asean stand on some of the issues would make Asean look better – and more central. While there is some progress in respect of a position on the South China Sea, it is still vulnerable to turncoat insider states, constant Chinese challenge (when Anifah Aman repeated at the opening of the Foreign Ministers Meeting last Tuesday last April’s Asean chairman’s statement about “the erosion of trust and confidence” because of recent developments – China’s reclamation works in disputed areas – the Chinese ambassador looked up vacantly at the uninteresting PWTC ceiling), and to the fact that Asean claimant states have not resolved differences among themselves.

So how can they even sustain the common position, now informed primarily by that on the Code of Conduct. After that, what?

There has, again, to be organised work outside of set-piece meetings and grand occasions to prepare thoroughly the ground for a common Asean position, including resolving the South China Sea disputes with one another. There must be a clear identification of this issue in post-2015 Asean and a determined process to take it forward.

In sum, Asean when pronouncing that it is a community at the end of the year, must also announce that it will up its game in community-building, as no doubt that pronouncement will be accompanied by the assertion that only a milestone has been reached, that community-building is an ongoing process.

It would be demonstratively good if, apart from meaningful participation throughout each year in the process, there was also an annual review through a “People’s Assembly” at the Asean secretariat in Jakarta every Asean Day – like today Aug 8.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.