Nor Yakcop: I think it is very important to look at ASEAN as a whole because that is where we get the synergy and the 2+2 = 5 facts but each individual country in ASEAN will have to be strong because we cannot have synergy out of 10 weak countries. We need strong countries because the synergy will be stronger, so each country will have to be strong on its own.

For us, in Malaysia we have done well as I said early on from being a poor country to a high middle income country within 2 generations and we should be very happy, we are but we are not happy enough. We want to be what we potentially think we can which is to be a high income country just like the developed countries and to do that, we look at our model that have been very successful, extremely successful. But we found interestingly that that model (unintelligible). So, we changed our model and as explained, there are 6 areas that form the trust of the new model, the new transformation program. One is moving away from factor-led growth to producitivity-led growth. Number 2 from balanced regional growth towards focusing on urban agglomeration and concentrated industrial clusters. Number 3, from sector diversification towards specialization in niche industry.

Four, before that we used to restrict foreign skilled labour, now we are very open to embrace them into the… gives all sorts of incentives for them to come. Number 5, we build schools, hospitals and all that; I think we have done very well but now we are moving towards soft infrastructure; quality of teachers and the quality of the workforce etc, maintenance at running building. And the role of government has been quite significant, in that respect it will continue to be because we just can’t move on. But we really want the private sector to be the engine of growth. And our role is to be the facilitator. In fact, we are setting up a facilitation fund of 20 billion to help the private sector. The private sector will build school, hospital and university, instead of us and we said “okay, to make your project viable, here is the 5%”. So, we safe 95% even if we get 5% and we get the hospital done. Leverage government spending. That’s quite big in the Tenth Malaysian Plan.

We used to have KPIs based on how many schools we built, how many kilometres of road we built. It is no longer like this, it is now in terms of quality. Everyone knows it is difficult to measure but we are going towards that. The whole mindset has changed, the government mindset has changed and to us, we are taking this transformation very strongly. I am sure other countries are also doing that. Beyond ASEAN lately… ASEAN itself has to leverage on China, India and Asia as a whole. The advantage for us at this point is that, in a way this downgrading of US bond from AAA is quite significant for us although it has not created much of a downside. Our early assumption on investment by central banks in this region was that the US is risk-free; no more.

No more because it can be downgraded, the signalling effect. So, in the context we already trading more among ourselves. We used to export 18% of our products to States, now is only 10. We used to to export 3% of our products to China, it is now 12%. So we are trading more ourselves. But with these downgrading etc, we can even have more investment among ourselves without investing in the US. Why don’t we invest in infrastructure funds?

CARI: That is almost a necessity.

Nor Yakcop: That is almost a necessity. And the interesting part of ASEAN and Asia taken together, I like to see ASEAN and Asia taken together. We have surplus countries and deposit countries and it is interesting. So, we have surplus China, we can take the money to lend to deficit India, deficit Vietnam. Like they demand India has to build road for the next 20 – 30 years, billions and billions US dollar worth of roads will have to be built in the next 1 or 2 years. That’s how they would have to avoid the supply constraint, lower cartels and etc. And the China has the (unintelligible) surplus country.

So, if we can coordinate amongst ourselves, I think we can depend less on the West and in the way it will hedge us against in case there is another headwind from the West in the future but we can optimise on our strengths and on our reserves.

CARI: Yes but Asia as a whole is of course an emerging market with surplus relative to the West. So, you are suggesting that some of them can be taken up by…

Nor Yakcop: ASEAN can make it maximise and even, working with Asia. ASEAN can leverage using Asia.

CARI: And then, for ASEAN to leverage this asset, the surplus and the reserves; there would have to be a very large infrastructure…

Nor Yakcop: Indonesia is an example, Indonesia needs plenty of infrastructure and China is outside of ASEAN. But China can use its surplus to help ASEAN and we in Malaysia, all the expertise in building roads etc and we are doing it in India, we can do it in Indonesia, we can work together. There will be so many opportunities for win-win situation. We can just leverage on each other. First, within ASEAN and then ASEAN leverage within Asia.

CARI: This, to take the example of road building, yes there is certainly a huge need in Indonesia. And you know, for example I think Malaysian companies were involved in the trans-Jakarta highway. It didn’t quite come through.

Nor Yakcop: It takes time. I think we have to have patience. It takes time but we cannot lose heart, we just have to (unintelligible).

CARI: Many of the problems were actually in terms of the business models or the regulatory ones, so I have had sort of Indonesian ministers, former minister of trade for example, saying that the key need is to have a private-public partnership to fund this.

Nor Yakcop: I think that is very important. I think to we have pioneered the private-public partnership. The 20 billion is one of the classical examples of private-public partnership that we need to do but I think that it is very good for each country, it’s ideal private-public partnership. The model can be used in ASEAN as a whole or even when ASEAN leveraging with Asia. The more critical, necessary but insufficient factor or condition that you need is buy-in from each ASEAN capital that 2+2 = 5. We have to buy-in. That is the most likely (unintelligible) because there is a tendency for each ASEAN country to say, “Ok, this sounds good but do I really benefit?” So, we have to tell everyone that it is a win-win for all although we do not see it directly but it takes a little bit longer term or look at it indirectly, it is a win-win for all.

Once we get the buy-in from all the leadership in all these ASEAN countries, it will be a lot easier. I think the most important step is to get the buy-in and then in that respect, what CIMB is doing is excellent in setting up this unit under you all. To do that is an excellent first step forward.

CARI: We try to bring some of these arguments to people and also we are the secretariat of this new venture, the ASEAN Business Club. I think in the panel that I chaired this morning, there is a very interesting consensus that businesses cannot just; they don’t just have to act beyond merely advocating and just put the argument about integration. What they do can help bring the region together by spreading ownership, you know, creating stakeholders across the region so that if you have Malaysian companies who also have significant Indonesian ownership for example, then shared interest can start to bridge us in and take the barriers down.

Nor Yakcop: Yeah it is a value chain actually if you see. The value chain must consist of everybody, then we will (unintelligible). Because sometimes political reason that this value chain, we just keep aside. Maybe short term make sense but in the long run, to create more business by expanding our value chain like we do this and Indonesia do that, I think that is excellent. We have to be inclusive. Like what we have done ourselves, although we have been inclusive all the while, our Prime Minister came out with this slogan “1Malaysia”. People can always say “1Malaysia” but you have to say it loud and you have to do action to show that you are really 1Malaysia and we have taken that. So, we have to similarly show that we are 1ASEAN. We know that we are 1ASEAN, we have done a lot of projects together, in terms of custom and I myself, I am involved in (unintelligible) and the northern corridor, the (unintelligible).

So, we are doing a lot of small things but we need this push from top-down to say 1ASEAN, 1ASEAN and we have to do it. That will help and we have to, we cannot be selfish. Some of the things that we are doing, we have to open up and let other ASEAN members do so that everyone feels that they are part of it.

CARI: In each cabinet, for example, could we kind of commit to having a kind of an ASEAN minister. What are your thoughts on that?

Nor Yakcop: The problem is that the ministers who are responsible for, who attend these ASEAN forums are very convinced of what they need to do. The issue is the actual projects are handled by line ministers; the minister in-charge of public works department, the minister in-charge of agriculture, the minister in-charge of domestic trade, these are the line ministers, they don’t necessarily attend the meetings and share the philosophy.

The question is how to, the line ministers to be there with us. That is what we have to do, to decide. I don’t have an answer but there must be some forum or some mechanism to bring the line ministers.

CARI: That is very interesting, I mean it is good that you identified where the gap is.

Nor Yakcop: The line ministers will have to be brought up in the forum in one way or another. This is the policy, this bridge has to be built, it has to be built and they are committed to it. Now, it goes down, they hear about it.. it doesn’t go to the line minister of DKR, or domestic trade. So, we ourselves are thinking at our level, ASEAN level that I chair, I am part of, how to bring the line ministers into our forum. But this is work in progress.

CARI: I think the sub-regional efforts are very very important. It doesn’t have to be 10 countries right?

Nor Yakcop: But even then we have this problem of line managers not knowing and not pushing hard enough but we are working on that but the same model can be used in a bigger framework or ASEAN.