11 Aug, 2011

Rising ASEAN says U.S., Europe “No Longer Engines of Global Growth”

Imtiaz Muqbil

Manado, Indonesia, 10 August 2011 – In another sign of the shifting world order and growing economic assertiveness in Asia and the ASEAN countries, Indonesian Vice President Prof Dr Boediono has declared that the US and Europe could no longer power the world economy, but ASEAN economies are in a better situation right now to face the global uncertainties.

Opening the 43rd ASEAN Economic Ministers Meeting and Related Meetings here, he said all ASEAN economies were affected by the global financial crisis of 2008-09, but relatively sound fundamentals and quick responses rewarded ASEAN with a rebound by 2010. He added, “In the recent weeks, we have seen the uncertainties being created in the US with the protracted debate on the debt ceiling, potential for a double dip recession and most recently, the downgrade of the US sovereign rating. In Europe, we have seen the difficulties in managing the debt packages of Greece, Ireland and Portugal, and the anxieties of a debt crisis spreading to Italy and Spain.”

“What does all of this mean to us in ASEAN? Since the 2008 global financial crisis, it is evident that the US and Europe could no longer be the main engines of growth of the world economy.”

He added that the strength and relevance of regional cooperation will once again be tested as ASEAN faces uncertainties in the global economy and the rather shaky functioning of multilateral institutions and governance. But he said the best responses would be to be vigilant and be prepared with national and regional policy responses and cooperation.

The VP said ASEAN has the need and scope to substantially raise competitiveness across ASEAN economies and for ASEAN as a whole. He said ASEAN needs some clear thinking on what ASEAN Centrality means in practice.

Importance of China and India

“ASEAN is faced with a large and increasingly powerful Chinese economy in the North, and a huge Indian economy in the West is also making rapid progress. The region will ultimately need to define its role and competitive strengths at the crossroads of these two emerging economic giants.”

Due to be held until August 14, the ASEAN Meeting includes all ministers in charge of economic, commerce, trade and investment in all ASEAN Member States. Their primary focus is building the ASEAN Economic Community (AEC) by its target year 2015, and to discuss ways to further engage Dialogue Partners and other stakeholders in the process. An AEC Blueprint that falls under their purview charts what needs to be done to facilitate intra- and inter-regional trade in goods, services, and investment.

They are also discussing ways increase the utilisation of the ASEAN+1 Free Trade Area agreements and further economic integration measures with ASEAN Dialogue Partners to support ASEAN’s 600-million-people-strong integration into the global economy. Talks are to be held with eight of ASEAN’s ten Dialogue Partners – Australia and New Zealand (as one), China, India, Japan, Republic of Korea, Russia, and the United States. ASEAN has ongoing Free Trade Area agreements and economic partnerships with China, Japan, Republic of Korea, India, and Australia and New Zealand.

On Aug 13, there will be an inaugural ASEAN Trade Facilitation Forum which will see business representatives from ASEAN Member States, the United States and the wider region converging for the first time to engage in a direct dialogue with the Ministers and Senior Economic Officials. The Asian Development Bank Institute (ADBI) will also present the findings from its ASEAN 2030 study.

ASEAN has benefited from a strong economic growth of 7.4 per cent and increased commitments from its Member States. By end-July this year, ASEAN has completed 71.95 per cent of measures due under Phase I (2008-09) and Phase II (2010-11) of implementing the AEC Blueprint, as greater efforts were exerted to reach the goals of an AEC by 2015.

This year’s economic ministers meetings also mark the first since the ASEAN Leaders adopted the Master Plan on ASEAN Connectivity at the 18th ASEAN Summit in Ha Noi, Viet Nam on 28 October last year.

Indonesian President Yudhyono: Brave New World Lies Ahead

On 8 August 2011, Indonesian President Dr. Susilo Bambang Yudhoyono marked the 44th Anniversary of the founding of ASEAN with a lecture on the ASEAN Community in 2015 and Beyond. He said that although ASEAN has come a long way, it “will need plenty of this versatility and agility, to face the brave new world that lies ahead. More than ever, ASEAN now has a unique opportunity to transform the region, shape the architecture of Asia Pacific, as well to contribute to the global agenda.” He outlined the following points:

(+) First, through its various dialogue mechanisms, and like no other regional organization, ASEAN has emerged to become an indispensable diplomatic hub in the Asia-Pacific. This has placed ASEAN in a very strategic position, to be a mover and shaper of regional affairs.

(+) Second, ASEAN has demonstrated its economic resilience, in the face of the recent global financial crisis. The ASEAN region is predicted to grow between 5.7 percent and 6.4 percent this year, which is higher than the world average of 4.5 percent.

(+) Third, ASEAN has developed assets that are relevant to global issues: we have ample forests; we have natural resources and commodities; strategic maritime space and resources; we have huge population with dynamic youth; we are a region with extremely diverse religious and ethnic make-ups; we are open societies and we embrace moderation.

(+) And fourth, ASEAN has increasing ability to speak with a collective voice in international forums. This enhances our capacity to contribute to the resolution of global issues.

Said the President, “We are blessed that Southeast Asia today is much more stable, much more peaceful, and much more coherent, than at any other time in history. We are fortunate that today there are no wars in Southeast Asia, and that ASEAN – as a group and individually – has developed constructive relations with all major powers.

President Yudhyono said that ASEAN has now entered the final lap just before the 2015 establishment of the ASEAN Community. He said this event must be celebrated in all the ASEAN cities, towns and rural areas. This means that we must do more, to spark in our peoples a sense of participation — a sense of ownership in the work of ASEAN.

“This also means that we must fully carry out our program of connectivity, so that our peoples have every opportunity to interact with one another, and know one another more closely. We could achieve this, if we could soon agree on a common visa arrangement.

“We must continue to sharpen the region’s capacity, for effectiveness and speedy response to mitigate the impact of natural disasters. We must also ensure that our people enjoy the economic benefits of the work of ASEAN. The overall population of ASEAN is already more than half a billion, half of which is the new middle class. And we have a combined GDP of USD1.5 trillion.”

“On the whole, we have to contribute to the changing politico-security climate of the Asia-Pacific region for the better. And in the light of our new responsibilities and our new roles in international affairs, we are called upon to be more proactive and more creative. We have to contribute to world governance, not only in the economic sphere, but also in the politico-security realm.”

Dr Surin Pitsuwan: Much Achieved, But Much Still To Be Done

According to Dr Surin Pitsuwan, Secretary-General of ASEAN, although the lead up to 2015 will encounter a few “bumps and challenges,” he is “certain that by 2015 the very foundations of the AEC will be there.” While we have made significant strides in our market integration, the need for quantifiable indicators and assessments of where we are now is crucial to ensure there will be no significant detours and derails that impede the achievement of our goals by 2015 and beyond.”

He cited some examples of positive changes. “For example, under the AEC’s single market and production base initiatives, tariffs in the region have been reduced to zero for the ASEAN-6 countries of Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. The CMLV countries (Cambodia, Myanmar, Laos, Vietnam) have also fully ratified the tariff reduction schedule that will fully implement the ASEAN Trade in Goods Agreement (ATIGA). Efforts to address non-tariff barriers, trade facilitation and standards have been strengthened.

In addition to products standards already in place, a Focal Group has been established that will further review current policies and strategies for standards and conformance in the region. To achieve customs integration, seven countries have endorsed the Memorandum of Understanding to implement the ASEAN Single Window Pilot Project. In the area of services and investment liberalization, Member States have signed eight packages of commitments under the ASEAN Framework Agreement on Services, and adopted the modality for the elimination of investment restrictions and impediments under the ASEAN Comprehensive Investment Agreement (ACIA).

To achieve freer flow of capital, the ASEAN Exchanges was launched linking the region’s seven stock exchanges, and thus further promoting ASEAN as an asset class. Meanwhile, new agreements and plans have been developed to boost the integration of transport, energy, and information technology, as well as to promote intellectual property rights in ASEAN.

Dr Surin said that the ASEAN Secretariat has set up a new high-level ASEAN Integration Monitoring Office (AIMO) to track the progress of regional economic integration. This office will be armed with the necessary tools, databases and methodologies to better understand the deep regional economic integration in goods, services, investment, and trade facilitation. Eventually, these tools will be used to influence policies and facilitate evidence-based decision making.

Dr Surin pointed out two key issues that will be critical to ensure that AEC is achieved by 2015.

First, ASEAN will need to strengthen the implementation of programs both regional and national levels. In this regard, commitments to integration matter most. ASEAN States are being urged to ensure that regional commitments are transposed into national commitments. While there are on-going initiatives to improve the quality of ASEAN integration, like the Mid-term Review of the AEC Blueprint and the Enhancement of AEC Scorecard, the real test of how far integration should go depends on individual countries’ commitment. Alongside commitments is the issue of implementation capacity. As there are always constraints to implementing various initiatives under the AEC, a key priority is the need to enhance capacity building efforts to support implementation of regional commitments at the national level.

The second is the need for greater regional coordination of trade, investment and financial policies. Naturally, financial and trade integration should go hand in hand. To facilitate trade, he said, “we need to create the financial instruments to hedge the risks of trade and investment flows. Likewise, we need financial integration to facilitate specialization and exploitation of economies of scale, which are related to trade.” Without significant integration of financial systems, ASEAN economic integration cannot go as far as it could, Dr Surin said.

Master Plan on ASEAN Connectivity

To fulfill the vision of ASEAN Leaders to bring peoples, goods, services and capital of ASEAN closer together, a Master Plan on ASEAN Connectivity was approved at the ASEAN summit in Ha Noi on 28 Oct 2010. This plan reviews the achievements made and the challenges impeding the linkages. It includes key strategies and essential actions required, with clear targets and timelines, to address these challenges.

Download the Master Plan on ASEAN Connectivity here

It covers the period 2011-2015 and aims to connect ASEAN through enhanced physical infrastructure development (physical connectivity), effective institutions, mechanisms and processes (institutional connectivity) and empowered people (people-to-people connectivity). The three-pronged strategy will be supported by the required financial resources and coordinated institutional mechanisms.

Physical Connectivity: The challenges that need to be addressed include poor quality of roads and incomplete road networks, missing railway links, inadequate maritime and port infrastructure including dry port, inland waterways and aviation facilities, widening of digital divide, and growing demand for power. This calls for upgrading of existing infrastructure, construction of new infrastructure and logistics facilities, harmonisation of regulatory framework, and nurturing of innovation culture. Seven strategies have been drawn up with the view to establish an integrated and seamless regional connectivity through multimodal transport system, enhanced Information and Communications Technology (ICT) infrastructure and a regional energy security framework.

Institutional Connectivity: Key issues here include non-tariff barriers such as impediments to movements of vehicles, goods, services and skilled labour across borders. To address this, ASEAN will need to harmonise standards and conformity assessment procedures, and operationalise key transport facilitation agreements, such as those governing Facilitation of Goods in Transit, Inter-State Transport and Multimodal Transport to reduce the costs of moving goods across borders.

In addition, ASEAN States have to fully implement their respective National Single Windows towards realising the ASEAN Single Window by 2015 to bring about seamless flow of goods at, between and behind national borders. An ASEAN Single Aviation Market and an ASEAN Single Shipping Market must be pursued in order to contribute towards the realisation of a single market and production base. Essentially, ASEAN should further open up progressively to investments from within and beyond the region.

People-to-People Connectivity: Two strategies have been formulated to promote deeper intra-ASEAN social and cultural interaction and understanding through community building efforts and, greater intra-ASEAN people mobility through progressive relaxation of visa requirements and development of mutual recognition arrangements (MRAs) in the field of education.

The Master Plan also identifies priority projects from the list of key actions stipulated under the various strategies, especially those which will have high and immediate impact on ASEAN Connectivity. These include:

(i) Completion of the ASEAN Highway Network (AHN) missing links and upgrade of Transit Transport Routes (TTRs); (ii) Completion of the Singapore Kunming Rail Link (SKRL) missing links; (iii) Establish an ASEAN Broadband Corridor (ABC); (iv) Melaka-Pekan Baru Interconnection (IMT-GT: Indonesia); (v) West Kalimantan-Sarawak Interconnection (BIMP-EAGA: Indonesia); (vi) Study on the Roll-on/roll-off (RoRo) network and short-sea shipping; (vii) Developing and operationalising mutual recognition arrangements (MRAs) for prioritised and selected industries; (viii) Establishing common rules for standards and conformity assessment procedures; (ix) Operationalise all National Single Windows (NSWs) by 2012; (x) Options for a framework/modality towards the phased reduction and elimination of scheduled investment restrictions/impediments; (xi) Operationalisation of the ASEAN Agreements on transport facilitation; (xii) Easing visa requirements for ASEAN nationals; (xiii) Development of ASEAN Virtual Learning Resources Centres (AVLRC); (xiv) Develop ICT skill standards; and (xv) ASEAN Community building programme.

Critical to the Master Plan is the mobilisation of required financial resources and technical assistance to implement the key actions and prioritised projects. Recognising the scarcity of available resources, ASEAN will be exploring and tapping on new sources and innovative approaches, which include, among others, the possible establishment of an ASEAN fund for infrastructure development, public-private sector partnerships (PPP), and development of local and regional financial and capital markets, particularly to finance the key deliverables identified to be achieved by 2015. ASEAN will further strengthen partnership with external partners, including Dialogue Partners, multilateral development banks, international organisations and others for effective and efficient implementation of the Master Plan.

To implement the Master Plan, relevant ASEAN sectoral bodies will coordinate the implementation of the strategies and actions under their respective purview while the National Coordinators and the relevant government agencies are responsible for overseeing the implementation of specific plans or projects at the national level.

An ASEAN Connectivity Coordinating Committee will be established and report regularly to the ASEAN Coordinating Council, ASEAN Political-Security Community Council, ASEAN Economic Community Council and the ASEAN Socio-Cultural Community Council. Partnership arrangements and regular consultations with the private sector, industry associations and the wider community at the regional and national levels will be sought to ensure the participation of all stakeholders in developing and enhancing the ASEAN Connectivity. A scorecard mechanism will be set up to regularly review the status of the Master Plan implementation.

ASEAN Common Visa

One of the key shortcomings in promoting people to people contact is continued restrictions in movement of citizens of ASEAN countries through each other’s countries. The ASEAN leaders claim they are committed to accelerating the easing of visa requirements for ASEAN nationals as provided by the prioritized projects of the Master Plan on ASEAN Connectivity. The ASEAN Tourism Ministers’ discussions in January 2011 included elements of a single visa in the ASEAN Tourism Strategic Plan 2011-2015. However, it is a long way from talk to action. The ASEAN Foreign Ministers have tasked their senior officials SOM “to collaborate with the Directors-General of Immigration Departments and Heads of Consular Affairs Divisions of Ministries of Foreign Affairs Meeting (DGICM) and other relevant sectoral bodies to study the implementation of a progressive visa relaxation as well as the possible establishment of an ASEAN common visa for non-ASEAN nationals and report to the 19th ASEAN Summit.”

Education

As part of the ASEAN Community Building process, a 5-year Work Plan on Education has been charted, and includes recommendations such as the teaching of ASEAN studies, exchange of students programme, and the development of a framework of a transfer of credits among universities in ASEAN Member States, building upon existing arrangements. Indonesia has also declared its intention to establish an ASEAN languages centre to promote proficiency in the languages of ASEAN Member States.

Cultural Identity

As fostering greater appreciation and understanding of ASEAN’s diverse culture and heritage will be a key factor for the success of ASEAN Community Building, the 18th ASEAN Summit in Jakarta supported the idea of having an ASEAN television channel or network along with enhanced media cooperation to forge an ASEAN cultural identity among the people in the region.

Indonesia, as the Chair of ASEAN, has proposed holding the first ASEAN Fair in conjunction with the 19th ASEAN Summit and Related Summits to be held in Bali in November 2011. The four-week event will showcase arts and cultural performances of all ASEAN Member States as well as highlight the achievements and potentials of the region’s creative and cultural industries.

Alternative Ways to Help Fund Micro, SMEs

Financial experts from nine ASEAN Member States, Japan, and the Republic of Korea, met in Bali on 27 July 2011 to exchange views, lessons learnt and good practices to help Small- and Medium-Enterprises (SMEs) gain better access to finance. The two-day “Workshop on Financing for ASEAN Micro, Small and Medium Enterprises in the 21st Century” aimed to find the best solution to improve MSMEs’ access to finance by bridging the asymmetric information gap i.e. between the lenders and borrowers.

Mr I Wayan Dipta, Deputy Minister, Ministry of Cooperatives and SME of Indonesia, emphasized the importance of SMEs as the backbone of economic development for ASEAN. They account for more than 96 per cent of all enterprises; generate 50-98 per cent of employment; contribute around 30-57 per cent to GDP and 19-31 per cent of exports.

One of the key barriers to SME development, however, is their limited access to finance. To be competitive, the enterprises need to invest in innovation and improve operational efficiency and productivity. Without adequate financing, the enterprises cannot innovate and be competitive in the regional and global economic climate.

Public-private partnership, either in the forms of government-to-government (G-2-G), business-to-government (B-2-G) and business-to-business (B-2-B), among Member States and Dialogue Partners could take crucial role in support of the creating the right and timely awareness for MSMEs towards these alternative sources of funding, besides the conventional bank loan.

The first plenary introduced the idea of credit guarantee, as an answer to overcome the MSMEs difficulty in providing collateral, while the second plenary on venture capital, was designed for financing the start-up of MSME. The third and final plenary emphasised the importance of financial education for MSMEs, to increase its access to the banks as well as for the purpose of consumer protection. The documents from plenary and summary reports are available for download on website: www.smecda.com/asean.

University Course to Focus on ASEAN’s Rich Socio-Cultural Identity

Bangkok, 8 August 2011 — Prospective university students in ASEAN nations will soon be able to take a class in undergraduate studies that focus on ASEAN in a comprehensive regional and global context. Recently in Bangkok, representatives from the ASEAN University Network (AUN) and senior faculty from its member universities met to review and finalize proposed modules to create a foundation ASEAN Studies Course, in preparation for a seminar in early 2012 to train junior faculty from the 26 AUN member universities in instructing the course.

Dr. Nantana Gajaseni, Executive Director of AUN explained that “we are moving towards a broad ASEAN Studies Course that will introduce students across ASEAN to a deeper understanding of ASEAN as an institution and a process, and to the rich socio-cultural dynamics of Southeast Asia.”

The course has been in development by AUN members since 2009, when the AUN and the East-West Center jointly sponsored a workshop to examine the state of ASEAN studies programs in higher education in the region and consider how existing programs could be expanded and coordinated.

Dr. Azmi bin Mat Akhir from the University of Malaya, said that the “this new regional course developed points the way to preparing leaders of tomorrow in ASEAN studies that will be sensitive to differences across the region while examining the historical, political, security, economic and socio-cultural issues that have led to the emergence of a regional ASEAN identity.”

The details of the finalized course will eventually be made available through the AUN website. It is expected the course will start to become available as soon as mid-2012, when a summer course is anticipated for students from throughout the region.

The 3-day workshop was funded and organized by the U.S. Department of State and U.S. Agency for International Development-funded ASEAN-US Technical Assistance and Training Facility.