16 Nov, 2017

World Economic Forum report calls for sweeping overhaul of “slow, top-down, backward-looking” ASEAN bureaucracy

Imtiaz Muqbil

Bangkok, 14 November 2017 – A joint report issued by the World Economic Forum and the Asian Development Bank has called for a sweeping administrative, operational and financial overhaul of the ASEAN secretariat to make it more functional and efficient in meeting its own over-arching goal of closer socio-cultural, economic and political-security integration.

According to a media release by the WEF, the report, “ASEAN 4.0: What Does the Fourth Industrial Revolution Mean for Regional Economic Integration?,” analyses how emerging technologies will reshape South-East Asia, and identifies actions for ASEAN leaders to prepare for the deep transformations that lie ahead.

The report was commissioned by the WEF’s ASEAN Regional Strategy Group (RSG) – made up of 26 ASEAN chief executive officers, government ministers and academics – and written by the Forum and ADB. Presented to the 10 ASEAN heads of state during the 31st ASEAN Summit in Manila, it says its conclusions apply not just to ASEAN but also “organisations like it”, all of which will need to “reimagine and redesign the way they manage regional governance.”

Three of its key recommendations are for the ASEAN decision-making structure to be democratized and decentralised via more debate and public participation; for the staff to be replaced with more competent people well-versed with managing the complexities of change; and for a shift in the funding model away from equal contributions and more towards a “capacity to pay.”

Its conclusions have enormous relevance to the management of ASEAN tourism policies and strategies, especially in the context of the upcoming ASEAN Tourism Forum in Chiang Mai, Thailand, in January 2018.

Indeed, the conclusions prove 100% right this editor’s long-standing argument that the 1996 shutdown of an autonomous- and professionally-led ASEAN Tourism Information Centre and the subsequent transfer of the management of promoting ASEAN as a single destination to what is now being described as a “slow, top-down and backward-looking” bureauracy in the ASEAN Secretariat has been the main reason for the failure of the 10-member grouping to develop a strong ASEAN tourism brand image. Read my 2010 report here: https://www.travel-impact-newswire.com/wp-content/uploads/2010/08/UNWTO-REPORT-on-ASEAN-Tourism-Integration.pdf

The World Economic Forum report (which can downloaded here: https://www.weforum.org/whitepapers/asean-4-0-what-does-the-fourth-industrial-revolution-mean-for-regional-economic-integration) also supports the recommendations of a book by Professors Kishore Mahbubani and Jeffry Sng on the future of ASEAN. This editor was the only travel industry journalist to recognise the value of this book and review it here: https://www.travel-impact-newswire.com/2017/08/asean50-new-book-shows-how-asean-tourism-undermined-the-asean-miracle/

“The Fourth Industrial Revolution” is a term coined by the World Economic Forum to describe the “deep transformations” taking place worldwide, that will affect just about every aspect of life as we know it.

The WEF media release quotes Justin Wood, Head of Asia Pacific and Member of the Executive Committee at the World Economic Forum as saying: “The Fourth Industrial Revolution is unfolding at tremendous speed. Indeed, the pace of change is accelerating. All over the world, governments are struggling to keep up. The traditional ways of shaping policy, writing regulations and setting standards are too slow, too top-down and too backward-looking. What is needed is an approach that is much faster, more agile, more experimental and more iterative.”

Nazir Razak, Chairman, CIMB Group Holdings, Malaysia, and Chair of the ASEAN RSG, is quoted as saying, “While there is a lot to celebrate on the 50th anniversary of ASEAN, we mustn’t rest on past achievements. This revolution will transform everything, from economic structures to social systems. Many aspects of our lives will improve. But there will also be many worrying challenges, such as how automation and artificial intelligence are replacing jobs. We have to understand these issues and have appropriate policies to address them.”

Stephen Groff, Vice-President of the ADB, is quoted as saying, “Today, the technologies of the Fourth Industrial Revolution appear to be contributing to rising inequality around the world. But this need not be the case. With prudent fiscal management and appropriate policy, opportunities for lifelong learning and incentives for skills training can be created. And this is especially true for ASEAN. ADB considers the potential impact of Fourth Industrial Revolution technologies on jobs in ASEAN a critical area for exploration to support inclusive growth in years ahead.”

Says the report itself: “The nature of cross-border relations and economic interaction will be revolutionized. It will not be enough to think only about a national response. In the years ahead, regional organizations like ASEAN will be called upon ever more heavily to help steer and shape these historic transformations. And yet, given the accelerating speed and breadth of technological change, shaping regional policy is growing ever harder. It means that ASEAN and organizations like it will need to reimagine and redesign the way they manage regional governance.”

Here is the full text of all the seven recommendations in the report:

A way forward for ASEAN: Suggestions for ASEAN leaders to consider

Having set out the urgency for ASEAN leaders to consider a new approach to regional integration under the Fourth Industrial Revolution, this paper concludes with a set of suggestions that might offer a way forward.

These suggestions do not focus on specific policies themselves (such as how to deepen internet access or how to address data protection). Rather they focus on the process by which policies are designed and developed. They focus on the overarching system of governance and how to ensure that the ASEAN organization, as the body driving regional governance, can be agile, fast, iterative, experimental, inclusive and open.

Of critical importance, any suggestions for reforming the ASEAN organization must not lose sight of the strengths of the ASEAN Way. As mentioned earlier, this approach to regional governance has served South-East Asia well for the past 50 years.

Yet, at the same time, the ASEAN Way may need an upgrade in the era of the Fourth Industrial Revolution. Already it is apparent that the region is struggling to achieve the goals set out under the vision of the AEC. And navigating the new era will place much heavier demands on the region. So, while respecting the strengths of the ASEAN Way, what can the region do to upgrade its approach to regional governance?

1. ASEAN Secretariat to become a “platform organization”

Regional integration, particularly in the era of the Fourth Industrial Revolution, is highly complex. Every industry standard, every investment rule, every technical agreement that is addressed requires not only significant expertise but also considerable time and effort. Overseeing this complexity, and doing it at the speed of the Fourth Industrial Revolution, demands a new approach to organizing regional integration efforts.

One important idea is for the ASEAN Secretariat to consider becoming more of a “platform organization”. This means creating an ecosystem upon which multistakeholder groups of experts do the heavy lifting of integration, with the Secretariat acting as the convener and governor of their activities.

A useful analogy is the Apple iOS or Android operating systems used on smartphones. In both cases, Apple and Google create the ecosystem upon which third parties – software developers – are the main actors. Neither Apple nor Google are directly involved in developing new apps. Instead, their role is to govern the ecosystem and to make sure that it runs smoothly, with all actors adhering to the rules of the platform. (In this case, the rules would cover things such as the technical standards that developers must follow for their apps to work.)

In the context of ASEAN, the Secretariat would design and run the “operating system for regional integration”. Third parties – multi-stakeholder groups of experts – would do the work of designing and formulating new standards, policies and regulations for integration. The role of the Secretariat would be to ensure that all the various integration projects running on its “operating system” are well governed and are conducted in the right manner. (In this case, the rules would cover things such as the composition of working groups and the processes by which they develop policy proposals.)

In many senses, the ASEAN Secretariat already functions as a platform organization. But the idea would be to formalize and upgrade the operating system so that the “app developers” (the multi-stakeholder groups working on integration projects) could function more effectively. For the Secretariat, this would mean a shift in how it works. On the one hand, it would play a stronger role in running the “operating system for regional integration”, through things such as convening and governing working groups. On the other hand, it would play a reduced role in producing the actual content of integration (the suggestions for new standards and regulations), which would be produced by the working groups.

Staff at the ASEAN Secretariat would not be experts themselves on the details of standards or regulations. Instead, they would be experts on running and administering the operating system for integration.

Ideas for developing new “apps” or integration projects would need to be endorsed by the ASEAN member states. But, once endorsed, a working group would be convened on the platform to do the work of crafting the regulations. The ASEAN Secretariat would oversee the formation of the working group and ensure that the group followed agreed processes for developing regulations. For example, a proposal might be submitted to the Secretariat to develop a set of rules governing data privacy. Once approved by the ASEAN leaders, a working group would be convened of national regulators, technology companies, academics and civil society leaders. This working group would follow the procedures set out by the Secretariat to produce a mutually agreed set of rules to be implemented at a regional scale.

This platform model is not intended in any way to undermine the sovereignty of ASEAN nations. Any proposals for new regulations or standards would still need to be ratified at a national level before they became law.

In developing this “platform” concept, the Secretariat could look to the example of the OECD, an intergovernmental organization with 35 members. It brings together various stakeholders from government, business, civil society and other groups to work collectively on important issues. Sometimes this work results in the creation of standards, such as on the safety of chemicals, or on tax. The process of creating these standards is driven by consensus and the output is in no way legally binding on the member governments unless they decide to implement it at a national level. However, the simple process of identifying best practice approaches towards regulations does create a “soft law” effect, whereby expectations rise that suggestions from the OECD should be implemented by governments.

Adopting a platform approach would require significant changes to the modus operandi of the Secretariat. As such, it would make sense to adopt a stepped approach, whereby certain regulatory issues, such as those governing e-payments, are experimented with first adopting a “sandbox” approach. If the model is proven to be effective, the approach could be adopted more broadly.

2. Delegate key activities to affiliated functional bodies

Extending the idea of ASEAN as a platform organization, the Secretariat could also consider delegating more functions to affiliated third-party groups. These groups or institutions would operate on the platform in a more independent fashion. This would allow ASEAN to maintain oversight while also benefiting from a larger ecosystem of institutions, which will be critical in managing the sheer scale of engagement and implementation that will be required. To date, ASEAN has been reluctant to delegate many of its functions, but there are examples that have worked well.

One notable example is the ASEAN Macroeconomic Research Office (AMRO), which is responsible for managing the region’s financial safety net under the Chiang Mai Initiative Multilateralization. Another good example comes from the ASEAN Infrastructure Fund, which provides a platform for public-private partnerships (PPPs) in investments required under the ASEAN Connectivity Masterplan21. Again, ASEAN has delegated responsibility for this fund to other experts – in this case, the management and administration of the fund is carried out by the Asian Development Bank on behalf of the ASEAN organization.

3. Shift from long-term blueprints to rolling three-year plans

At present, ASEAN invests considerable effort in developing a strong long-term vision for regional integration with documents such as the ASEAN Economic Community Blueprint 2025. Arguably, however, because the Fourth Industrial Revolution is characterized by rapid, non-linear change, plans such as these quickly become outdated. Under the Fourth Industrial Revolution it is advisable not to attempt to forecast the future because most forecasts are likely to be wrong. Rather, it is important to be agile and allow for course correction. ASEAN could, therefore, consider supporting its overarching goals with rolling three- year strategies that are revisited and revised frequently.

4. Ask the people: Democratize and decentralize

If ASEAN is truly to benefit from the widespread expertise in its societies, it should consider increasing its openness to their direct engagement in policy creation. The founding vision of ASEAN was to create an organization that is owned by the people of ASEAN and run for their benefit. The Fourth Industrial Revolution could help this vision to become reality.

As internet and smartphone penetration deepens across ASEAN, there is substantial opportunity to make ASEAN policy formulation more inclusive. Dedicated portals could be established to gain direct feedback from citizens and experts. Policies could be debated in public. Ideas could be crowdsourced. By embracing new Fourth Industrial Revolution tools for public engagement, a more democratized and decentralized vision for the ASEAN organization could emerge.

5. Multi-country test beds

A pan-ASEAN platform could be established that would nurture multi-country regulatory experiments and cross- border innovation hubs. An initiative of this kind was set up in Europe in March 2017, called the European Platform of National Initiatives (EPNI). The goal of EPNI is to help European industries respond and stay abreast of the Fourth Industrial Revolution by linking national initiatives to create multi-country test beds and “sandboxes” where regulations can be tested in different regulatory contexts to help a rapid roll-out across the wider European Union. EPNI is multistakeholder in character, bringing together business leaders, regulators, academics and others to work collectively on crafting new regulatory approaches to digital technologies. Currently, 13 national initiatives have joined forces under the EPNI and the EU has earmarked €5 billion of investment to support the initiative, with significantly more investment expected to be raised from the private sector.

6. A new staffing model for the Secretariat

Running the “operating system” for regional integration would require the ASEAN Secretariat to think in new ways. The key to success is operational or execution excellence. In particular, the Secretariat would need to hire staff capable of running a platform model effectively and who are well- versed in managing the new tools, such as new systems of communication, new mechanisms for virtual collaboration, new tools for gathering feedback and ideas, and for directing feedback into policy discussions.

Alongside a shift in skills, ASEAN leaders could consider a new approach to the recruitment of staff, with workers hired for their skills, based on merit, and hired on a permanent basis. While some positions at the Secretariat are already of this character, the idea of “appointed” positions, based on rotation among ASEAN nations, would be phased out.

In a similar development, the Secretariat could consider appointing a permanent “CEO” type of leader, hired for his or her experience of crafting regulation and policy, and with a strong record of execution.

7. A new funding model for the Secretariat

To recruit the right staff, in the right number, and to build the right systems to drive integration, the ASEAN Secretariat will need more funding. The current funding level, of roughly $20 million a year, is not enough. In 2014, the ADB estimated that, by 2030, the ASEAN Secretariat would need an annual budget of $220 million to manage the ASEAN Community effectively23. This estimate is based on different calculations than would be relevant for the platform model. However, it is clear that sufficient funding for the ASEAN Secretariat as a platform organization would be much larger than at present.

Mahbubani and Sng argue that if contributions by ASEAN member states were calculated according to capacity to pay, ASEAN would be reasonably well funded. For example, if the UN formula for calculating contributions was adopted within ASEAN, an annual budget of $220 million would require a contribution from Singapore of $56.78 million.

This contrasts with the budget of Singapore’s Defence and Foreign Ministries of $9.8 billion and $353 million in 2014. Given the role that the ASEAN organization plays in ensuring long-term security and prosperity, this might be money well spent. It is also worth noting that, for specialized vehicles such as the ASEAN Infrastructure Fund, the nations of ASEAN are already practising the principle of making differential contributions, albeit in the form of capital contributions rather than recurrent expenditures.

Naturally, if funding is increased, it creates concerns of a concurrent rise in bureaucracy and waste. These concerns could be addressed by redesigning the ASEAN Secretariat along the lines suggested in this paper, by adopting a platform approach to regional governance and by tweaking the skills of the Secretariat staff.