NAYPIDAW, Myanmar – Member states of the Association of Southeast Asian Nations (ASEAN) are struggling to get ready for full economic integration by 2015, and most of their 600 million people are unaware of the changes that will take place.
That was the conclusion by policy makers and business people speaking at the Lippo-UPH Dialogue at the World Economic Forum in Myanmar’s capital Naypidaw.
But participants were also hopeful the issues would be resolved, as the leaders did not renege on their commitments but recognised the need for action.
Key areas still to be resolved include an ‘open skies’ aviation agreement, elimination of subsidies for rice farmers, and the need to develop the human capital needed to exploit the opportunities.
“In the last ASEAN meeting that we had we had come to the recognition that we cannot be as idealistic as we were. I think most of the boxes are going to be checked off by the end of 2015, but some countries I think have come to the realisation that we are not going to be as ready as we might have thought in 2003 by the end of 2015,” said Gita Wirjawan, Indonesia’s Minister of Trade.
This delay was a worry for business people eager to explore opportunities in other ASEAN markets previously closed to them.
“I would say that the business community is somewhat disappointed and our clients within that, largely based on the expectations. They were all expecting 2015 to be the date and somehow they don’t see enough traction. And I think the reason for that is really two or three. I think given the crises we are going through there is a risk that the national priorities will overtake the compulsion. There isn’t really a compulsion mechanism for ASEAN,” said Jaspal Bindra, CEO of Asia and Group Executive Director of Standard Chartered Bank PLC.
Differences between members states was another reason for slow progress.
“One of the challenges with an integration like this is about how you tie countries together economically but respect the political and social differences that exist in a region that’s as diverse as the ASEAN region,” said John Rice, Vice Chairman of General Electric (GE).
“I think it’s a little bit of a ‘thread the needle’ activity but very important and if you can get it right you can unlock a tremendous amount of growth. I think this region with the population, with the growth in the middle class and the interest that people have in improving lends itself this kind of activity,” Rice said.
But Minister Wirjawan said: “Now, by 2015, December 31st, there’s going to be a few boxes that Indonesia is likely not going to be able to check off. But that’s okay. Because by way of joining this community we’re only going to be encouraged and also forced to basically try to check off those boxes as early as possible. That’s only by way of competition coming from our brothers and sisters in other ASEAN countries, but also from the world over.”
One example was fuel subsidies, which were being cut despite the measure being unpopular.
Another panellist was also more sanguine about the deadline.
“Please do not expect a big bang event in 2015 where everything is going to happen overnight when the ASEAN Economic Community comes into being. We’ve made progress in some areas and unfortunately regressed in some areas,” said former Singapore Ambassador to the United Nations and Dean of the Lee Kuan Yew School of Public Policy, Kishore Mahbubani.
“But over time and following the ASEAN pace, gradually the ASEAN Economic Community will come to be and by the end of the decade, whatever the vision was, if it’s not done by 2015 it will be done by 2020,” Mahbubani said.
He highlighted that politicians and bureaucrats from the region met freely to cooperate on various matters, engaged major global powers, and most importantly, have enjoyed peace for many years.
“The one region of the world that is the most diverse region in the world, with 300 million Muslims, 80 million Christians, 150 million Buddhists and Taoists and Confuscianists and all that. Guess what. This most diverse region in the world has achieved peace, so it brings metaphysical significance to the world as a whole because ASEAN is teaching the world that as you become a global village we can all live together and work together. And that’s why it’s such a tragedy that this ASEAN story is not even understood by the citizens of ASEAN,” said Mahbubani.
Awareness among the 600 million people living in ASEAN countries about the Economic Community and the changes it will bring is very low.
“The reality is, ladies and gentlemen, if you take a drive out of Jakarta for a mere 15 to 20 minutes you will meet up with so many people who still don’t have a clue as to what the ASEAN Economic Community is, and what it means to Indonesia”, said Trade Minister Gita Wirjawan.
It was a view echoed by Serge Pun, Executive Chairman of Singapore Exchange-listed Burmese conglomerate Yoma Strategic Holdings.
Serge Pun said businesses were not familiar with how things will change when the ASEAN Economic Community takes effect on December 31, 2015.
“We talk about ASEAN integration and we actually don’t know what we are going to integrate. Or at least, the vast population doesn’t. The vast number of businesses doesn’t. A few government officials may. So there’s a lot of concern about what is this zero tax, how does it really affect us, does it benefit us or does it hurt us. There’s no answer,” he said.
Import duties for ASEAN products and services will be cut to zero, and all economic sectors will be open for investment, with equal treatment of ASEAN investors in all other ASEAN countries.
Some restrictions, such as visa requirements for some member states, will remain, which was raised as a concern for some panellists and members of the audience.
One of the biggest challenges for the region is to train and educate its 600 million strong population to seize the opportunities that lay ahead.
“It’s an exciting time for business and the entire region but I think one of the challenges that remain that will become a hurdle for ASEAN to really realise its full potential is human capital. We need to make sure that each country and each person has the adequate human capital to be able to compete and also receive the benefits of this integration,” said John Riady, Director of The Lippo Group and Dean of the Faculty of Law at Universitas Pelita Harapan (UPH).
“So, in Indonesia we are making a contribution through UPH, which is now one of the leading private universities in Indonesia. It is our hope that every Indonesian receives that they need in order to be competitive and to excel in this regional environment,” Riady said.
GE’s John Rice said skills were required at all levels, from technicians to future business leaders.
Jaspal Bindra from Standard Chartered highlighted that access to banking services was a critical enabler in economic development, that brings more people into the middle class.
There are stark income disparities among member states.
Singaporeans have an average per capita income of US$49,754 a year, while Myanmar is at the bottom of the rankings with US$1,040.
Even within Indonesia there are vast disparities, acknowledged by Trade Minister Wirjawan, between the main islands of Java and Sumatra in the west, and poorer provinces in the east.
The so-called MP3EI Masterplan for Acceleration and Expansion of Indonesia Economic Development aims to address this.
ASEAN was established on August 8, 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Brunei, Myanmar (then Burma), Cambodia, Laos and Vietnam joined later, and Timor Leste and Papua New Guinea are observers.
It covers a land area of 4.46 million square kilometres, about half the land area of the United States. –Reuters
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