2013 Jun 08
June 8, 2013

Mind the gap

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Last month, Asean launched an initiative aimed at narrowing the development gap among its members. At the ceremony, Vu Dang Dzung, the Vietnamese representative to Asean, acknowledged that it was “impossible to build a community if gaps persist among the member countries”, referring to the Asean Economic Community (AEC).

The AEC vision is for Asean to become by 2015 “a single market and production base, a highly competitive economic region of equitable economic development, fully integrated into the global economy”. Although it will not be achieved – at least not fully – by then, the fast-approaching deadline should be a motivation for Asean leaders to step up their efforts. And boosting competitiveness should be the priority, for it will foster economic development, which will, in turn, reduce regional disparities and accelerate regional and global integration.

Since 1979, the World Economic Forum has been studying and benchmarking competitiveness. The 2012-2013 edition of its Global Competitiveness Report (GCR) reveals the deep and persisting competitiveness divide in Asean. Singapore ranks second overall – behind Switzerland – among 144 economies included in the report. Cambodia, Asean’s worst performer, ranks 85th. Malaysia (25th), Brunei (28th), Thailand (38th), Indonesia (50th), Philippines (65th), and Vietnam (75th) come in between (Laos and Myanmar are not covered but will likely be included in the next edition).

We define competitiveness as the institutions, policies and factors that set the level of productivity of a country. These include governance, infrastructure, education, market efficiency, financial development, technological adoption, market size, business sophistication and innovation. In all these areas, there are many profound gaps among Asean countries. Corruption, red tape, transport and energy infrastructure, for instance, are bottlenecks for a large majority, so is technological readiness and the growing skills gap.

That being said, there are reasons for optimism. First, Asean members fare well compared with the rest of developing Asia. Second, most Asean countries exhibit positive trends, with all either improving or maintaining their rank since 2005.

The responsibility of addressing structural problems lies primarily with national actors. Regional cooperation is not the panacea. But Asean remains the forum where critical trans-national issues, such as trade facilitation, terrorism and environmental protection, are addressed, and common Asean stances on key issues including trade negotiations are decided.

Asean is also the interface where good practices are shared. There are many stories of Asean members successfully addressing key competitiveness issues that could be emulated. For instance, Singapore is a competitiveness champion. Its administration is one of the world’s least corrupt and most efficient. Malaysia has been tackling excessive regulation, and the Philippines, where a national competitiveness council was set up in 2006, has made significant strides against corruption.

The WEF is committed to supporting these efforts, through its research and by leveraging its convening power. The WEF on East Asia 2013 is taking place in Nay Pyi Taw under the theme “Courageous Transformation for Inclusion and Integration”. During this meeting, hundreds of leaders from Asia will discuss bold and far-reaching solutions for boosting competitiveness, accelerating integration and improving resilience.

Since its creation 60 years ago, Asean has made significant strides. But evolving from a loose association to a tightly knit group will require stepping up efforts, particularly to narrow the cavernous competitiveness divide. In 2012, at the WEF Annual Meeting in Davos, Lim Hng Kiang, Singapore’s minister of industry and trade, used a nice analogy to refer to Asean: “Like the swan, we do not always move forward. We sometimes go in rounds – but always gracefully.” It is time for the swan to soar. And let’s not quibble over the fact that this bird is not found in Southeast Asia.

Thierry Geiger is an economist with the World Economic Forum’s Global Competitiveness and Benchmarking Network, where he leads the Asia competitiveness practice. –Thierry Geiger,  Asia News Network