Asean Economic Ministers Must Deliver

24 August, 2015
As appeared in TheStar.com.my

AFTER the gathering of Asean foreign ministers earlier this month, including with their counterparts from farther afield, Asean economic ministers (AEMs) assemble in Kuala Lumpur from this weekend to concentrate on the establishment of the Asean Economic Community (AEC).

This will be their last big meeting before Asean leaders meet at the 27th summit to pronounce on the establishment of the Asean community. And, while there are three pillars to the Asean community idea – political and security, socio-cultural and economic – it is out of the AEC that there is the greatest expectation.

The AEC project is the most tangible. It is the most numerically determinable. The success of the AEC will spawn almost everything else. The extent of the other two pillars depends on how well the Asean economic engine is delivering good to businesses and the people.

The progress of communities at national, regional – like in the most developed European Union – and global level, as in trade and finance, is largely determined by functional integration in the economic field.

So as the AEMs meet this time, they are under the cosh to deliver. They will make or break the pronouncement of a credible Asean community.

They should not just focus on the post-2015 AEC, however necessary it may be to give it attention. There are still outstanding matters they can and should address before the end of 2015. I would classify these matters into three categories.

First, the low-hanging fruits that they can get done quickly to make the AEC something immediately real and experienced by businesses and people.

Those Asean lanes at airports which are points of entry and departure should be something seamlessly experienced right across Asean. Many member states have made the lanes available, but there are some significant laggards including Jakarta. Malaysia, as another example, should make these available at other airports as well, like Penang and Kota Kinabalu.

It is really quite simple to show this kind of commitment, with no issue of national interest involved.

The other simple initiative outstanding for so long is the Asean Business Travel Card (ABTC). There is already the Apec – of which most Asean countries are members – Business Travel Card. Just have a supplementary card, and call it the ABTC as between the Asean member states.

This way the AEMs can make the ABTC happen without having to reinvent the wheel and from there the ABTC can be expanded to Asean member countries, like Cambodia, which are not members of Apec. It is there to be done in two simple steps. AEMs can make it happen to facilitate business travel which surely will drive further the economic integration process.

There are a number of other “low-hanging fruits” proposals I have made to Asean ministers and leaders in my capacity as chairman of the Asean Business Advisory Council, but I will just highlight one more – the Asean internship programme which exists in Singapore and Malaysia.

Instead of waiting for similar programmes in other Asean countries, the two initiatives should be expanded and broadened to include students from universities in other interested Asean countries, and also to include not just university students to be placed in participating companies but also apprentices from technical and vocational institutes, which would be of interest to less developed Asean economies. Singapore and Malaysia, as more developed regional countries, should do this for the less advanced member economies.

Second, while there has been really significant decline of tariff levels in Asean trade, there has been a rise in non-tariff measures and barriers (NTMs/NTBs) which impairs trade activity.

The AEM meetings from this weekend will of course not be able to remove them all, or even a significant number. But the AEMs should come out with a clear roadmap to phase out NTMs/NTBs in time with the official launching of the AEC.

They should prioritise and focus on economic sectors close to the people, in line with the proclaimed people-centric Asean.

After the air tragedies of the recent past, one would have thought there would be a real commitment for Asean to act together as a community to improve the situation. While establishment of an Asean civil aviation regulator may take some time, there could be a clear policy decision to do so.

Meanwhile, specific steps can be taken: establish regional pilot training centres; establish regional air traffic control centres; and set up an “Airport Infrastructure Fund”.

There are three other sectors that could be focused on. The agri-food sector, which is close to the people and is one of Asean’s so-called Priority Integration Sectors, should be addressed to facilitate trade and availability. A couple of immediate steps can be taken: apply a mutual recognition agreement (MRA) on standards, additives and contaminants to ensure Agri-food products that comply with the requirements of one Asean country is compatible with the requirements of all others; and apply an MRA on nutrition labeling for minimum requirement on information provided for Asean-wide consumers, without the obligation to reprint or over-label.

The other critical sector is logistics to ensure goods reach the people without delay and at a reasonable price.

Some NTM/NTB practices in this sector work against this. A commitment by the AEMs to implement a system for an Asean-wide common certification of transport for usage in all member states will address the most inhibitive transport practices, such as requiring mandatory equipment change across borders. Some of the national transportation company concerns can also be addressed by forming transport logistics joint ventures.

The retail sector is the third sector that is close to the people which should be concentrated on, e-commerce particularly where Asean is lagging behind developed economies with total Internet sales of just 1% of total turnover when the number is well over 8% elsewhere.

Apart from the logistics, the main problem in this connection is e-payments – whereas the use of technology in this area in particular is critical to the promotion of integration. The AEMs should show they understand the modern economy and the needs of their society by taking prioritised action.

Finally – and most importantly – the AEMs must take concrete action to address the needs of the micro, small and medium enterprises (MSMEs).

There are three reasons why they must do so: they must be seen to be serious about doing something on the fourth leg (narrowing the development gap) of the AEC and avoid the accusation they are only interested in pushing for open markets implicit in the other three legs; a community cannot survive for long, let alone develop further, if there are unsustainable disparities within it (Singapore GDP per capita is over 50 times that of Cambodia); and the MSMEs are the backbone of the Asean economy in terms of employment particularly but also of output and exports – if the backbone breaks there has to be serious surgery, or worse.

There is one initiative – on access to finance for MSMEs – which the Asean Business Advisory Council is pursuing. Access to finance is the most serious and long-standing problem facing MSMEs. This initiative, which is fully private sector-driven, should get clear formal endorsement from the AEMs. After it, a hundred flowers could bloom and there will be real progress in MSMEs obtaining finance.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.