Overview of Lifting-The-Barriers Reports for Munir Majid Advisor to the Lifting-The-Barriers Initiative

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Overview of Lifting-The-Barriers Reports for Munir Majid
Advisor to the Lifting-The-Barriers Initiative

 Lifting-The-Barriers Report Launch
29 November 2013

 –

Your Excellency Le Luong Minh
Secretary General of ASEAN

Dato Sri Nazir Razak
Group Chief Executive, CIMB Group
Co-Chair of Asean Business Club Malaysia

Your Excellencies Permanent Representatives of ASEAN,

Our research partners,
Members of the media,
Distinguished guests, ladies and gentlemen,

Good morning,

  1. Today’s launch of the Lifting-The-Barrier reports marks the continuation of an important initiative by the ASEAN Business Club. Following the Network ASEAN Forum in August this year, our research partners produced six reports that are set to enhance the integration process for ASEAN industries.
  2. I would like to start by quoting a survey conducted by the U.S. Chamber of Commerce this year indicated that 54% of American companies had an ASEAN strategy and looked forward to the full implementation of the AEC. Although 52% of respondents had reservations about whether ASEAN could achieve full implementation, 84% of executives expected profits to increase in 2014 as integration continued.
  3. This is in contrast with the responses we hear from local firms and SMEs, who have just been learning more about the AEC and are scrambling to find footing. This is because foreign businesses in ASEAN are large multinational companies with the capacity to formulate strategy and even propose policies that would improve the business environment.  For example, the foreign businesses hold consultations with ASEAN ministers throughout the year where they raise their concerns and discuss solutions.
  4. This is a practice that the ASEAN private and public sectors should adopt. Although there is already an existing architecture of engagement with the policy makers, we believe that we have to expand the channel and intensify this level of engagement with substance and actionable policy recommendations, as we become an ASEAN Community.
  5. This is why the Lifting-The-Barriers Initiative is crucial. Today’s launch of the LTB reports will articulate the challenges of integration and pave the strategy forward for our industries. Just like the AEC blueprint, we have taken an industry approach, so our work will complement that of the policy community.Ladies and Gentlemen,
  6. The six LTB reports are in; aviation, financial services, capital markets, healthcare services, connectivity, and infrastructure, power and utilities. These are existing areas of integration that ASEAN government officers are actively pursuing.
  7. The obstacles that have been identified are not new; economic nationalism, human resource constraints, regulatory congestion, and underdeveloped infrastructure. What is new here are the ideas and solutions.
  8. Let me begin with financial services and capital markets. The report recognises that the central banks are working on the ASEAN Banking Integration Framework (ABIF). The ABIF project aims to create a license that allows qualified indigenous banks to operate seamlessly in the region. This project was announced in 2011, but will be rolled out sometime in 2014.
  9. The LTB report here provides 7 ideas to break the barriers, each with rationalisation for the banking community, regulators and governments.  These suggestions call for; (1) a Pan-ASEAN Banking Pass (2) Free Talent mobility (3) ASEAN Alliance (4) ASEAN Credit Bureau, (5) ASEAN Rating Agency, (6) Free Data Flow (7) Standardisation of documents requirements. These suggestions, although by no means exhaustive, address the real challenges echoed by the industry players and will translate into three measurable primary customer benefits — better services, better access to credit, and cheaper cost for banking services.
  10. The capital market paper offers broad recommendations that will enhance the ASEAN Capital Markets Forum’s roadmap and the ASEAN Trading Link. The LTB posits convening major stakeholders and regulators to firstly, clarify the benefits by establishing and publicising a clear, credible and quantitative evaluation of the potential economic benefits accruing to each ASEAN member states as a result of capital market integration, and ideally these benefits could be attributed to key economic sector (ie: the small-to-medium sized enterprises); Secondly, increase transparency – policy makers should present an honest assessment of the challenges arising from anticipated negative impacts on certain sectors – or it may risk impairing the credibility of the overall integration project; and finally some quick fixes that can be considered. This involves (a) simplifying listing requirements – by allowing usage of English Language document submission across all ASEAN markets; and a uniform response time to submissions and requests (b) simplifying tax collection for investors across multiple geographies through a single payment point (c) increase coordination in investor education by equip individual investors on the composition and merits of local indices.
  11. Just as more businesses are investing in Southeast Asia, ASEAN firms are also increasingly operating in China, India, and Japan. Integrated financial services and capital markets would assist expansion of our home grown businesses. The benefits of liberalisation would go beyond just reducing transaction costs and improving access to credit, but would enable the private sector to fully utilise the AEC.Ladies and Gentlemen,
  12. Equally important in reaching the potential of the AEC is the Master Plan for ASEAN Connectivity, which envisions a connected ASEAN. The LTB’s contribution for physical infrastructure recommends, in order to catalyse infrastructure development in the near term, there needs to be 1) a coherent transparent regulatory framework; 2) sufficient upfront investment in and review of project preparation and 3) mechanisms for long term financing
  13. ASEAN needs three main levers to deliver potential savings in infrastructure projects; 1) Improving project selection and optimising infrastructure portfolios could save 20% of the total productivity opportunity, whereas 2) streamlining project delivery approval and land acquisition process could save up to 15% of total annual investment and most significantly 3) making the most of existing infrastructure assets could generate savings up to USD400mil a year. These methods have proven results and should be considered by the ASEAN Coordinating Council on Connectivity.
  14. For aviation, the growth of low-cost carriers has created an unprecedented amount of regional travel, but resistance against opening markets persist. An innovative proposal here was an ASEAN Community carrier, which finds the middle ground on the issue of national ownership. It also highlights a concern on how ASEAN engages with large external partners such as China. A segmented market puts ASEAN carriers at a disadvantage as it allows China access to a single market, but our carriers are restricted to operating out of their home countries. We have to be mindful of nuances when deciding what is best for the region.
  15. In telecommunications, the experts agree that the burgeoning market needs cohesive regulatory structure for international roaming, mobile advertisements, and payment systems. There are also opportunities here for mobile transaction services, banking, and commerce. Telecommunications is a key enabler of institutional connectivity, which is not only necessary for businesses, but also for the formation of a regional community.
  16. The LTB Initiative also examined the healthcare service sector in ASEAN. As the market grows with medical tourism and affluence, regulatory capacity must keep apace. This is why the report recommends an ASEAN-wide medication approval process, easing requirements for medical tourists, and mutually recognising clinical qualifications. This will create more market opportunities, access to regional talent, and competitive prices.
  17. Because these industries face similar challenges, many of the LTB recommendations can be used interchangeably. For example, convening the relevant stakeholders to discuss political challenges for capital markets integration is an idea that would be effective in all sectors. A frank and open discussion with policy makers and implementers can achieve a great deal.
  18. The aviation report called on ASEAN to take a united stand on traffic rights, but it is a strategy that makes sense for the entire region when it negotiates with larger economies for concessions. Movement of professionals and mutual recognition of qualifications is critical for all sectors to tap into the region’s talent. Lastly, assisting lesser developed Member States through an alliance model in the banking system was also proposed, but could be considered for hospitals and health care services in other countries, as well.Ladies and Gentlemen,
  19. For this initiative to be successful, an enduring commitment to partnership between governments and businesses is required. If we can begin the process of consultations and discussions based on the direction of these reports from the working group to senior official’s level, I am certain we can get something meaningful done.
  20. What is also important is public awareness and their buy-in for the AEC. Promotional campaigns can only do so much, but when you are being cared for by a foreign doctor or flying a route that didn’t exist two years ago, you start to feel the difference. If the public is involved, there will be more pressure from the bottom to accelerate economic integration. The collective benefits and voice of ASEAN consumers far outweigh those of interest groups.
  21. With just about two years to go, the final stages of the AEC will be the most difficult to implement. There will be resistance from national monopolies and those who do not want competition. But market forces in the global economy cannot be kept at bay for long. What is at stake here is not just next quarter’s numbers; we are looking at ten, twenty years down the road where competition from abroad becomes more intense. At this juncture, it is then better to work with trusted partners and use ASEAN as a platform to compete with the rest of the world.
  22. By working together, we can find innovative solutions that can make everybody more comfortable with integration. These reports get down to brass tacks; and now bold politically viable ideas are on the table. If they are taken up seriously, and we push forward the integration agenda, we can bring tangible benefits of integration to the people and give meaning to being an ASEAN company in the ASEAN Economic Community.
  23. Lastly, it is my honour to invite the Sec Gen of ASEAN, His Excellency, Le Luong Minh to deliver his keynote address.

 

Thank you.