Press Release: ASEAN Business Club: Launch of Lifting-The-Barriers Reports
ASEAN Business Club to take up proposals of the Lifting-the-barriers reports with ASEAN decision-makers post 2015 to secure a more meaningful place for the private sector in the Asean economic integration process.
KUALA LUMPUR, 25 August – The ASEAN Business Club (ABC) and CIMB ASEAN Research Institute (CARI) jointly launched the third set of Lifting-The-Barriers (LTB) Reports today in Kuala Lumpur, held alongside the 47th ASEAN Economic Ministers Meeting.
The LTB reports were launched by the Chair of ASEAN Economic Ministers’ Meeting 2015, Dato’ Sri Mustapa Mohamed, the Minister of International Trade and Industry of Malaysia. Speaking at the launch, he said he welcomes the input from the private sector, as it is one of the priorities of ASEAN to push for the business sector to play a more proactive role in economic integration.
“For 3 years, ASEAN Business Club and CIMB ASEAN Research Institute have been producing the Lifting-The-Barriers reports with a structured approach to address the challenges in ASEAN economic integration. We, the policy makers, have found it to be a useful reference”, said Dato’ Sri Mustapa Mohamed.
Tan Sri Dr. Munir Majid, President of the ASEAN Business Club, said the proposals in the report are constructive but a number of the recommendations have become repetitive, which is a reflection of the slow progress in the process of lifting the barriers. ABC will continue to take up the proposals identified in the proposals with ASEAN officials post-2015 in order to establish a more meaningful place for the private sector in the Asean economic integration process.
“The ABC seeks optimality as well as strategic progress in the establishment of the AEC. These reports and the effort help to put our case forward. Some of the sectors covered in these reports – such as capital and financial markets – are critical to real economic integration. Finance is the lifeblood of the economy. It is the enabler. Therefore there is some concentration on this sector because it will drive all the other sectors as well in the integration of the Asean economy – making it that single economy with those great prospects of size and growth”, said Dr. Munir.
The launch marks the third set of white papers published by ABC and CARI. The six major sectors that are being highlighted this year were 1) Air Transportation, 2) Financial Services & Capital Markets, 3) Tourism, 4) Healthcare, 5) Retail and 6) Infrastructure.
Air transportation sector
The report noted that the ASEAN Single Aviation Market (ASAM) is unlikely to be fully achieved in time to meet the 2015 deadline. Much remains to be done for the economic and market integration of the aviation sector, while the work on technical and regulatory integration is still at its early stages. Therefore, it is likely that ASAM will have to be extended, or to have a second stage declared for the post-2015 period to tackle both unfinished and new goals.
The report identified ten recommendations, largely, for the governments to accelerate the integration agenda:
(1) Facilitate cost reduction and efficiencies for all airline operations; (2) Overcome infrastructural constraints as well as the shortage in skilled human capacity; (3) Establish a Joint Aviation Authorities (JAA)-type body to drive the adoption of “base” standards against which national standards can be compared for equivalence; (4) Adopt a formal legal agreement on mutual recognition for certifications, licenses, permits, approvals; (5) Establish procedures to ensure consistent implementation, monitoring implementation and taking corrective measures against non-compliance; (6) Initiate high-level industry meeting among ASEAN airline CEOs and IATA to identify airlines’ needs by way of technical integration that would benefit all of them; (7) Pursue market access liberalization beyond third, fourth and fifth freedom operations to include seventh freedom rights;( 8) Lift restrictions on “community carriers” (9) Negotiate with third countries as a unified bloc and to ensure that ASEAN community carriers are recognised for operations to those countries; (10) Recognise seventh freedom rights for fellow member states’ carriers to operate externally (i.e. extra-ASEAN) to third countries.
Financial services and capital market sector
The report recognises that policy-led integration initiatives are likely to continue its slow progress. Whereas industry-led initiatives have the potential to accelerate evolution towards an integrated ASEAN market at a nimbler pace, incorporate latest leading practices, market developments and technology.
Following the proposal tabled in 2014 to set up a Financial Services and Capital Markets (FSCM) Expert Group to ASEAN leaders by the ABC, the report focuses on exploring the industry led theme with three initiatives: (1) Push forward the ASEAN Trading Link (ATL) initiative by way of regional depository and clearing links to drive further integration and efficiency in regional capital markets; (2) Explore Peer-to-Peer (P2P) models, starting with crowd funding, explore alternative financing models to fulfill the needs of the underserved SME segment; (3) Enhance efficiency of regional payments leveraging new age digital technology developments.
In the tourism sector, the report’s primary recommendation is to strengthen the private sector’s capacity to organise, advocate, and finance its stance to removing key barriers in the integration of ASEAN tourism sector.
It also aims to drive towards the full participation of the private sector as a driver of tourism economic integration, and in particular, in the ASEAN Tourism Strategic Plan (ATSP) 2016 – 2025 formulation and implementation process.
The report highlighted six recommendations to over the barriers: (1) Research and advocacy on the need for further reductions in barriers affecting transportation, cross border, and mutual recognition of certification standards (2) Strengthen the capability of the industry in ASEAN regional tourism affairs to echo a stronger voice (3) Prioritise the harmonization of inter and intra-regional transportation in the area of safety, security policies, regulations by the private sector as the main provider of transportation services in the region (4) Mutual Recognition Agreements (MRAs) need to be fully implemented to ensure supply of a quality pool of manpower in the region (5) Market ASEAN as a single destination by the private sector (vi) Further identify what is needed from the public sector to raise the competitiveness of ASEAN as a global destination.
The retail section of the report argues that driving innovation in ASEAN represents a unique opportunity to take the retail industry to the next level. It improves the retail experience for consumers, facilitates the emergence of regional players, homogenises the retail space across countries, and helps drive ASEAN markets integration. There are barriers to the development of retail innovation in ASEAN, including market readiness, cumbersome regulations, integration of talent, insufficient infrastructure capabilities and lack of access to financing for innovators.
The report identified four specific actions to overcome those barriers and to fully unleash the potential of retail innovation in ASEAN: (1) Reduce non-tariff barriers for new products by harmonising labeling & testing requirements and increasing the capacity and influence of the ASEAN secretariat; (2) Improve access to talent to drive innovation by encouraging the inclusion of the retail sector into the design and delivery of vocational training and harmonising the recognition of certificates across ASEAN; (3) Improve trade efficiency to ease the flow of new products and services across countries, thus further driving the implementation of the ASEAN Single Window and harmonising the payment eco-system; (4) Drive integration of ‘Retail Innovators’ by establishing a regional network of government agencies promoting innovation and fostering collaboration between innovation incubators and retailers.
ASEAN healthcare sector also faces obstacles to reach its full potential. In view of the broad scope of collaboration required by each country, a coordinated approach is required to achieve the vision of the ASEAN Economic Community Blueprint. The report proposed five broad suggestions to overcome the barriers: (1) Mutual Recognition Agreement for human resource exchange (2) ASEAN Innovative Healthcare Council to address public and private healthcare development (3) More public and private partnerships to increase and promote healthy lifestyle (4) Healthcare companies to balance societal needs and needed profits by government assistance (5) Certification of insurance companies to set a level of healthcare quality across ASEAN.
Projections show that ASEAN economies need to invest over US$60 billion a year in infrastructure until 2020 to support and maintain the region’s high economic growth. However, infrastructure supply in ASEAN economies remains low relative to the needs. With the rapidly rising demand the infrastructure deficit is expected to widen in most of the member countries. ASEAN faces the ‘infrastructure financing paradox’ – a gap between the need and supply of financing – even though both savings rates and foreign reserves are high in ASEAN. The majority of ASEAN member states, except Singapore and Malaysia, could only feed less than half of estimated demand. With inadequate financial sources from government and overseas development aids, private financing participation is expected to increase through Public Private Partnership (PPP) scheme, equity participation, and privatisation.
The report suggests for the public sector to (1) Provide or expand the market for long-term credit; (2) Widen the access for cross border financial flows especially for infrastructure financing; (3) Establish a dedicated unit in government (especially for the case of PPP) that functions to speed up and streamline the process, communicate with potential investors professionally, and address the underlying problems such as how to offer good projects. The private sector, on the other hand, has to actively participate in nurturing the market and supporting the public sector accordingly. Among crucial efforts are to: (1) maintain good communication with the host country’s government; (2) have the willingness to involve local partners; (3) recruit and transfer knowledge to local experts; and (4) value the environment.
The 2015 reports were jointly produced with the contribution of independent research partners namely Faculty of Law, National University of Singapore for Air Transportation; Accenture for Financial Services and Capital Market; ASEAN Tourism Association (ASEANTA) for Tourism; A.T. Kearney for Retail; Frost & Sullivan for Healthcare, and Economic Research Institute on ASEAN and East Asia (ERIA) for Infrastructure.
Since it was launched in 2013, the Lifting-the-barriers Initiative has yielded 19 reports to date, covering 12 clusters of key sectors in ASEAN.