Address on the ASEAN Economic Community 2015 by Dato Timothy Ong in Manila on June 26 th 2014 Ladies and Gentlemen, Anyone following the discussions on the ASEAN Economic Community (AEC) will be struck by the seeming disconnect between the world of ASEAN policy makers on the one hand and the world of ASEAN business people on the other. In the world of ASEAN policy makers, in the many, many meetings of ASEAN Ministers and officials there is a sense that an AEC is surely and steadily being created. There is a blueprint. There is a deadline. There is even an AEC scorecard. Away from the official meetings - in corporate boardrooms, trading houses and SME work places across ASEAN there is little apparent awareness of the AEC. When asked: Are you aware of the AEC 2015? 55% of ASEAN businesses surveyed two years ago said No. Those who were unaware of the AEC 2015 included 77% from Indonesia, 80% from the Philippines and 86% from Singapore. What accounts for this disconnect? The short answer is that when it comes to economic integration theory practice is much harder than theory especially when it comes to a region as diverse and unequal as ASEAN is extremely difficult. The case for ASEAN economic integration is clear and compelling. If ASEAN is one economy, its combined population of 600 million people would be the third largest in the world. If ASEAN is one economy, its combined GDP of USD 2.3 trillion would be the eighth largest in the world. If ASEAN is one economy, there would be huge gains in terms of efficiency, cost savings and competitiveness. The AEC is a blueprint for a quantum leap in the economic competitiveness of ASEAN through economic integration. The reality is that ASEAN today is ten very different countries at very different stages 1
of economic development. One ASEAN country is an absolute monarchy, two have military governments, two are one party socialist states and five are democracies with varying degrees of popular participation. Two ASEAN countries are high income economies (Singapore and Brunei), three are upper middle income economies (Malaysia, Thailand and Indonesia), four are lower middle income economies (Philippines, Vietnam, Laos and Cambodia) and one is a low income economy (Myanmar). The difference in the per capita income of ASEAN s richest and poorest member is 60 times. The difference in the per capita income of ASEAN s richest member and the ASEAN average is 15 times. Economic integration requires some willingness to compromise on national sovereignty when it comes to economic matters. An ASEAN Competition Policy for example requires an ASEAN Competition Authority not 10 competition authorities. Because ASEAN members are at very different levels of economic development, it is extremely difficult to align immediate priorities. ASEAN s unwillingness to compromise on national sovereignty on all matters, its practice of Agree First, Talk Later may work brilliantly when it comes to forging diplomatic alliances across political divides but is dysfunctional when it comes to economic integration. ASEAN s commitment to economic integration is a little like the way many people are committed to losing weight. Most people want to lose weight but not with the same determination, not at the same speed and not in the same way. Similarly, ASEAN members want economic integration but not with the same determination, not at the same speed and not in the same way. ASEAN policy makers aspire to create a common market but an ASEAN business wishing to operate across ASEAN will find very different regulations and procedures in each ASEAN country. Based on the 2014 World Bank/IFC survey comparing business regulations affecting SMEs across the world; Starting a business It takes on average: 3 procedures and 2 ½ days to start a business in Singapore, 2
3 procedures and 6 days in Malaysia, 4 procedures and 27 ½ days in Thailand, 10 procedures and 34 days in Vietnam, 15 procedures and 35 days in the Philippines, 10 procedures and 48 days in Indonesia, 6 procedures and 92 days in Laos and 15 procedures and 101 days in Brunei Darussalam. 2 ½ days in one ASEAN country to start a business; 101 days in another ASEAN country. Construction permits It takes on average: 11 procedures and 26 days to deal with construction permits in Singapore, 25 procedures and 77 days in the Philippines, 22 procedures and 95 days in Brunei Darussalam, 23 procedures and 108 days in Laos, 11 procedures and 114 days in Vietnam, 8 procedures and 157 days in Thailand, 13 procedures and 158 days in Indonesia and 21 procedures and 652 days in Cambodia. 26 days in one ASEAN country to deal with construction permits, 652 days in another ASEAN country. I could go on but the point is clear. While the case for ASEAN economic integration is clear, the reality is that ASEAN today is ten nations with very different rules and regulations for business. ASEAN members want economic integration but not with same urgency, not at the same speed and not in the same way. Within this context, what is the way forward? 3
For companies and business, I would suggest Thinking Bigger. This is not to suggest planning and acting as if there is already ASEAN economy. However much our policymakers talk about a single market and production base, it doesn t exist yet. The suggestion to think bigger however is a reminder that no ASEAN enterprise can afford to be ignorant of the opportunities and challenges presented by ASEAN economic integration. When it finally arrives, economic integration will mean a much larger market but it will also mean greater competition that will challenge privileged and protected interests. ASEAN businesses most likely to benefit from the pathway to a single market are those best able to anticipate and adapt to changing landscape. For governments and policy makers, I would suggest Thinking Smaller. Thinking Smaller is not a call for timidity or scaling back on the vision of an AEC. It is however a reminder that for the AEC to be real to ASEAN businesses, policy details and implementation matter as a grand Vision and Blueprint. A pragmatic starting point is to focus on low hanging fruit such as the harmonization of the regulations for SMEs in ASEAN. It may be difficult to deal with protection of sensitive industries like Malaysia s auto industry and Thailand s telecom industry. On the other hand, why cannot the procedures and days required to start a business and obtain construction permits be the same in all ASEAN countries? Let me leave you with one thought. I believe it was Robert Schuman a founding father of the European Union who declared: Europe will not be made all at once or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity Clearly, ASEAN is not Europe nor does ASEAN aspire to be like Europe but the point that a community is built through concrete achievements which first create a de facto solidarity applies as much to ASEAN as it does to Europe. Paraphrasing Mr Schuman I would conclude that the ASEAN Economic Community will not be made all at once or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity. 4
Thank you. 5