A E C P i o n e e r s - L e t ' s Ta l k P o l i c y
18 July 2014, Manila
Y B h g Ta n S r i M u n i r M a j i d
Chairman, CIMB ASEAN Research Institute
Chairman, ASEAN Business Advisory Council (ABAC)
Malaysia
Chairman, Bank Muamalat Malaysia
THE ASEAN ECONOMIC COMMUNITY (AEC)
MECHANISM
AEC Blueprint
Where are we going?
AEC Roadmap
How do we get there?
AEC Scorecard
How are we progressing?
THE ASEAN ECONOMIC COMMUNITY (AEC)
MECHANISM
AEC Blueprint
Where are we going?
Single market and production base
Competitive Economic Region
Equitable Economic Development
Integration into the Global Economy
THE ASEAN ECONOMIC COMMUNITY (AEC)
MECHANISM
AEC Scorecard
How are we progressing?
2012 Scorecard
(latest publication)
Single market and production base
Competitive Economic Region
Equitable Economic Development
Integration into the Global Economy
THE ASEAN ECONOMIC COMMUNITY (AEC)
MECHANISM
AEC Scorecard
How are we progressing?
Single market and production base
Updated:
Competitive Economic Region
Equitable Economic Development
Integration into the Global Economy
=79.7%
as of the 23rd ASEAN
summit in October
2013
KEY SECTORS STILL FACE POLICY BARRIERS
Policy Barriers:
1. Non-acceptance of ASEAN agreements and protocols
2. Non-inclusion of seventh freedom and domestic operations
3. Ownership and control restrictions
4. Competitive threat from Non-ASEAN carriers
1. OTC market development
2. Broadening investor base
3. Enhancing liquidity
4. Furthering integration
1. Fiscal constraints
2. Lack of investor-ready PPP project pipeline
3. Complex execution due to regulatory and institutional inefficiencies
4. Ineffective governance systems
KEY SECTORS STILL FACE POLICY BARRIERS
Barriers identified by the LTBs:
1. Heterogeneity of regulatory framework and restrictive market access
2. Constraints on Talent Mobility
3. Cross border data flow and off shoring regulatory constraints
4. PAN Asia trade flow and focus on China and India
5. Lack of Standard Infrastructure to facilitate cross border credit
6. Lack of Standardisation across the region with respect to operational
process and common infrastructure
1. Roaming and International Direct Dialling Costs
2. Capitalising on Mobile Advertising
3. Capitalising on Mobile Payments
1. Economic Gap
2. Barriers in Human Capital
3. Infrastructural Barriers
4. Cultural and Policy Gaps
R E S E A R C H S H O W S L I B E R A L I S AT I O N I N T H E A S E A N AV I AT I O N
I N D U S T RY W O U L D Y I E L D S I G N I F I C A N T B E N E F I T S
• Numerous comprehensive studies on the benefits of air services liberalisation for ASEAN countries have been
made, of which most are unanimous that the overall benefits of liberalising the aviation industry include:
Increased
choice
More
competition
Lower
fares
Lower freight
rates
Indonesia
Increased
tourism
Increased
foreign
investment
revenue
Growth in
related
services
Increased
employment in
airline-related
jobs
Malaysia and Thailand
• Research objective: Quantify benefits for
Indonesia in 2025 of an ‘ASEAN Open Skies’
policy
• Estimated size of benefits:
 Additional GDP = 7 trillion Rupiah (US$679
million)
 Additional jobs created = 32,000
 Decrease in real air fares = 2.5% per
annum
 Additional international passenger traffic =
16.3 million per year by 2025
 Additional international air freight traffic =
290,000 tonnes per year by 2025
• Research objective: Study the impact of liberalisation
(unlimited 3rd and 4th freedom rights)between the two
countries in 2005.
• Size of benefits:
 No. of passengers travelling between the two
countries = 1.5 million
 No. of passengers travelling as a result of the
liberalised arrangement = 370,000
 Additional full-time jobs (per country) = 4,300
(est.)
 Additional GDP (per country) = US$114 million
Source: InterVISTAS-ga (2006)
Source: Indonesia Infrastructure Initiative (IndII) (2011)
8
CASE STUDY: MYANMAR
Infrastructure need of large cities in
Myanmar
• In 2011, Myanmar spent only US$800 million on
infrastructure. However, the country has the potential to
quadruple the size of its economy, from US$45 billion in
2010 to over US$200 billion in 2030 but in order to
support the targeted 8% GDP growth, Myanmar needs
to increase its infrastructure stock.
• Myanmar is estimated to need a total infrastructure and
real estate investment of US$320 billion between 20102030, according to McKinsey Global Institute report on
Myanmar.
• About 60% of this investment needs to be in residential
and commercial real estate, but power plants, water
infrastructure, road and rail networks also require
substantial investment.
Source: McKinsey Global Institute CityScope Database 2.0; Pike Research; Japan International Corporation Agency;
McKinsey Infrastructure Practice benchmarks per asset type; McKinsey Global Institute analysis
Large cities in Myanmar would likely need to
invest US$147 billion from 2010-2030 to
upgrade infrastructure for existing population
and new arrivals.
• With increasing urbanisation, large cities alone will need
about 45% of the estimated infrastructure need.
• There are several megaprojects being planned by the
government, including:
 Dawei special economic zone
 Sittwe port on the Indian Ocean
 Kyaukpyu Industrial Zone
9
CASE STUDY: INDONESIA
• Indonesia’s infrastructure challenge is the key
impediment to reaching a potential GDP growth rate of
8%, according to McKinsey Global Institute.
Infrastructure spending
2004 - 2009
Indonesia’s
infrastructure
spending
excluding
transport is far
below 2% of
GDP.
• The government has acknowledged that Indonesia needs
around US$30 billion annually (4 % of GDP) in
infrastructure investment for the next 5 years.
• The capacity of the road network on the island of Java,
home to about 60% of the population, would need to be
tripled but has seen limited expansion in the last decade.
• Law and regulation changes as well as new initiatives are
being instituted to enable faster infrastructure
development, including
 the “fast-track” electricity development
programmes (2006)
 private sector participation in electricity (2009)
 the land acquisition law (2012)
• Infrastructure spending in nominal terms has been on the
rise but it has consistently stayed well below 2% of GDP.
• Government initiatives have thus far been insufficient in
catalysing the infrastructure development that the country
needs.
Source: McKinsey Global Institute analysis, : Indonesia’s
Ministry of National Development Planning
10
W E L FA R E G A I N S F O R
ASEAN COUNTRIES
IF THESE BARRIERS ARE NOT OVERCOME, ASEAN
WILL NOT REAP THE POTENTIAL BENEFITS OF AEC
• Research shows that the potential average income gain
from full implementation of the AEC are about 5%
• These benefits should grow over time as the region's
economies mature and evolve to make economic
integration more productive
• The potential welfare benefits are even greater when
ASEAN engages in external partnerships (8.9% for AEC+
and 11,6% for AEC++)
• These benefits will not be realised in 2015 if ASEAN does
not reach full implementation
AEC = Full implementation of the AEC
AEC+ = 1.+ FTAs with Australia, New Zealand, India, Japan, China, S-Korea
AEC++ = 1.+ 2.+ FTAs with USA and the EU
Source: Petri, Plummer, Zhai, 2012, Economic Community: A General Equilibrium Analysis
POTENTIAL INCREASE IN ASEAN EXPORTS
• According to research, exports from ASEAN have the potential of increasing by more than 40% with full
implementation of the AEC, and up to 89% with FTAs with external partners
• The potential increase of ASEAN exports will likewise only be realised if the AEC is fully implemented and succeeds
in building external partnership
AEC = Full implementation of the AEC
AEC+ = 1.+ FTAs with Australia, New Zealand, India, Japan, China, S-Korea
AEC++ = 1.+ 2.+ FTAs with USA and the EU
Source: Petri, Plummer, Zhai, 2012, Economic Community: A General Equilibrium Analysis
39% BUSINESSES HAVE NO OR LIMITED
KNOWLEDGE ON THE AEC
• The 2013 ABAC survey on ASEAN Competitiveness found that 39% of respondent businesses
have no or limited knowledge on ASEAN policy initiatives
Knowledge of ASEAN policy initiatives
No knowledge = 7%
Limited knowledge = 32%
= 39%
Source: M.H. Wong & A. Wirjo, 2013
YET, 75%OF ASEAN SMES THINK THE AEC WILL
POSITIVELY IMPACT THEIR BUSINESS
A study of SME agencies in each AMS and
93 ASEAN SME entrepreneurs:
Source: The ASEAN SME Regional Development Fund Conceptual Framework.
A B O U T 7 0 % F I R M S A R E N O T U S I N G A S E A N F TA S
•
A 2012 ABAC survey on ASEAN competitiveness found that only 29% of respondents
revealed that their organisations used preferential provisions in ASEAN or ASEANplus economic agreements.
Use of preferential provisions in
ASEAN agreements among firms:
46% of firms do
not plan to use
preferential
provisions
ASEAN NEEDS TO IMPROVE ITS COMMUNICATION
Private Sector
o corporations
o business leaders
o industry players
ASEAN
MESSAGING
Public sector
o civil societies
o civil servants
o politicians
General public
o school Children
o youth
THINK ASEAN