Active public-private partnership can drive the next wave of ASEAN’s development providing the rules of engagement can be set in place, says Pushpanathan Sundrum
Since its inception in 1967, ASEAN, being an inter-governmental organisation, has been driven by governments. With the stakeholders organised in a hierarchy of ‘tracks’ – governments in Track 1 and think tanks and academia in Track 2 – the private sector has historically been placed together with non-governmental organisations in Track 3 given its limited role in the ASEAN processes.
ASEAN countries were focused in the initial years on using social-cultural cooperation as a means of forging cooperation while pursuing their respective economic and development agendas.
The politics of the day dictated the use of such an approach. Think tanks and academia were accorded the higher stature of ‘Track 2’, and through this they have contributed significantly to the development of various policies and initiatives of ASEAN, including the development of the ASEAN Regional Forum, the East Asia Summit, and the ASEAN Free Trade Area.
Private sector engagement with ASEAN back then was minimal. Businesses interacted with the heads of government, ministers and ASEAN officials through the ASEAN Business Advisory Council (ABAC), which was established in 2001 and whose members were nominated by their respective ASEAN governments.
The ABAC flagship event, which was inaugurated in 2003, is the ASEAN Business Investment Summit. It is a platform for governments and businesses for networking and to discuss issues of importance to business. The event has been a feature at the annual ASEAN Summit of the heads of government. Another organisation created around the same time was the ASEAN Chamber of Commerce and Industry (ASEAN CCI) – a network of the national chambers of commerce to promote trade and business cooperation, in particular intra-ASEAN trade which is 25 per cent of ASEAN’s total trade.
At the more technical level, there were a number of industry focused ASEAN associations such as the ASEAN Cosmetic Association (ACA), the ASEAN Federation of Textiles Industries and the ASEAN Automobile Federation, which worked with the various ASEAN committees in
promoting trade facilitation especially in customs and standards harmonisation in their specific sectors.
The ACA played a role in the development of the first ASEAN Directive on Cosmetics, setting the standards for trade in that area which is currently being implemented. Historically, only one successful business council had been established by an ASEAN “dialogue partner”: the US-ASEAN Business Council. It was established in 1984 and it represents the interests of over 100 major US corporations doing business in ASEAN.
However, all of this changed in 2007 with the signing of the ASEAN Charter and the adoption of the ASEAN Economic Community (AEC) Blueprint for the establishment of a rules-based and highly competitive ASEAN Economic Community by 2015. The AEC recognised the business community as a key stakeholder in the building of the community.
It also acknowledged the private sector as the engine of growth and economic integration in the region while the governments provide a conductive environment for trade, investment and other economic activities through appropriate regional policies, initiatives and schemes. The aim therefore, was to realise jointly and with the participation of civil society, in particular the people, a competitive single market and production base that is plugged into the global economy.
This new dimension has brought about the changes that the private sector has been waiting for. It includes a new generation of community agreements such as the ASEAN Trade in Goods Agreement, the Comprehensive ASEAN Investment Agreement and soon an agreement on the movement of natural persons. At the same time, the ASEAN trade tariffs are today almost zero since the realisation of the ASEAN Free Trade Area in 2010. The free trade agreements with ASEAN’s major trading partners such as China, Japan, South Korea, Australia and New Zealand have now been realised and are at different stages of implementation.
The ASEAN economic ministers and their senior officials have engaged in dialogue with representatives of industry associations and business councils during their meetings. They are encouraging businesses to tap into opportunities from the ASEAN agreements, free trade agreements and other schemes and at the same time strengthen the foundations of the AEC. ASEAN is also keen to explore public private partnership approaches to implement some of the priority regional infrastructure projects and has set up an ASEAN Infrastructure Fund (AIF) of US$ 485 million as seed funding for partnerships with the private sector.
While the changes are welcomed, more will have to be done to promote public-private sector engagement as economic integration deepens. First, the engagement of economic ministers and officials with the industry should be enhanced to include all of the 12 priority integration sectors identified by ASEAN, which include electronics, e-ASEAN, healthcare, wood-based products, automotives, rubber-based products, textiles and apparels, agro-based products, fisheries, air travel, tourism and logistics.
Such engagement should not end with a dialogue alone. The private sector should make every effort to have regular interactions at the official and technical levels of ASEAN to remove impediments to trade and investment. For this, it is necessary to understand the ASEAN processes and how to engage ASEAN.
While ASEAN should review the implementation of the priority integration roadmaps for each sector, the private sector should provide its feedback and inputs to make the review effective so that it would facilitate trade. In parallel, the private sector could come up with its own sector specific scorecard through their respective industry associations. Focus should also be put on addressing those priority sectors that will have the most impact on the ASEAN economies such as electronics, agro-food, automotive and e-ASEAN.
Second, more dedicated ASEAN industry associations are needed that will support the ongoing work in the harmonisation of standards for the priority integration sectors. Such associations could provide the technical and industry knowledge for the development of regulatory frameworks, mutual recognition arrangements and directives that will facilitate both intra-ASEAN trade, transparency and predictability of doing business in the region. Here, the private sector must take the lead.
Need for Dialogue
There should also be more business driven dialogue partner associations to promote their trade interests with ASEAN. This is especially so for the key trading partners such as China, Japan, South Korea and India whose trade with ASEAN has increased significantly. Such associations can assist businesses to tap into the free trade agreements between ASEAN and the key trading partners as they are now under-utilised. Third, a conducive environment needs to be created for public private partnership (PPP) especially to finance the building of the major infrastructure needs of the region.
ASEAN’s infrastructure requirement up to the end of the decade is about US$600 billion and the governments would require PPPs to accomplish this. But private investment currently only accounts for 20 per cent of the share of infrastructure financing while public funding and Official Development Assistance account for 70 per cent and 10 per cent respectively.
There is therefore potential to increase the private investment portion of infrastructure financing through more information sharing on potential infrastructure projects, appropriate incentives and guarantees from governments for long-term projects.
The PPP units in the planning ministries and relevant agencies of ASEAN countries should come together, discuss the various regional projects and come up with innovative approaches to attract the private investors with the participation of key financial institutions such as the World Bank and Asian Development Bank. Only if the projects are viable and can generate reliable and sustained cash flow, will private investors be interested. The private sector should also be allowed to come up with PPP proposals for projects identified by ASEAN so that a bigger pool of proposals can be developed for consideration.
Needless to say, all proposals must be put through rigorous assessments that would include feasibility studies and value for money assessments before being considered for financing.
There is immense potential for greater public-private sector engagement in ASEAN. But it requires both sides to take the lead and work together to realise the benefits. For this, more channels for engagement need to be created and such channels will have to be deepened through regular interaction. The ultimate goal will be to bring the private sector to the table of ASEAN meetings so that a more vibrant AEC can be realised by 2015 and beyond.
Pushpanathan Sundram is managing director of EAS Strategic Advice and the former deputy secretary general of ASEAN. He spoke at the Corporate Affairs Forum in November 2012