The ASEAN-BIS Day 2 (17 November 2011) – ASEAN Connectivity

Finally, by lunch time our technical problem was solved. Thank you to the organising committe for sorting the problem out. The luncheon keynote address was presented by M.S. Hidayat, Indonesian Minister of Industry. Excellent lunch and an excellent keynote speaker (and ID card in our hands), we could not ask for more. Minister Hidayat highlighted some of the key issues regarding sustainability, connectivity and inclusive growth that the ASEAN government and business communities through discussion at this summit should focus on.

The parrallel sessions on building an interconnected ASEAN Economic Community presented some of the leading names in the business communities as well as political figures. It was hard to choose which one should be attended. The GoLive Indonesia Representative (GIR) decided to attend the session on Capitalising ASEAN Connectivity. One particular reason was the idea of ASEAN connectivity seems to be quite broad and it is not clear what it refers to despite the fact that the ASEAN has already distributed a 91-page document explaining what this is about.

Sitting as the panelists include Jakob Friis Sorensen (Chairman of EU-ASEAN Business Council), David Lee Carden (US first resident Ambassador to ASEAN), Paulo Cesar de Souza e Silva (President of Civil Aviation of Embraer), Sam Moon Thong, President (Indonesia, Malaysia & Myanmar) of Keppel Land International), and Emirsyah Satar (CEO of Garuda Indonesia / Vice Chairman of APINDO).

Stefan Koeberle (Country Director World Bank Indonesia) provided a brief background of three main aspects of ASEAN connectivity. These include physical connectivity such building infrastructure; institutional connectivity such as removal of Non-Tariff Barriers (NTBs) and harmonising standards; and people-to-people connectivity. At the moment, ASEAN is running 15 ‘integration projects’ aiming at promoting this connectivity. The projects include building highway, improving broadband access, etc. Mr Koeberle closed his opening statement by highlighting two key issues that ASEAN countries should thoroughly look at: (1) How to develop a better-connected ASEAN that has more competitiveness and be resilient towards external shocks; and (2) How to promote inclusive growth taking into account large discrepancies among ASEAN members.

Ambassador David Lee Carden (who said that he preferred presenting his ideas in that meeting to greeting ‘an important lady from the US’ given the importance of sharing his ideas with his ASEAN friends) viewed that we do not get connected to deal with pandemic issues such H1F1 pandemic. To get better connected, ASEAN needs capital. This can only be done if the government can shift away people’s economic behaviours from precautionary savings to investments. ASEAN governments must also provide pension fund and facilitate the creation of capital markets. All of these would require a new kind of investors. To attract these investors, sound macroeconomic management is paramount. Equally important aspects are good governance; rule of law, no corruption; information sharing, etc. Ambassador Carden was asked by his colleague ‘Why the US does want to transfer technology?’. His answer was because there is no adequate protection of Intellectual Property Rights (IPRs) in some countries. Before governments in ASEAN make significant changes to address those issues, it would be difficult for business communities to move forward and contribute to the progress of ASEAN connectivity.

Emirsyah Satar of Garuda Indonesia focused his talk on physical connectivity especially aiports. He pointed out a classic dilemma between business profit and getting connected. Giving an example from air transportation in ASEAN, he explained that in many cases there are many opportunities to supply flights but the traffic (ie. market demands) is just not there. Examples include flights between Indonesia and Brunei and between Indonesia and Philippines. The absence of direct flights between these countries may cost ASEAN not being better connected. Looking at trends in the last years, Mr Satar viewed that ASEAN markets are growing having new entrants into the region. However, this imply that ASEAN needs more airports. Attracting private investments for example through a model of Public-Private Partnerships (PPP) has some major challenges which is related again to a classic dilemma he pointed out earlier. Using challenges in building airports in Indonesia as an example, Mr Satar suggested that not all aiports in Indonesia offer profits. He supported a good idea behind ASEAN Infrastructure Fund but the Fund would not be sufficient for everyone. As an illustration, there are 185 aiports in Indonesia. Therefore, the role of governments in ASEAN is once again crucial in developing infrastructure within the ASEAN region.

Paulo Cesar Silva of Embraer shared his company experience which potentially can be replicated by companies in the ASEAN region given similar socio-economic characteristics between Brazil and many ASEAN countries. Since its establishement in 1969, Embraer was a government-owned company until 1994. In 1994, the company was privatised. Mr Silva defined privatisation as the integration of two cultures: technological and industrial culture (as indicated by having good engineers; characteristics that many government-owned institutions have) and entrepreneurships. This privatisation is a definite success story. Embraer’s number of employees has gone up from around 6,000 employees in 1994 to 17,000 employees in 2011. The profit has also increased from US$ 25 million in 1994 to US$ 3,778 million in 2011. Now the company has 60 airline customers in 40 countrie s and becomes the third largest commercial aircraft manufacturers. Perhaps, this is a model that ASEAN should look at.

Jakob Friis Sorensen of EU-ASEAN Business Council highlighted the importance of a coordinated masterplan. Furthermore, he suggested that ASEAN: should have a clear vision; communicate with all stake holders; keep the momentum going as 2015 is near!; and learn from the EU.

Whilst the session presented great ideas, it is not simple to summarise this matter: Who should take the leadership role. Given the track record of governments, more contribution of the private sector is required. Business communities, however, need to lobby the government, added Ambassador Carden. The GoLive Indonesia Representative also expressed her opinion to the forum in the question and answer session that we have not talked much about inclusive growth. Participation from NGOs and small business might also be important in addition to hearing success stories from large companies. This is important given the third aspect of ASEAN connectivity is people-to-people connectivity.

This article is prepared by Risti Permani.

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Filed under ASEAN, ASEAN-BIS, Conference, East Asia, Economic development, Economic Integration, Euro, Indonesia, Infrastructure, Investment

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