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Moving the ASEAN Economic Community Forward into 2025 and Beyond:
Some Key Challenges and Opportunities
Ponciano Intal, Jr.Senior Economist
ASEAN 50th Anniversary Symposium IV: ASEAN@501 March 2018, Tokyo Prince Hotel, Tokyo
Key PointsKey Considerations for ASEAN and AEC Moving Forward
• ASEAN People’s Aspirations and Expectations• Leaders’ Perspectives• Three Key Global Developments
Moving AEC Forward into 2025 : Challenges and Opportunities
• Addressing Non-Tariff Measures• Towards Seamless Trade Facilitation• Services Development, Liberalization and Cooperation: Bringing ASEAN into Global
Services Revolution• Regulatory Improvement, Good Regulatory Practice (GRP), and International
Regulatory Cooperation• Finance, Connectivity, and Innovation• RCEP as driver• AEC and ASCC: Towards Inclusive Integration• Critical Role of M & E and Stakeholder Engagement
Findings from the Survey Results
There is strong aspiration for: an integrated and connected ASEAN a resilient, equitable and sustainable ASEAN an ASEAN of good governance an ASEAN with significant global and regional presence
and contributionGap between aspirations and expectations for 2025: Narrowest: Integrated and connected ASEAN Widest: ASEAN of good governance Large: Equitable and sustainable ASEAN Considerable: Resilient ASEAN; ASEAN’s global and
regional engagement
Insights from the Survey Results
Significant overlap between pressing regional and national concerns. Pressing concerns mirror aspirations-expectations gaps: E.g., Corruption Income disparity and social inequality Climate change, natural disasters and regional resiliency Integration and trade, investment and regulatory
coherenceRegionally concerted national actions bring synergy Synergy among AMSs Synergy among blueprints: AEC + ASCC + MPAC + APSC
Leaders’ Perspectives
• PM Abhisit Vejjajiva of Thailand:“ASEAN must strive to bring its member countries together and create a sense of shared destiny of peace and prosperity for all ASEAN peoples based on common ASEAN values with an ASEAN identity….” 2017
• Pres. Fidel Ramos of the Philippines:“If the Southeast Asian peoples are to embrace ASEAN as their “Community”…they must see it a pervading, beneficial influence on their daily lives. They, as stakeholders, must regard the ASEAN vision as their own.” 2017
Three Key Global Developments Brexit, Trump and the rise of protectionism: inclusivity and
management of adjustment are critical in an integrating world• egalitarian Japan vs non-egalitarian US experiences
India/SA-ASEAN-China growth corridor: • Fastest growing largest consumer market in the world; most
potent global growth driver• Risk: inequitable growth if integration not managed well
Digital Revolution, Possible 3rd Unbundling, and Industry 4.0• Digital revolution and e-commerce offers SME global-GVC reach• 3rd Unbundling (Baldwin): de-linking labor service and service
provider—marked services globalization• Industry 4.0 and its relevance to ASEAN• WB: “analog components” critical against adverse effects; e.g.,
over-concentration, labor-market “hollowing out”• Investing and preparing for 3rd unbundling and industry 4.0
Key PointsMoving AEC Forward into 2025 : Challenges and Opportunities
• Addressing Non-Tariff Measures• Towards Seamless Trade Facilitation• Services Development, Liberalization and Cooperation: Bringing
ASEAN into Global Services Revolution• Regulatory Improvement, Good Regulatory Practice (GRP), and
International Regulatory Cooperation• Finance, Connectivity, and Innovation• RCEP as driver• AEC and ASCC: Towards Inclusive Integration• Critical Role of M & E and Stakeholder Engagement
Non-Tariff Measures
Rising incidence of NTMs Toward Non-protective NTMs• Principles and guidelines on
NTMs– GRP and non-discriminatory– Stringent rules on import/export
quantitative measures• Effective transparency and
monitoring mechanism• AVEs, private sector, NTM
prioritization for streamlining• Address technical barriers to
trade thru effective or harmonized standards and conformance
Towards Seamless Trade Facilitation
Key Measures• National and ASEAN Single
Window (goal: more AMSs, more documents in ASW)
• National and ASEAN Trade Repositories; NTMs in NTRs
• Self-certification• 10 % reduction in trade
transactions costs by 2020• ASEAN Trade Facilitation
Indicators (ASTFI)• Paperless processes, electronic
payment, border agency coordination, ACTS, etc..
• ATF-JCC
GDP Impact of 20% Reduction in trading costs (Itakura based on 2007 data);
ASEAN and Services Globalization
• Services support participation in GVCs. Producer services productivity affects goods firms’ participation in GVCs
• Service value chains and webs, with ICT revolution• “Servification” accelerating in manufacturing• 3rd Unbundling and industry 4.0
Services and productivity growth; services globalization
• Confidence in contracting out and service market contestability and productivity shaped by policy and regulatory regime
• Services sector contestability contributes directly to better services export and indirectly to manufacturing exports
Capturing the benefits
• Change mindsets: “Exporters are importers”• Services sector contestability and liberalization• Shift to negative list from positive list• Regional cooperation in certification systems and training• Quality infrastructure, digital connectivity, and better
regulations to benefit from digital revolution• Source: Findlay (2016) for first 2 sections
Reframing services regulatory reform and facilitation
0
20
40
60
80
100
120
140
160
180
200
5 7 8 5 7 8 5 7 8 5 7 8 5 7 8 5 7 8 5 7 8 5 7 8 5 7 8 5 7 8
Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam
Num
ber o
f sub
sect
ors
offe
red
by m
embe
r sta
tes i
n AF
AS 5
, 7, a
nd 8
FE ≤ 49% FE ≥ 51%
Progress of ASEAN Framework Agreement on Services
Source: Intal and Chen (2017)
Importance of Good Regulatory Practice/Well Performing Regulatory Management
System to AMSs & ASEANWell performing institutions add to (AMSs) attractiveness to FDI (ceteris paribus); see B. Anghel, 2005, “Do institutions affect FDI?”
•Regulatory quality: one index point increase raises FDI inflow by 4.6 percent•Government effectiveness: one index point increase raises FDI inflow by 3.0 percent•Control of corruption: one index point improvement raises FDI inflow by 2.6 percent
Domestic competition and government efficiency leads to greater intra-ASEAN trade than pure customs facilitation per se (ERIA study)
•Domestic competition + government efficiency: 1 % rise leads to 2.4 percent increase in intra-ASEAN trade
•Customs clearance + logistics competence: 1% rise leads to 1.5 percent in intra-ASEAN trade
Huge gap in ratings in WB governance indicators among AMSs, from one of the world’s best to one of the world’s lowest
Learning from good cases and well performing institutions in AMSs; e.g., Malaysia’s PEMUDAH; Viet Nam’s Project 30 and Resolution 19, Singapore
Other Key Investment and Growth Drivers Financial development, integration, stability and inclusion
• Extensive set of initiatives and measures under ASEAN Financial Integration Framework
• Management of macro risk from financial integration (East Asia wide, not just ASEAN)
Connectivity• Production networks, agglomeration, and new model of development (i.e.,
tiering; role of industrial agglomeration and infra)• Master Plan on ASEAN Connectivity (MPAC) complementing AEC Blueprint• “Connecting the Connectivities: e.g., MPAC/BRI/ Japan’s Quality
Infrastructure/AIIB/ADB, Plus Transport and Trade Facilitation Innovation, Digital Revolution
• Greater focus on productivity growth• Aggressive FDI, technology transfer, and innovation friendly policies• Investment in R & D plus institutions and human capital ; training• Regional cooperation in S & T and IPR• Empowering SMEs and worker upgrading for inclusive growth under digital
revolution and industry 4.0
RCEP for Development, Peace and East Asia’s Global Leadership
(Reference: Peter Drysdale, 2016)
RCEP for Development
• ASEAN, China, India, etc. all require supply side structural reforms to move up the development ladder and raise competitiveness
• RCEP can be concerted integration-cum-supply side reform agenda facilitated by technical and economic cooperation
• RCEP can start modestly but needs to have ambitious end goal
RCEP , Peace and Collective Leadership
• Big Powers and middle powers in East Asia plus India working together for peace and prosperity• ASEAN and East Asia peace underpinned by economic progress• RCEP and collective leadership to overcome border issues (e.g., South China Sea)
RCEP for Global Leadership• RCEP benefits ASEAN and world better than TPP (Itakura, 2016)
• TPP: 0.7 % (ASEAN); 0.1 % (World)• RCEP (H) + TPP: 3.1 % (ASEAN); 0.46 % (World)
2.3
9.5
5.8
3.0
5.0
3.3 2.9
8.3
13.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
ASEAN Coexistence of Five ASEAN+1 FTAsCoexistence of Five ASEAN+1 FTAs and CJK FTAsASEAN+6 FTA
East Asia Integration Matters:Potential Economic Impacts of Development of ASEAN++ FTA
(Regional Comprehensive Economic Partnership)Source: Computed by Itakura for MTR Project
Notes: Brunei is proxied by “Rest of South East Asia” in the simulation, excluding Myanmar.Cumulative Percentage Point, deviation from baseline, 2011 to 2015.
AEC and ASCC for Community Building and Inclusive Growth
Trump and Brexit Lessons: Inclusive Integration/Globalization Critical
ASCC as Important Complement to AEC
• ASEAN : engages and benefits people• ASCC: “integrative glue” for an inclusive, resilient and sustainable ASEAN
Community • Health, education and skills training, labor, social protection, etc.: important
complement to AEC for inclusive growth-biased integration
ASCC as “integrative glue” and “unifying glue”
• Most ASCC key concerns involve cross-sectoral and/or cross-Community measures, related to global commitments (e.g., SDGs, Sendai Framework), and their success depends on stakeholder participation and voice
• ASCC as basis for ASEAN identity (PM Abhisit Vejjajiva)
Leaders’ Perspectives
Pres. Soeharto, Indonesia
“We have just put our signatures on very important documents…They are the manifestation of our determination to promote peace, progress, stability, and welfare of our peoples through closer cooperation in all aspects.” 1976
Pres. Gloria Arroyo, Philippines
“ More than just a regional community, [ASEAN] must be a dynamic force in Asia towards maximizing the benefits of globalization… uplifting the poor in our region.” 2017
Implementation! Implementation!
PHILIPPINE 4 Cs:
COMPLIANCECOLLABORATION
COMMUNICATION For
COMPETITIVENESS
AEC much more than integration: AEC is about concerted domestic reform and improved governance.
•Business, and all, benefit from well performing AEC
ASCC is at the heart of ASEAN community
building and builds foundations for an inclusive, resilient
and sustainable ASEAN Community
Seize the Moment:ASEAN a hot investment destination. Make it even hotter for longer with a well performing AEC.
•4 AMSs in top 15 global investment destinations of MNCs in 2017-2019 (Indonesia, Thailand, Philippines, Vietnam)
THANK YOU VERY MUCH
Integrated and Connected ASEAN
82%76%
81% 84%
74%
61%68%
77%
0%
20%
40%
60%
80%
100%
Consumers have easyaccess to goods and
services from any ASEANcountry.
It is easy for skilledworkers and
professionals to findwork in other countries
in ASEAN.
ASEAN countries are wellconnected through
roads, railways, air, andshipping.
People and businessescan communicate easily
with one anotherthrough ICT.
Aspirations and Hopes by 2025 Expectations by 2025
ASEAN Governance, Resilience, Equity
74% 73% 73%78%
39%
49%44%
58%
0%
20%
40%
60%
80%
100%
There is goodgovernance and verymuch less corruption.
There is equitable accessto opportunities for
ASEAN peoples.
ASEAN major cities areless polluted and more
livable than they aretoday.
ASEAN is able toanticipate, respond andrecover faster togetherfrom natural disasters.
Aspirations and Hopes by 2025 Expectations by 2025
Pressing Problems
29%
31%
29%
18%
27%
33%
22%
39%
29%
47%
23%
24%
27%
28%
30%
32%
35%
36%
46%
47%
0% 20% 40% 60% 80% 100%
Quality education provision and access
Unemployment
Infrastructure availability and quality
Human rights
Poverty
Agriculture and food security
Trade, investment, and regulatory coherence
Income disparity and social inequality
Climate change and natural disasters
Corruption
Faced by ASEAN Faced by Country
GDP Per Capita in 2011
GDP Per Capita (US$, 2011 Prices)Growth of GDP Capita (2011 = 100)
in 2025 in 2035 in 2025 in 2035
ASEAN 3,668 6,294 9,812 172 268
Brunei 41,060 52,141 80,710 127 197
Cambodia878 1,788 2,972 204 338
Indonesia 3,470 6,225 9,928 179 286
LaoPDR 1,266 2,656 4,531 210 358
Malaysia 10,058 16,354 23,875 163 237
Philippines2,358 4,844 8,502 205 361
Singapore52,871 65,199 80,428 123 152
Thailand 5,192 7,862 10,791 151 208
VietNam 1,543 3,106 5,372 201 348
RoSEAsia 1,056 2,579 5,038 244 477
Low Income GroupLow Middle Income GroupUpper Middle Income GroupHigh Income Group
Per Capita GDP (in USD at 2011 Prices), 2025 and 2035: ASEAN and AMSsSource: Data from Itakura (2017); Sta, Maria, Urata and Intal (2017)