If the Asean Connectivity proposal proceeds as planned, Asean will be a
formidable economic power house in the world in the near future.
For instance, if Asean today were
a single country with 600 million people, it would be the world’s ninth largest
economy. Population wise, it is the world’s third largest. As such Asean is the
world’s fifth largest trading power after the EU, US, China and Germany.
But it is a big “if.” Such grandiose
visions of a well-connected and integrated Asean are slow in materializing due
mainly to the lack of funding for both “hard” and “soft” infrastructures.
Since last September, Asean has
been able to mobilize a mere US $485 million under its ambitious Asean
Infrastructure Fund (AIF) to help finance projects identified by the Master
Plan of Asean Connectivity (MPAC), approved by Asean leaders in 2010.
The fund is rather small. The
Asian Development Bank (ADB) calculated that Asean would need $600 billion over
10 years to materialize the MPAC—about $60 billion annually. Such an amount of
investment is extremely high by Asean standards. The bloc members need to do
more and redouble their efforts. For the time being, Malaysia has committed the
largest amount at $150 million, followed by Indonesia with $120 million. The
ADB, which will help manage the fund, pledged $150 million. Other Asean states
are thinking about it. Burma plans to join next year with an initial
contribution of $100,000.
Thailand also plans to contribute
to the fund knowing full well the huge benefits of a fully connected Asean.
However it has to overcome domestic hurdles and be approved by the National
Assembly. Asean Secretary-General Surin Pitsuwan said in a recent interview
that he hoped this fund would attract other Asean member states to follow suit
and, more importantly, their private sectors. By 2020, the fund is expected to
offer $4billion in loans and an estimated $13 billion worth of total leverage.
At a recent international
symposium in Phnom Penh on the realization of MPAC organized by the
Jakarta-based Economic Research Institute for Asean and East Asia (ERIA), it
was clear that private sectors in the region were still out in the cold when it
came to information pertaining to the MPAC projects and what are needed.
Representatives from the private
sector lamented the lack of consultation with the Asean governments on proposed
projects. They argued that “top-down” decision-making does not augur well with
the private sector which needs better information and clear policies, including
their costs and benefits. The Asean decisions on certain projects, some of the
investors contended, has discouraged their involvement from the very beginning.
Without sufficient data and
incentives, the private sector is still reluctant to invest in numerous
projects—over 700—throughout a region that stretches from Mumbai to Danang.
Large investment capital is
available in private sectors both within Asean and its dialogue partners. They
want to invest, but the Asean governments must create an enabling environment
for their investments along with attractive incentives. Furthermore, they are
willing to engage in public-private partnerships to fund what will be a huge
infrastructure. On the cautious side, some forms of guarantee such as viability
gap funding must be provided.
Whenever Asean discusses
connectivity these days, they are embarrassed by snail-paced progress on past
projects. For instance, one of the principal infrastructure projects initiated
in 1995 was the Singapore-Kunming railway link, which is still under
construction. It was supposed to be completed years ago. Somehow, there is no
additional support from countries which have substandard railways—no incentive
to invest.
These railways are situated in
Burma, Laos, Cambodia and Vietnam. Thailand, which is the hub of this railway
link, still has to reconnect with its neighbors in both the west and the east
to complete the regional railway network. Those missing links are just short
distances. For instance, the portion in Burma is only 6 km while the one on the
Cambodian side is 48 km. It is laudable that the Yingluck government has placed
high priority on huge infrastructure projects such as the Dawei deep-sea port
development and the high-speed train linking Thailand, Laos and China. But
other smaller projects that could be completed without much cost have been
neglected.
Obviously, the “hardware”
infrastructural projects get all the attention for the time being. Many
dialogue partners have expressed interest in the MPAC including the
“Plus-Three” countries (China, Japan and South Korea), as well as the US,
Australia, India and Russia.
However, for the time being only
Japan has acted, mapping out nearly three dozen flagship projects worth about
$25 billion to enhance the connectivity in Asean. These projects when completed
would link mainland and maritime Southeast Asia. China and South Korea have
informed Asean that they have similar plans to contribute to regional
connectivity.
As the deadline for the Asean
Community approaches in 2015, the region’s leaders are getting nervous as their
countries and citizens are still not ready. More than they would like to admit,
hundreds of action plans under the economic, political/security and
socio-cultural pillars have not yet started. It is not surprising then that the
foreign and economic ministers of Asean were arguing whether the start-up date
should be Jan. 1 or Dec. 31.
Obviously, the economic ministers
spoke volumes. Now the Asean Community is scheduled to begin at the end of
2015—some 365 days later than what the foreign ministers originally intended.
At this juncture, at least 33
percent of the economic measures, especially in services and investment, have
yet to be implemented. Kudos must go to the economic ministers as they know the
grouping’s reality well, especially when it comes to nasi goreng and curry.
Without extraordinary pushes from the Asean leadership, the envisioned
community will be a defected one. Other “software” connectivity including
institutional and people-to-people innovations will be further delayed.
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