“Connectivity is an important plank in ASEAN’s strategy to enhance competitiveness”-

H.E. Le Luong Minh, Secretary-General of the Association of Southeast Asian Nations (ASEAN), believes that ASEAN has used its central and pivotal role to drive the deepening of economic integration within the region and into the global economy. By bringing the economies of the 10 ASEAN member states together, ASEAN today represents a major economic bloc with a gross domestic product (GDP) of nearly $3 trillion – approximately 3 per cent of the world’s total.

Excerpts from H.E. Le Luong Minh’s speech at the ASEAN Insights Conference, held on September 11, 2014 in London…

On the ASEAN Economic Community

Although the building of the ASEAN Economic Community (AEC) is and will remain very much a work in progress, there has been substantial advancement in the run-up to 2015. ASEAN is moving towards the creation of a tariff-free zone for ASEAN products, with close to 90 per cent of products subject to zero duties, a self-certification scheme to encourage more ASEAN-based companies to benefit from ASEAN integration efforts. ASEAN is putting trade facilitation issues at the forefront of its economic agenda. ASEAN is spending a great deal of resources to set up a single window for customs clearance, an ASEAN trade repository of laws and regulations, and harmonise standards and conformance.

ASEAN is now almost into the last lap of the implementation of the AEC Blueprint. Of the 229 prioritised key deliverables identified for 2013, 82.1 per cent have been implemented. There is still much to be done to fast-track the implementation of these AEC deliverables. ASEAN is focusing on the high-impact priority areas and measures for establishing a single market and production base, like the customs single window, and service and investment liberalisation.

On connectivity

ASEAN connectivity is another important plank in ASEAN’s strategy to enhance competitiveness. Physical connectivity is focused on air, road, rail, and maritime taransport.

The aviation industry in ASEAN witnessed remarkable development over the past decade with international arrivals in ASEAN increasing threefold between 2003 and 2013, from 33 million to 99 million. The capacity of ASEAN airlines almost tripled over the past decade. The overall capacity increased from 94 million seats in 2003 to 268 million seats in 2013. This was mainly attributed to the boom in low-cost carriers (LCCs). In 2003, the share of LCCs was only 4.2 per cent with 4 million seats, which increased to 57 per cent share or 155 million seats in 2013. The anticipated increase in tourism will correspondingly increase the demand for air travel, the purchase of more aircraft and associated investment in airports and air travel services.

Significant progress has been made in the liberalisation of transport services through the implementation of the ASEAN Open Skies Policy. Liberalisation of air services up to the 5th freedom traffic rights for both passenger and cargo transport was concluded in 2010. Under these agreements, any designated airline of an ASEAN member state can offer unlimited services of transporting passengers and cargo to and from any cities with international airports, in other member states. Once the remaining member states complete their ratification process, one would see a greater boom in the aviation industry. These developments provide a sound platform for ASEAN to begin engaging the dialogue partners in further liberalising market access for air services into major markets such as China, the European Union (EU), India, Japan, and the Republic of Korea.

In terms of land transport connectivity, the priority is completion of the ASEAN Highway Network (AHN) and the Singapore–Kunming rail link. Maritime connectivity is also at the forefront. The Master Plan and Feasibility Study on the Establishment of an ASEAN roll-on, roll-off (ro-ro) Shipping Network and Short-sea Shipping in March 2013 has been completed. Preparations by the private sector are ongoing to look into the launch of  ro-ro services in different parts of the Philippines and Indonesia, and these have potential to attract more private investment. ASEAN is working towards the establishment of an ASEAN Single Shipping Market (ASSM). The implementation framework of the ASSM is being finalised.

On the benefits from economic and regional integration

Thanks to ASEAN’s economic integration efforts, important gains are already being felt by the member states. Real GDP growth has been holding well within the range of 5–6 per cent in the last few years. Total ASEAN trade in 2013 was $2.5 trillion with top trading partners being China (12 per cent), the EU (9.8 per cent), and Japan (9.7 per cent). Foreign direct investment (FDI) inflows increased to $122.4 billion in 2013 from $114.3 billion in 2012. Top investors are the EU (22 per cent), Japan (18.7 per cent), intra-ASEAN (17.4 per cent), and China (7 per cent).

Increase in per capita incomes has been substantial. Consumer markets are more competitive leading to a cheaper and wider range of goods and services. Development gaps are narrowing with the total combined GDP of Cambodia, Laos, Myanmar, and Vietnam (CLMV) having increased from merely 6 per cent of that of ASEAN as a whole in 2009 to approximately 12 per cent in 2013. In fact, the less developed CLMV are gaining the most in productivity from regional integration.

Significantly, regional integration has also made ASEAN more attractive to FDI, both from outside and particularly from inside the region, with several ASEAN countries among the world’s top investment destinations. Greater investments can be seen as a consequence of rising confidence in future opportunities in the region and the relative stability it offers compared to the rest of the world.

Major global European companies in various industries have established their presence in ASEAN and many of them are expanding in the region. Current figures show that FDI from the EU to ASEAN rose from $18.1 billion in 2012 to $27 billion in 2013, comprising 22 per cent of total FDI flows in ASEAN, making it the largest source of foreign investment in the region and second to the investment from ASEAN itself.

The way forward

In recognition of ASEAN’s dynamism, strategic importance, and contribution to the region and the wider Asia-Pacific region, there is sustained interest, a renewed focus, and greater engagement from other countries and regional groupings. Actively promoting its collective interests and increasingly speaking with one voice, ASEAN is ready and well positioned for the future as a more integrated and seamless ASEAN, a significant contributor and player on the world stage, and one that is firmly embedded in the global community of nations.