ASEAN: What next for business?

By Sofjan Wanandi

This article is based on a paper presented at the Private Sector Salute to ASEAN's session in Kuala Lumpur yesterday.

KUALA LUMPUR: ASEAN at 30 is an exciting prospect. As an association, a grouping of Southeast Asian nations, it has grown and matured. At 30, the most important development is its membership expansion. Soon, perhaps by the middle of next year, all 10 Southeast Asian nations will be in ASEAN. This would be the realization of the dream of ASEAN's founding fathers.

An expanded ASEAN would certainly bring new challenges to the region. To maintain the group's cohesion is one of such challenges. However, ASEAN's expansion may not necessarily create major strains to the organization as has been often predicted.

The growing economic integration in the region is one reason to be confident about the region's future. The economic integration in Southeast Asia that has accelerated since the 1980s is not likely to experience a halt because of Asia's current economic crisis. In fact, continued efforts at integrating the region will make it a stronger economic entity that can overcome and prevent similar crises in the future.

It is unfortunate that the region is experiencing this crisis at a time when we have just embarked on stepping up our economic integration through the implementation of AFTA, the ASEAN free trade area. The crisis should not divert our attention away from this effort. It is important, therefore, that we should renew our understanding of why we had embarked on this venture in the first place.

AFTA is not just about reducing tariffs and other trade barriers among the members of ASEAN. Elimination of these barriers would transform the region into a significant single market. This market would make the region attractive to investors from within as well as from outside the region. We have agreed that we do not want to create a closed regional market. Instead, the market should be as open to outsiders as it is open to its own members. This is the essence of the concept of "open regionalism" which ASEAN has adopted and supported not only in Southeast Asia but in the wider Asia-Pacific region.

ASEAN countries are not only reducing the barriers to trade among themselves. At the same time that they are implementing AFTA, which grants preferential tariffs to ASEAN members, they are also reducing their favored nations tariffs unilaterally.

In some ASEAN countries these two reductions have been undertaken in tandem, while in other ASEAN countries they are pursued at different paces.

Whatever the case, the basic intention is commonly shared by all ASEAN members, namely to strengthen regional cooperation in order to improve the group's position in the world economy. We are doing this not simply by sharing our markets but more importantly by pooling together our resources. This is ASEAN's overall strategy.

This same strategy also has to guide the activities of ASEAN's business community. The business community in ASEAN has also grown and matured. It should not be trapped by the idea of securing the regional market for its own. Rather, it should benefit from a pooling of regional resources to continuously up- grade the competitiveness of its undertakings globally.

By eliminating the barriers to trade and investment regionally and globally, business in the region can exploit the different comparative advantages of the various ASEAN members.

In doing so, businesses can continuously enhance their international competitiveness. The expansion of ASEAN to include Vietnam in 1995, and Laos and Myanmar in 1997 (and Cambodia prospectively in 1998) will increase the region's diversity and further enhance its potential to maintain its international competitiveness.

It is to be noted that multinational corporations (MNCs) from outside the region have adopted this wisdom for many years now. This strategy has received a boost from the development of AFTA. MNCs in the region have positioned themselves to take advantage of the different comparative advantages of ASEAN's diverse member countries.

ASEAN's expansion provides another important boost to further develop their production activities. Southeast Asia, in their view, promises to become a production powerhouse in a range of manufacturing activities.

It is a shame that the businesses from the region itself have been late in recognizing this opportunity. However, it is better late than never. ASEAN at 30 should provide us, the business community in ASEAN, with a golden opportunity to redress this shortcoming.

There is a lot that the business communities in ASEAN can do together. Our sharing of the regional market should be only to prepare us to enter the global market. Our pooling of resources will help strengthen us in our endeavor to participate in the global market. Up to now, our approach has been to go our own ways without realizing the opportunities derived from cooperation.

The region's great diversity should not overshadow the fact that we also have a great deal in common. Southeast Asia is a region endowed with rich natural resources. We should cooperate in order to exploit these resources in a much more economic and responsible fashion.

We can share our experiences and our technologies. We also must undertake joint research and development activities to enhance our value-added products. We are major producers of natural rubber, oil palm, wood and many other resource-based products.

Southeast Asia also continues to have great potential in many labor-intensive manufacturing activities, especially if efforts can be made to upgrade the skills of our labor force. It is in the vast area of human resources development that we can and should cooperate. Thus, an important agenda for the ASEAN business community is to cooperate in efforts to improve the quality of products and the quality of human resources.

In the area of more capital and technology-intensive manufacturing activities, there is a wide scope for cooperation. Our governments have introduced the concept of brand-to-brand complementation, the BBC scheme, as a way to promote cooperation in the region in such sectors as the automotive industry.

This has been further supported by the ASEAN Industrial Joint Venture (AIJV) scheme. It should be noted that these schemes allow for participation by companies and investors from outside the region. They are consistent with the concept of open regionalism that has been mentioned before. These schemes could provide a basis for the joint development of our technological capabilities.

Again, outsiders have been quicker in realizing this opportunity than the business community within ASEAN itself. Here too, it is better late than never.

The ASEAN business community should explore the many possibilities for the development of joint activities, joint ventures and the establishment of regional strategic alliances.

Ultimately it is the ASEAN business community that should be at the forefront in taking advantage of the opportunities that continue to expand with the maturing of ASEAN and the Southeast Asian region as a whole.

The writer is chairman and CEO of the Gemala Group, Indonesia.