ASEAN: What next for business?

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.