Part 2 of 2: The future of ASEAN's competitiveness

Part 2 of 2: The future of ASEAN's competitiveness

Susilo Bambang Yudhoyono, Vientiane/Laos

But that's not all -- the road to success is much tougher than
that. To gain maximum benefit from integration, we need to meet
other conditions. First of all, governments -- and I am speaking
of my country as well -- we all need to increase the efficiency
of all economic transactions in the region. The quality of these
transactions are vital because if they are good, then individuals
will be prompted to improve their skills, and companies will be
prompted to increase their capital and output.

Of course, as with most everything else in this globalized
world, it's all about connectivity. And these transactions that I
speak of depend on an array of economic institutions, as well as
on the quality of physical infrastructure.

Simply speaking, a country where property rights are absent,
trade policies are highly restrictive, and corruption is rampant,
is unlikely to enjoy rapid economic growth -- regardless of the
size of its domestic market, its human capital, or its production
technology.

Our main challenge today is to deepen our economic
integration. Why? Two words: India, and China. I am sure that
everybody in this room is familiar with the presence, and
potential, of those two emerging economic powers. China is a
behemoth for foreign investors, in many ways unbeatable as a
manufacturing outlet.

But in my meetings with investors, I have also learned that
businesses seek to reduce risks and investing too much in one
location increases those risks. We have to take advantage of
their strategy of diversification, and lure them to our region.
ASEAN, as a single entity, can be as attractive as those two
economic giants, but it is our responsibility to make it so.

Here is where diversity can be an asset. We can leverage this
diversity into a complementary factor, one that allows the region
to attain economies of scale. And if we make regional production
networks more manageable, then producers can break up a
production activity into many, separated, location-specific
steps. This would greatly increase intra-regional trade.

And for those skeptics who think this is wishful thinking, I
say to them, niches for labor-intensive activities are constantly
being created in areas that are traditionally viewed as capital-
or technology-intensive, such as electronic products. That's why
the promotion of a single production base brings benefits to all
its members, the more advanced as well as the less advanced.

We can also enhance our competitiveness in the service sector.
We can promote low-cost, but high-quality service industries. I
can name many possibilities: we can position ASEAN as a global
outsourcing hub, a tourism hub, or a health and well-being
industry hub. We can take advantage of all these potential
industries. After all, efficient services are also vital to
national and regional competitiveness as a whole.

Having outlined to you the vision and rationale for having the
AEC, I also want to say that this has been a year of progress and
achievements. My ASEAN colleagues and I will be signing an
important document: the ASEAN Framework Agreement for the
Integration of Priority Sectors.

By providing concrete action plans and road maps for the
integration of eleven economic sectors, this agreement is the
first major installment to the realization of the single
production base and market. And the industries affected run the
gamut, including electronics, textiles, automotive, fisheries,
wood-based and rubber-based industries, as well as key service
sectors such as air travel, tourism, health-care, and e-ASEAN,
our version of e-commerce.

Now, let me reiterate again that I am a believer in free trade
and open investment. I believe that those two factors are
essential elements of this great undertaking before us, they are
the main drivers of our regional integration. Our initiative in
1992 to form the ASEAN Free Trade Area, or AFTA, was a bold step.
The subsequent plan for an ASEAN Investment Area, or AIA, was
another giant leap. If we build on these initiatives, I am
confident that ASEAN will be one step closer to realizing its
full potential.

Here is where I will put, so to speak, my chips on the table.
Under my leadership, Indonesia is pledging to accelerate our
efforts with other ASEAN members to deepen this economic
integration. The priority of our administration is to boost
investment, exports, and infrastructure building -- aims that I
am sure all of you share with me.

We know that this aim will not happen without a plan -- so we
are formulating a road map that will enhance business
transactions and improve our investment climate. How? We will
streamline our bureaucracy and all the red tape that comes with
it, including in vital areas such as customs, taxation,
transportation, and standards.

In January 2005, we will hold a very key meeting: an
Infrastructure Summit, as the prelude to a five-year
infrastructure-building program. I strongly believe a well-
functioning infrastructure is essential to a well-functioning
economy. Indonesia needs a total of US$ 72 billion to finance the
building of roads, railways, ports, airports, power plants, clean
water systems and irrigation facilities. Funding will come from
government and private investments. It is my hope that those of
you interested can come to our summit.

A healthy partnership between the government and the private
sector is also a necessity. As President, I have reiterated my
wish to have regular direct consultations with the business
community. On its part, the Indonesian Chamber of Commerce and
Industry (Kadin) will also include representatives of foreign
businesses in Indonesia through the foreign chambers. I also look
forward to inputs from you the business sector, the ones who are
at the forefront of the realization of the ASEAN Economic
Community, as to what more ASEAN can do to achieve the vision of
a single production base and market.

My government is working hard on these issues. After all, the
positive impact of our efforts will be felt not only by
Indonesian producers and consumers, but also far beyond our
national borders.

We all want ASEAN to succeed in economic cooperation. This
success requires member nations to strengthen their abilities to
play an active part in the cooperation. We need to look to each
other for mutual support, providing exchange programs and other
experience-sharing opportunities when needed.

This is an abridged text of keynote address given by President
Susilo Bambang Yudhoyono at the 2nd ASEAN Business and Investment
Summit in Vientiane, Laos, on Nov. 28 2004.