Unlocking ASEAN's economic competitiveness

Unlocking ASEAN's economic competitiveness

Alan Cassels, Jakarta

With a population of about 500 million, a combined gross
domestic product of US$737 billion, and a total trade of $720
billion, ASEAN today is very much an economic force in the global
arena.

Against the backdrop of economic growth, there has been a
strong positive shift in the drive towards economic integration
within ASEAN. This is reflected in the rapid growth of intra-
ASEAN trade supported by enhanced cooperation at the governmental
level.

However, with the rapid economic renaissance of China in
recent times, foreign direct investment (FDI) flows into ASEAN
has slowed in comparison to China, which is being viewed as
increasingly attractive as a FDI destination. Today, China is
attracting more FDI than all the other Asian countries combined,
not least ASEAN.

The world's fastest growing economy registered FDI of $53.51
billion in 2003, according to China's Ministry of Commerce. This
compares with $20.3 billion in ASEAN FDI flows over the same
period.

The economic emergence of China and India can be seen both as
a challenge that poses formidable competition to ASEAN member
countries as well as an opportunity for ASEAN.

To address the economic competition posed by China and India,
ASEAN needs to understand - on a macro level -- the contributing
factors to their success. These include a large market, low cost
labor, cheap land and a large concentration of supporting
industries.

By contrast, while ASEAN also possesses many of these core
attributes, its strengths lie in pockets of strong competencies
in, for example, electronics, petrochemicals and automotive
industries.

In light of this, perhaps the vision for ASEAN would be to
move towards a boundary-less manufacturing and production
platform in an integrated market.

As ASEAN works towards this, the logistics industry can play
an important role as a crucial link in moving raw materials and
finished goods between these pockets of competence within the
region. Moreover, the effective application of supply chain
management, companies can harness collectively the specific
competencies of the different areas in ASEAN; for example, by
streamlining supply chains that span across borders in ASEAN and
providing distribution services to markets in all ASEAN countries
seamlessly.

There must also be close collaboration between the private
sector and ASEAN regulators to facilitate the seamless movement
of goods across borders.

For example, ASEAN must continue to liberalize its market. Air
transport is both the most regulated and the highest value-added
form of transportation, and, as such, it should be part of any
trade liberalization regime.

The Common Effective Preferential Tariff (CEPT) rules of
origin will enable more companies to qualify for the lower CEPT
compared with the higher Most Favored Nation (MFN) tariff rates.
This will in turn promote greater trade flows between ASEAN.

The agreements signed by China and ASEAN in Laos at the recent
ASEAN Summit will take the two sides further towards the goal of
setting up the world's largest free trade area by the end of the
decade.

For ASEAN to reach its full potential as a trade and
investment hub in Asia, the development of efficient, secure and
"world class" customs across industry supply chains is an
important challenge and opportunity. A streamlined and uniform
set of customs guidelines and procedures across ASEAN would
benefit companies through greater transparency and efficiency as
well as facilitating the flow of goods across national borders.

In addition to the 'single window' approach which includes the
electronic processing of trade documents at national and regional
level, perhaps an e-customs platform could be implemented across
ASEAN in time, thus expediting a more efficient process in going
paperless.

A key to achieving this -- and hence unlocking ASEAN's
competitiveness is for ASEAN to move towards a boundary-less
manufacturing and production platform in an integrated market.

To this end, the logistics industry can play an important role
by harnessing the specific competencies of the different areas in
ASEAN effectively, designing and managing supply chains that span
across borders in ASEAN, enabling the distribution of parts and
finished goods across markets in all ASEAN countries seamlessly
and in particular, to capitalize on the tremendous opportunities
emerging from the development of China and India.

The writer is Senior Technical Advisor, PT Birotika
Semesta/DHL Express.