The Opportunity of the ASEAN Economic Community
The Australian Institute of Company Directors Annual Conference
Remarks by Mr Simon Merrifield
Australian Ambassador to ASEAN
Kuala Lumpur, 21 May 2015
Thanks for having me on this panel. It’s good to see a strong Australian business interest on this theme of ASEAN economic integration. And it’s great to be on the panel with friends from ANZ, whose publication “ASEAN: The Next Horizon” is a really inspiring read.
As we’ve heard, there are several major drivers of growth in Southeast Asia and the AEC is one of them. I want to talk a bit about how the AEC will change ASEAN as a business proposition. Because it will, but slowly. There’s no big switchover to a new governance blueprint.
The ASEAN economic integration project is iterative. Progress is best measured in five-yearly instalments. And in five years’ time it’s likely to look a lot more like a single market and production base that it will at the end of this year.
One other key point is that ASEAN is and always will be institutionally light, by design. So there’s no supranational authority. There’s no pooling of sovereignty. There’s no super-ministries driving the member states to comply. It will be like that for a very long time – there’s no appetite at all to change that.
So there are many things that ASEAN is not. The word community implies things to outsiders that simply aren’t part of the game plan – customs union, currency union, passports, single migration zone. None of these things are on the table.
This does not mean that ASEAN is deficient; rather, ASEAN just it is what it is. It’s important to understand where it comes from. It has always had a vision to lift the prosperity of Southeast Asia. But the missing precondition for prosperity in the 1960s was security and trust. Not only was the Cold War a hot issue in Southeast Asia in those days, but the original five ASEAN members had their problems with one another: Confrontation, Singapore’s separation from Malaysia, the Philippines claim on Sabah and so on. So ASEAN’s first mandate was to build trust to open the way for greater mutual engagement in all spheres, and that’s exactly what’s been happening for the past 47 years.
ASEAN has done remarkably well. Phenomenally well. It has been the central diplomatic mechanism for a region that has transformed from being characterised by conflict, tension and poverty to one that is dynamic, largely at peace and increasingly prosperous. And what a diverse region it is. Sure, ASEAN doesn’t have all the answers nor can it solve all its problems, but no regional organisation can. The critical thing is that ASEAN has built habits of cooperation. It structures and processes put leaders and senior people from government in regular contact very frequently, and that has built layer upon layer of engagement and familiarity.
So it’s very important to remember ASEANs achievements, the way it has gone about realising them, and use that as a frame of reference for what is going on today.
So what is happening in ASEAN that makes it of interest to Australian businesses?
- Governments, through the ASEAN Economic Community process, are working towards a more efficient business environment across the region, improving the economic architecture and complementing that with FTAs, including the AANZFTA.
- ASEAN has become a major foreign direct investment magnet.
- The services sector is growing rapidly and has a great deal of room for further growth.
- There will be productivity gains through education and training, and opportunities for education and training providers.
- Regional value chains are emerging at a fast rate and that trend is sure to continue.
- A commitment to reducing ASEAN’s infrastructure deficit could drive very significant investments.
So what should Australian businesses do?
- ASEAN is undergoing major economic and demographic changes. A shift in market structure from sub-scale and fragmented to scale and defragmented is taking place. Think about the opportunities this offers your business.
- Understand what the AEC is and is not. It is not the European Union. It is a step in a long journey towards closer regional integration. Don’t get out in front of the curve.
- Appreciate that many of the most attractive opportunities on offer will require a local business presence. This requires investment and deep organisational competencies.
- Invest in relationships. This is the key to the door for most ASEAN markets but takes time to develop. Many of the established and emerging regional business leaders have investment interests in Australia. These linkages to ASEAN are worth pursuing to expand and diversify your markets in the region.
- Invest in people, both locally engaged and expatriate. Ongoing staff development needs to be treated as a business-wide priority that applies to all staff members, not a select few.