Master Plan for ASEAN Connectivity: BUILDING BRIDGES

How ASEAN plans to pay for the dream of interconnected economies

At the 17th ASEAN Summit in Hanoi on October 28th 2010, the ASEAN Connectivity Master Plan was adopted with the strong consensus of all ASEAN leaders in order to create a better-connected ASEAN. The aim is to improve the competiveness of ASEAN as a whole by creating a smooth flow of goods, services, people and capital.

Thanks to this momentous start, the GDP per capita of ASEAN members is estimated to at least double by 2020, according to ERIA, a think-tank institution (see table 1). However, this ambitious plan still faces many hurdles.

This remarkable signing at the 17th summit in Hanoi is a fruit of many efforts made by all parties: varying from governments of member states, international financial institutions, dialogue partners, and the private sector.  
The establishment of an ASEAN Investment Fund last year supplied the initial capital of US$800 million to transform the plan into reality, although the capital requirement for a better ASEAN transportation network is much greater, estimated to reach US$596 billion during the period 2006-2015, according to calculations by ADB.

Significant financial resources and human capital will be required to implement the Development Master Plan for the whole of Asia. Between 2010 and 2020, Asia requires an investment of approximately US$8 trillion in overall infrastructure. In addition, Asia needs to invest approximately US$290 billion on specific regional infrastructure projects in transport and energy, where plans are already in the pipeline (2009 ADB and ADB institute paper).

“The master plan is very comprehensive” said ASEAN’s Deputy Secretary General, Mr. Pushpanathan Sundram, “we need to be very careful that everybody will benefit from ASEAN connectivity, not just the mainland countries, but also countries like the Philippines, Myanmar, Laos… and we need to be focused” DSG. Mr. Pushpanathan emphasized.

The physical transportation networks will include air, road, railway, maritime ports, logistics services, ICT, optical fiber networks, energy projects, trans-ASEAN gas pipelines, and special economic zones.

According to Mr. Kunio Senga, General Director of ADB’s Southeast Asian department: “This is the first time savings and reserves of ASEAN nations will be utilized for an infrastructure requirement.”

Concerns have arisen over how the implementation of the master plan can be fulfilled in such a limited timeframe, especially with an ambitious target of building a well- connected ASEAN by 2015.  Mr. Senga raised concerns over challenges in soft development aspects such as trade and investment facilitation. As Mr. Senga explains: “Investment and trade facilitation, cross-border transport facilitation has not progressed much.”

Looking at the significantly large amount of capital that Asia in general, and ASEAN members in particular, need to develop its intra-regional connectivity, Mr. Senga said that ABD itself could not provide the total amount of investment, neither could any financial institutions, or dialogue partners. The project will need to look at all possible financial sources: namely regional multilateral development banks, financial institutions, dialogue partners, national reserves, and last but not least, the private sector to participate and contribute.

However, Ms. Mari Elka Pangestu, Indonesian Trade Minister emphasized other challenges that should be addressed before the finance issue. “I think, money is available and is waiting for us… First and foremost, each country must have their own national connectivity plan, which will form a part of ASEAN. This is how ASEAN should formulate their design. Secondly, each country must have clear policies on infrastructure development, especially policy to make effective public-private partnership (PPP) modality… we need to have right policies and the right capacity in terms of human resources, project planning, proposal making, etc.,” she added.

In order to deal with the aforementioned challenges, ASEAN’s DSG., Mr. Pushpanathan stated that: “We are setting up coordinating committees on ASEAN connectivity.” The coordinating committee is expected to work closely with respective National Coordinators, government agencies, and relevant ASEAN sectoral bodies in the implementation of strategies and priorities put forward in the Master Plan.

As for the first phase of the plan, 15 flagship projects will be implemented by 2015. Of which, 6 projects will focus on improving infrastructure networks, 5 are institutional and the other 4 projects focus on improving people-to-people connectivity. Given that infrastructure projects require long-term investment, and that some of the Master Plan will be implemented beyond 2015, DSG Pushpanathan emphasized that some projects will be finished before 2015, one of them being the ASEAN single window project, which will be a great milestone to best facilitate trade.

Even when considering just the physical transportation networks, the ASEAN Connectivity Master Plan is an extraordinarily ambitious plan. Many authorities and experts have expressed private sector participation as a main financial source. The plan, however, will need proper promotion in order to attract private sector contribution. Mr. Dang Thanh Tam, Director of Tan Tao Group – a leading real estate developer in Vietnam, shared that as long as they are informed about the projects and understand the model of cooperation that can assure profitability, they will be willing to invest. Many other dialogue partners, such as Japan, China, and Korea have already announced their commitment in the master plan. When, and if, the master plan is complete, ASEAN together with East Asia will become the biggest business spaces on the world and will contribute greatly to the world economy


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