The first milestone towards an integrated Asean Community is coming up by the end of this year. Despite the overall progress towards closer regional integration, there is much speculation on the challenges and prospects of Asean's community-building efforts. This arises from the remaining obstacles for achieving a better connected region that brings its peoples closer together through more efficient procedures and practices.

The obstacles are mainly in the missing links within and across borders via road, rail, air and sea; more harmonised customs and immigration procedures to facilitate greater trade and tourism flows; and continuing mismatches in education and employment opportunities for young people in the region.

Three emerging trends highlight the importance of addressing these challenges. First, with greater exchanges and cheaper modes of travel, people-to-people, business-to-business and government-to-government links are stronger than in the past. This has quickened the pace of urbanisation in the region, leading to emergence of economic corridors and urban centres as potential important nodes along the supply chain.

Second, the economic imbalances between urban and rural areas are also leading to growing disparities, and more internal and cross-border migration flows. As a result, cities in South-east Asia are growing ever larger, with increasingly complex needs and demands on resources.

Third, it is becoming clearer that the pursuit of economic development requires an integrated approach with political and social stability, as jobs, energy and food security and environmental sustainability are all interlinked.

Better access to travel and communications has helped both maritime and mainland countries in South-east Asia to be more connected than in the past. Yet, the obvious gaps that still remain between and within some of the Asean member states have prompted Asean governments to prioritise connectivity as the main vehicle for regional integration.

Asean's connectivity efforts revolve around the implementation of the Master Plan on Asean Connectivity (MPAC) adopted in 2010.

The MPAC highlights three dimensions of being connected more closely - the physical infrastructure that will facilitate travel in and across countries; the institutional ease with which cross-border procedures can be completed; and the social and cultural connections that will be strengthened through this.

Building strong foundations

PRIORITY projects under the MPAC include the completion of the Asean Highway Network and implementing the Singapore-Kunming Rail Link (SKRL) project, and realisation of the Trans-Asean Gas Pipeline project.

Complementing the Asean Highway Network, Asean members Myanmar and Thailand are working with India to complete a Trilateral Highway by next year that will connect South and South-east Asia.

Singapore and Bangkok are already operating the railway that forms part of the SKRL's Eastern line, but work remains to be done for the spur line between Laos and Vietnam, and the Western line through Thailand and Myanmar. Singapore and Malaysia are now working on a high-speed railway that will complement and extend rail connectivity from South-east Asia through East Asia.

These infrastructure projects require substantial and sustainable financing. The Asean Infrastructure Fund, which started its lending operations in 2013, has not amassed sufficient pledges to meet the estimated US$8 trillion (S$10.9 trillion) needed to make the leap towards a world-class infrastructure that matches its aspirations for economic growth.

A session on strategic infrastructure at the World Economic Forum on East Asia in May last year has acknowledged the challenge of an "infrastructure gap". The challenge is twofold as Asean countries require both hard infrastructure and supporting institutional frameworks in place. In fact, soft infrastructure - or institutional connectivity - is the most important requirement for speeding up necessary reforms in Asean members. Cross-border trade agreements under the Asean and attendant national single-window implementation for streamlined customs procedures need to be developed.

The level of financing required for these key infrastructure projects highlights the need to welcome foreign direct investment, which in turn requires a conducive investment climate. Governments are also welcoming greater public-private partnerships to invest in major infrastructure projects, including those that span national borders. It is important to ensure that these types of cross-border investment leverage the comparative advantages of the companies investing in these projects.

A successful regional effort, however, has to be given effect by implementation and commitment at sub-regional and national levels.

In fact, implementation is most crucial at the national level.

Public servants in the relevant national agencies need to be prepared for the changes that will take place with better regional connectivity, greater use of the knowledge economy and new procedures under a more seamless regulatory framework. Businesses also need to play their part and be ready to adapt to regional changes rather than claim protection for fear of external competition.

It is all about changing mindsets and cultivating an outlook that sees the benefit of working regionally.

Governments and academic circles also have a role in communicating to citizens the changes and benefits that closer regional integration - particularly in the economic sectors - will bring.

By Moe Thuzar - straitstimes.com

The post Asean’s missing links need to be bridged appeared first on Asean Investment | Marc Djandji Blog.