Ladies and Gentlemen,
I feel both honoured and privileged to be here this afternoon, speaking to so many distinguished members of the ASEAN business community in this beautiful and charming island of Bali. I must congratulate the ASEAN-BIS Organising Committee for the excellent arrangements and for initiating this inaugural ASEAN Business and Investment Summit.
Thank you again for the invitation. You make me feel so warm and homely to be back amongst many familiar and friendly faces of business figures from both within and outside ASEAN. And since I have left the business world for politics for several years now, thank you for the chance to meet many of my dear friends again. I hope they didn’t notice some more wrinkles on my face!
This inaugural ASEAN Business and Investment Summit on the eve of the 9th ASEAN Summit cannot be more timely. ASEAN is facing intense competition and increasing risks in an ever more integrated and competitive global economy. As we look beyond ASEAN and East Asia, we see an increasing number of regional trading arrangements around the world.
In Asia, China and India are emerging as economic powerhouses of the region. While some of us have recovered from the 1997 Crisis, the FDI inflows to ASEAN continue to decline. The failure at Cancun is expected to have serious repercussions on the economic welfare of many countries, especially the developing ones. Firms are being forced to adopt and adapt regional and global strategies of doing business in order to survive and stay competitive.
ASEAN will not be able to maintain the status quo in the global production network in this fast-changing global competitive equation. It needs to establish an extensive network of regional economic arrangements with key economic players. This will expand and open up more opportunities for economic linkages in this region and beyond, and strengthen its competitiveness and attractiveness globally.
I hardly need to remind you that ASEAN is a market of over 500 million consumers. Our aggregate GDP is 1.164 trillion US dollars. We have a diverse and strong production base. But as ASEAN, we must ask ourselves: despite the ongoing integration process, have we done enough to utilise effectively the potential of our combined market and strength? Have we done enough to meet the global challenges facing us?
On the one hand, it is imperative for ASEAN to forge economic partnership with its major partners. Australia, New Zealand, China, India and Japan are among those partners. The United States and the European Union should be another. But on the other hand, it is also equally imperative that ASEAN must arrange its own house to strengthen its competitive edge, to make itself more attractive as economic partners for others and bring more benefits to its own people.
ASEAN must accelerate its own integration. We must move forward our regional economic integration to a higher plane. By combining individual and collective strengths, we can forge a more effective partnership among ourselves and with our Dialogue Partners to ensure a better future and more prosperity for this region and our peoples.
The ASEAN Leaders at the 9th Summit tomorrow will make an important decision and take a significant step forward on ASEAN integration with a view to advancing ASEAN towards achieving a competitive single market and production base.
The ASEAN Economic Community which was proposed and discussed at the 8th ASEAN Summit in Phnom Penh last year was a logical and timely initiative. For decades, ASEAN’s glossary was filled with abbreviations like the AFTA, AIA, IAI, AFAS, RIA etc, all indicating efforts to create greater intra-regional trade and investment integration. Yet, we are still far from the common goal. The achievements of the ASEAN Vision 2020, the Hanoi Plan of Action and the Roadmap for the Integration of ASEAN do not seem quite at hand. Not yet, until we can create the ASEAN Economic Community.
ASEAN may have achieved an important milestone with the realisation of AFTA among the six original members of ASEAN in 2002. It is now close to becoming a free trade area, with intra-ASEAN tariffs below 5 per cent and heading towards lower tariff rates. By 2010, ASEAN is scheduled to reach the ultimate target of zero tariff on imports among the original member countries.
But for the past two years, ASEAN has undertaken studies and self-assessment on how to move forward its integration and remain competitive in the globalisation of production process. The McKinsey report was found useful in its critical study on ASEAN Competitiveness. The High Level Task Force on ASEAN Economic Integration was established to identify initiatives to deepen and enhance ASEAN economic integration beyond AFTA. The academic think-tanks in ASEAN were also drafted into this process. But we have yet to fully engage the ASEAN private sectors in this deliberation. I thus look forward to hearing valuable inputs on this important initiative from the ASEAN-BAC at our meeting during the Bali Summit.
The ASEAN Economic Community or AEC, as proposed by the ASEAN Economic Ministers, would be a single market and production base, with free flow of goods, capital, services, investment and skilled labour. The year 2020 is the goal. But personally, I wish to see some of the AEC achievements by earlier dates. Seventeen years from now might be too late.
To be an economic community, the AEC must include the strengthening of the dispute settlement mechanism and setting-up of an effective system to monitor and enforce the implementation of all economic agreements. Tourism, transportation and financial cooperation must be included. The AEC should mean more than liberalisation of trade in goods, services and investment. It should help build up ASEAN’s competitive advantages in the globalised economy and create a strong sense of ASEAN community.
A truly integrated ASEAN will be able to attract more investment as companies can structure their manufacturing processes across the region to leverage each country’s competitive advantages. A truly integrated ASEAN will create equitable development and reduce poverty as well as socio-economic disparities. A truly integrated ASEAN must create a knowledge-based economy, deepen financial integration, and establish a strong regional production network.
To build a community, communication linkages are important. The AEC should also aim to establish a network of regional transport linkages as well as develop telecommunication networks for greater information and communication interconnectivity. The ASEAN free sky policy should be contemplated, especially with cargo transport. To facilitate the mobility of people, visa exemption for intra-ASEAN travel by ASEAN nationals must soon be in force. To promote ASEAN as a single destination, a single ASEAN visa for non-ASEAN tourists should be contemplated. Cooperation in these areas may have a kick-start launch on a bilateral or trilateral basis, whenever any two or three countries are ready to implement the idea.
As you may recall, energy played a pivotal part in the inception chapter of European integration by means of coal and steel cooperation. The AEC, too, must connect energy supplies to ensure regional energy security. Human resource development and people-to-people contacts must be part and parcel of the endeavour to bridge the development gap in the region.
The end result is the economic convergence of ten countries – one single economy.
To accelerate the comprehensive integration in trade and investment, 11 priority sectors have been identified, which are wood-based products, automotives, rubber-based products, textiles and apparels, agro-based products, fisheries, electronics, e-ASEAN, healthcare, and air travel and tourism. The roadmap for these priority sectors will be developed at the beginning of the next year. Integration measures could include, among others, incentives like zero tariffs, removal of non-tariff barriers, harmonisation of product standards, faster customs clearance and simplified customs procedures.
All of them require active private sector involvement. I would therefore like to take this opportunity to encourage the members of the ASEAN-BAC to participate actively in the on-going consultations on selected fast-track sectors. This process will enable the member countries to increase their confidence to expand further into other areas of cooperation where ASEAN has the potential to develop its niche in the global market.
As in other regional economic integration communities before ASEAN, integration is hard to accomplish if some members of the community are still facing the development divide. For all countries in the integration process to progress in a unified manner, special assistance programmes must be devised to bridge the divide. Through the Initiative for ASEAN Integration and the Roadmap for the Integration of ASEAN, the CLMV countries, namely, Cambodia, Lao PDR, Myanmar and Viet Nam, must be given assistance to accelerate their development so that they can benefit from the integration more equitably and beneficially.
When I looked at the GDP of Thailand and our immediate neighbours on the east and west, I was very disturbed to find out that of all the GDP of Myanmar, Lao PDR, Cambodia and Thailand put together, Thailand’s GDP accounted for 91 percent. The remaining 9 percent is the three countries combined. Other things being equal, in 5 years’ time, the divide will become 95 and 5. This situation is untenable and unhealthy for the three neighbours of ours, for Thailand, and for the ASEAN economic community initiative.
When ASEAN leaders met the ASEAN Plus China SARS Summit in April in Bangkok, I raised my concern with the three other leaders. I was glad that they shared my concern and were in agreement that the economic disparity between Thailand and her three immediate neighbouring countries must be quickly redressed. In August, the Foreign Ministers of the four countries met in Bangkok for the Economic Cooperation Strategy or ECS. I want the ECS to be a capacity-building initiative. The ECS should create more competitive potential, more work, more productivity, and more income. I want to see it help reduce poverty and produce sustainable development for our three neighbours.
It now involves cooperation in the areas of trade and investment facilities, industrial and agriculture cooperation, regional transport linkages, tourism and human resource development. The ECS activities need not involve all the four countries all the time. I want to see concrete and quick actions rather than words. Any project that can fly with any two countries’ participation must be allowed to fly. The ECS Plan of Action must be totally feasibly to implement. And to further reaffirm our political commitment, next month the three leaders and I will meet for the first ECS Summit in Pagan, Myanmar.
I am convinced that the ECS will play an essential part in complementing the Initiative for ASEAN Integration or IAI, and the Roadmap for the Integration of ASEAN or RIA, which are paving the way for the ASEAN Economic Community.
It is most challenging for ASEAN to embark together on this exciting journey.
On financial cooperation, ASEAN has also made crucial headway. The ASEAN Finance Ministers in August this year adopted a Roadmap for Financial and Monetary Integration covering the areas of capital market development, capital account liberalisation, financial services liberalisation, and ASEAN currency cooperation.
This ASEAN financial roadmap, together with what I call the new financial architecture of the world of difference, that is, the Asian Bond market, will be highly complementary to ASEAN economic integration.
The Asian Bond Fund of 1 billion US dollars was launched in June by eleven central banks of the Asia-Pacific region. It was given political support by the 18 members of the Asia Cooperation Dialogue or ACD, at its Second Ministerial Meeting in June, with India pledging another additional one billion US dollars. The Asian Bond Fund will play the role of lead investor in future development projects in Asia. The Asian Bond Fund and the Asian Bond market will create more wealth in Asia from our own resources. To become an even more effective tool, an Asia’s own credit rating agency should be established in due course. All the ASEAN countries, which are also members of the ACD, will stand to benefit from the Asian Bond market, especially for the development of the CLMV: Cambodia, Laos, Myanmar and Viet Nam.
In this endeavour, AFTA should continue to be an important vehicle for deeper economic integration, leading the way to the AEC. AFTA must serve ASEAN first before it can serve anybody else. AFTA must be implemented within the context of a common understanding among parties concerned. But in implementing it, we must face the reality. If we encounter a problem, like in the case of over-capacity in electrical goods or automobiles, we should deal with it squarely. Find the way so that it can be resolved. Join hands in dealing with the problem. Pool our resources to produce quality, world-class products for the rest of the world rather than compete with one another.
As for the partnership and cooperation with our Dialogue Partners, the complementary relationship between ASEAN and our economic partners will also lead to new opportunities in the world economy, whether in terms of trade and investment. Deeper integration among ASEAN will increase the level of confidence. It will make ASEAN more attractive to our Dialogue Partners as well as the regional and international business communities through enlarged economies of scale, lower production costs and enhanced competitiveness.
But as we are heading towards more integration, ASEAN must have a clear and coherent strategy towards our Dialogue Partners. Such a strategy will enable ASEAN to play a proactive role if and when the time has come for the eventual creation of an East Asia Community.
The road we have taken thus far has not been smooth. Sometimes, unstable external environments have undermined our capacity to push forward our integration. But ASEAN has succeeded in rebounding from the crisis faster than expected. I believe that today the spirit of solidarity and optimism abounds in the region in spite of some remaining difficulties.
The successful establishment of the AEC depends on the national resilience of individual members. Each member has to pursue its own course vigourously to achieve sustainable economic growth and development.
Stable economic growth would in turn provide the means for solving many internal social and political problems. It will also enable each individual economy to join in the regional integration process more effectively. There is no need to enable member countries to proceed first or later. Intra-ASEAN cooperation programmes must be strengthened to facilitate prosperity and long-term growth to prevent countries being left behind.
On our part, Thailand is ready to support ASEAN economic integration to create an ASEAN Economic Community. As Thailand’s economic growth is healthier and on the rise, Thailand stands ready also to render cooperation for faster growth among her CLMV neighbours.
The over 10 percent negative growth of post-1997 crisis has been replaced by the 5.3 positive growth last year. By the end of this year, Thailand expects to score a 6 percent or higher growth.
The 3 billion US dollar current account deficit post-1997 has been replaced by the 7.6 billion surplus last year. This year, despite high growth, we continue to expect a much higher surplus.
The rock bottom foreign reserves of 26 billion US dollars of post-1997 crisis has been eplaced by the 39 billion much healthier reserves, despite our 13 billion IMF loans pay-off, two years ahead of schedule. The external debt has been cut by more than half since the crisis.
The agricultural income is up by 2.5 percent. Exports reached an unprecedented growth of 19 percent during the first half of this year. Unemployment is declining from 3.6 percent in 2000 to the expected 1.4 percent this year. Foreign investment, the industrial sector and domestic consumption are on the upward trends.
This impressive growth rate was not the highest for Thailand after the crisis, but also the best performance among countries in Asia. This achievement will enable Thailand to engage actively in the regional integration process as well as lend a helping hand to its neighbours.
Regional economic integration also requires the regionalisation of ASEAN businesses. ASEAN private enterprises have to strengthen their networks across the region. Since markets are becoming regional, business linkages have to become regional too. The ASEAN Business Advisory Council is a fine example of such regional network and linkages. ASEAN public and private sectors must work closely to help maintain ASEAN competitiveness in response to new business developments and opportunities.
But neither the public nor the private sectors of ASEAN should ever lose sight of the fact that globalisation has created an environment of rapid change, unpredictability and uncertainty. Adaptive management and the economy of speed are now the name of the game.
For all of us in ASEAN, there is no time for complacency, no time to waste, and no time to delay. With the failure at Cancun and the delay of the Doha Round, ASEAN should quickly shift its gear into offensive mode for economic integration, which is now inevitable. Defensiveness, now, offers little or no chance to win.
With the ASEAN Economic Community, this is the time for action. This is the time to adapt to meet the change. This is the time to realise regional economic integration. This is the time to choose either to remain wedded to the traditional and run the risk of losing out, or to strike for change and stand a chance of winning it all in this globalised world.
To win or to lose………the choice is ours!
Thank you very much.