Lack of infra, onerous processes hinder ASEAN economic integration

Lack of infra, onerous processes hinder ASEAN economic integration

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Inadequate physical facilities, cumbersome procedures, and varying international business standards are the major stumbling blocks in sustaining the free flow of goods among Association of Southeast Asian Nations (ASEAN) member countries, international experts have observed.

The experts said these barriers can adversely affect ASEAN’s goal of a cohesive, competitive, and robust economic environment for its member states, according to a statement by the Philippine Institute of Development Studies (PIDS).

In his presentation at the public symposium on ASEAN Economic Integration and Nation Building held in Manila, Dr. Ruth Banomyong, director of the Centre for Logistics Research at Thammasat University in Thailand, said it is important to invest in infrastructure such as transportation and telecommunications to create seamless interconnectivity among ASEAN nations.

Discussing the same topic, Dr. Epictetus Patalinghug, professor emeritus of economics and finance at the University of the Philippines, also underscored the significance of infrastructure development in ASEAN integration.

He explained that “infrastructure investment creates a return of 5% to 25% globally,” adding that “physical connectivity associated with infrastructure affects 7% to 10% of an economy’s overall productivity.”

However, Banomyong revealed that ASEAN lacks funds to support infrastructure requirements, stating further that financial allocation remains to be a national decision. To ensure that there is available budget for the region’s trade and logistics requirement, member states should align their national thrusts with ASEAN’s priorities, he said.

Patalinghug, on the other hand, encouraged regional cooperation among ASEAN countries in establishing and nurturing the policy environment for new regional infrastructure projects, as well as in sustaining programs that support investments in trade- and transport-related facilities.

Maura D’ecosterd, senior trade law and policy officer of the Economic Research Institute for ASEAN and East Asia, meanwhile, noted how unnecessary and lengthy import and export procedures within ASEAN countries can hamper economic development.

Regulation matters

“Regulation matters because if poorly designed or inadequate, it can adversely affect economic performance,” she posited.

D’ecosterd said delays caused by domestic transportation, corruption, restrictions on hours of truck operations, and constraints on equity participation in logistics can add to domestic and transport costs, and can discourage potential investments.

She explained that poor customs procedures can increase both time and dollar costs; therefore, efficient regulation and regulatory coherence among ASEAN member states is necessary.

According to D’ecosterd, dollar and time costs are reduced when customs regulations are less restrictive, transport links are more contestable, fewer documents are required, and finance services are improved.

Another issue on ASEAN trade facilitation is the differing standards and policies of member states on the free flow of goods across international borders.

This refers to those barriers that hinder foreign or domestic access such as quotas, local content requirements, and technical standards that make it difficult to import products into or export them out of a country.

According to Banomyong, the legal frameworks outlined to facilitate efficient trade in the ASEAN region are in place but are not fully implemented because specific protocols have not yet been approved by member states.

He said these mutually recognized policies should be harmonized to enhance ASEAN’s trade and production networks, as well as to establish a more unified market for its firms and consumers.

D’ecosterd added that most of these protocols remain at the pilot stage, stressing that political will is imperative for these agreements to push through.

To address these barriers, the experts proposed the adoption of digital technology by micro, small, and medium enterprises (MSMEs) to improve their financial access and the use of open data among ASEAN member states.

Other recommended strategies include reducing the number of trade-distorting non-tariff measures across ASEAN nations, as well as diminishing the gap between vocational skills demand and supply in the region.

They also suggested creating a comprehensive baseline data on the logistics capability and best practices of each member state to get a better perspective of the ASEAN trading corridor, as well as to better address barriers concerning reliability and logistics performance, among others. – Roumina Pablo

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