Anniversary of the World-Class Innovation Business School. Beyond ASEAN Regional Integration

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1 Anniversary of the World-Class Innovation Business School Beyond ASEAN Regional Integration

2 Outline of Presentation Introduction to ASEAN Connectivity Priority Sectors Challenges and Beyond 2015

3 ASEAN Economic Community - AEC AEC To create stable prosperous and highly competitive ASEAN economic region by the year Free flow of goods, services, investment, and skilled labor Freer flow of capital Single Market and Production Base Measures used to systematically integrated sectors Tariff elimination Non-tariff barriers reduction Harmonization of standards / licensing Mutual recognition arrangement (MRA) Customs and trade regulations facilitation Outsourcing & industrial complementation Investment and service liberalization Trade facilitation More business friendly environment

4 Agro based Products Air Travel Automotives E-ASEAN Electronics Fisheries Healthcare Rubber based Products Textiles and Apparels Tourism Wood Based Products Logistics 12 Priority Sectors under AEC

5 Example of AEC Framework ASEAN Free Trade Area (AFTA) ASEAN Framework Agreement on Services (AFAS) ASEAN Comprehensive Investment Agreement (ACIA) ASEAN Harmonization Tariff Nomenclature ASEAN Single Window (ASW) ASEAN Industrial Cooperation (AICO) ASEAN Integrated Food Security (AIFS) Mutual Recognition Agreement (MRA) ASEAN Transport Integration ASEAN Logistics Roadmap ASEAN Framework on the Facilitation of Goods in Transit Financial and Monetary Integration in ASEAN Ensuring Energy Security in ASEAN Ensuring Safe Pharmaceutical Products in ASEAN Regional Cooperation in Intellectual Property Rights (IPRs) Etc.

6 Master Plan on ASEAN Connectivity Source: Master Plan on ASEAN Connectivity (2010)

7 People to People Connectivity Strategy 1: Promote deeper intra-asean social and cultural understanding Strategy 2: Encourage greater intra-asean people mobility

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11 Banda Aceh Pekanbaru Padang Medan Bengkulu 1 Palembang IMT-GT Jambi Serang Tj. Pinang Pkl. Pinang Lampung Jakarta Palangkaraya 2 Pontianak Banjarmasin Semarang Surabaya Jogjakarta 3 Samarinda Palu Denpasar Mamuju Makassar 5 Mataram BIMP-EAGA 4 Gorontalo Manado Kendari Kupang Logistics in Indonesia Six Economic Corridors in Indonesia Sofifi Ambon Sorong Manokwari 6 Wamena Merauke Jayapura Mega Economic Centre Economic Centre Proposed Location Special Economic Zone (SEZ) Proposed Location SEZ and FTZ 1 EC Sumatra 3 EC Borneo 5 EC Bali Nusa Tenggara 2 EC Java 4 EC Sulawesi 6 EC Papua Maluku Source: MP3EI (2011) 11

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14 Special Economic Zones ( 21 SEZ ) 7-Poi Pet SEZ 18- Kiry Sakor Koh Kong SEZ 15-Thary SEZ 5-N.L.C SEZ 2- Souy Chheng SEZ 1- Neang Kok Koh Kong SEZ 9- Phnom Penh SEZ 12-Tai Seng SEZ 4- Stung Hao SEZ 13-Oknha Mong SEZ 6-Manhattan SEZ 11- Sihanoukvill SEZ1 20-Kompong Som SEZ 17-D and M SEZ 21-PIC SEZ 19- Sihanoukvill Port SEZ 14-Gold Fame Pak ShunSEZ 16-Sihanoukvill SEZ2 3- S.N.C SEZ 10- Kapot SEZ 8- Duong Chhiv SEZ

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20 Challenges More liberal trade and investment policy requires more sophisticated & efficient supply of logistics services. In ASEAN region, MNC with their global production chains, require sophisticated logistics support, ranging from high levels of reliability in delivery, minimal transit time, to tight security for high-value goods and other specialized requirement such as cold storage capability during distribution.

21 Top Global Logistics Companies Seek Expanding Global Operations in ASEAN to Capture Trade Growth & Serve Sophisticated Logistics Requirements of Their MNC Clients Airlines Air France KLM Group Lufthansa Group Japan Airlines British Airways Singapore Airlines Freight & Parcel Delivery Deutsche Post (DHL) UPS FEDEX Nippon Express TNT 3 rd Party Logistics / Outsourced Logistics Management Davids Distribution DHL EXEL Logistics FEDEX Kerry Logistics Linfox Logistics NOL / APL Schenker TNT Logistics Toll Logistics UPS Shipping AP Moller Maersk Group Evergreen NYK COSCO NOL / APL Mitsui OSK OOCL Logistics Infrastructure Hutchison Whampoa Kepple Corporation Logistics IT SAP Oracle Packaging & Pallet Chep Losham Top MNC Clients Located in ASEAN Automotive: BMW, Ford, General Motor, Honda, Isuzu, Toyota Electronic: General Electric, Hewlett Packard, Hitachi, IBM, Philips Electronics, Matsushita Electric, Samsung, Sony Machinery & Equipment: ABB, Alcatel, Siemens Food: Coca-Cola, Nestle Retail: Carrefour, Royal AHold, Tesco Chemical: Bayer AG, Dow Chemical, Du Pont, GlaxoSmithKline, Johnson & Johnson, Novartis, Roche Diversified: Mitsui, Mitsubishi, Procter & Gamble, Unilever

22 ASEAN as production, trading and distribution base

23 Prioritized Projects: Leaders View Completion of ASEAN Highway Network (AHN) missing links and upgrade of Transit Transport Routes Completion of the Singapore Kunming Rail Link (SKRL) missing links Study on the Roll-on / roll-off network and short sea shipping Establishing common rules for standards and conformity assessment procedures Operationalize all national single window by 2012 Operationalization of the ASEAN Agreement on transport facilitation

24 Prioritized Project: Business View Mainly Institutional or Regulatory Connectivity Liberalization of Services Liberalization of trade in goods and NTC Investment protection and promotion Free flow of skill labor and MRA in logistics profession Supply chain integration of key business sectors Acceleration of signed transport and logistics agreement in ASEAN Establishment of free zones, free port, and special economic zones 24

25 Ten Challenges for ASEAN Integration 1. Lack of logistics literacy: unproductive use of printed and written information about logistics to develop personal knowledge and potential, to increase productivity, and to make decisions. 2. Logistics divide: Logistics Performance Index (LPI) in ASEAN is fragmented. 3. Gaps in the stock of human capital in logistics across ASEAN s countries: years of education, years of training, gender disparity, level of competence, level of salary, and training access and affordability. 4. Health, safety, and security problems. 5. Environmental degradation including carbon emissions problems. 6. Hazardous material handling and toxic waste problems. 7. Corruption problems: criminal prosecution for bribing a government contracting officer. 8. Unethical and misconduct behavior of logisticians: fraud and embezzlement and financial mismanagement. 9. Failure to meet and follow quality standards and procedures. 10. Lack of reliable partners who demonstrate integrity and operate on a transparent basis.

26 Way forwards Understanding of dynamics of economic and social development? Time management of plans and roadmaps. Is the investment in logistics infrastructure and services adequate to support growth? Is the regulatory environment stimulating the desired outcome? Do foreign investment regulations adequately support development? Workforce issues What services are sensitive? Cooperation, trust, and more operational plan and actions are important keys to manage supply chain integration while sometimes allowing flexibility of individual country.

27 7Rs Beyond ASEAN Integration supplying Right Materials in Right Quantity, for delivery at the Right Time and Right Place, from the Right Source, with the Right Service, and at the Right Price to customers