On making ASEAN a main driver of global economic growth
You stated your view that Brexit proves ASEAN’s gradual integration approach is right. What tangible goals can be achieved in the short run?
SRI NAZIR RAZAK: Brexit is a reminder that ASEAN integration has to move in tandem with the will of the people across all countries. The so-called “ASEAN Way” is about unanimous decision-making so every country must agree to every initiative. It is a slow way of integrating and makes economic integration especially tough. The ASEAN Economic Community that we have is well short of our original aspirations, but the good news is that no country wants to leave or exit ASEAN. ASEAN also has considerable other achievements on the economic front: tariffs have been reduced as much as possible, there has been a proliferation of ASEAN multinationals, and there are lots of good integration initiatives at various stages of implementation.
Does this mean ASEAN has achieved what was possible and should remain this way?
RAZAK: Definitely not. While we must not understate what we have accomplished, we must also admit that there is so much more than can be done to integrate ASEAN further for the benefit of its people, and to move the region forward as one of not just Asia’s, but the world’s, main economic drivers.
If we do not embrace and take advantage of the region’s scaleble economies, we will wake up one day to realise that the ASEAN marketplace is dominated by global players, more so now that we have entered the Fourth Industrial Revolution, an era of accelerated change and one that will be unforgiving to companies that do not significantly adjust their approach to business.
The most obvious area is e-commerce, where companies such as China-based Alibaba have been able to grow exponentially in their own markets. ASEAN’s issue is that it is not a small market, but it operates as 10 different markets, and this has to change or we will be overwhelmed by global platform companies.
I would argue that the Fourth Industrial Revolution means that the old pace of integration will not do and we need an “ASEAN Way 2.0”.
What specific measures should be implemented specifically in the banking sector to remove these hurdles in the financial sector?
RAZAK: In the banking sector, integration is too focused on licensing issues when what is important is operating synergies across borders, such as back office outsourcing, data movement and people transfers.
What is your view on the prospects of creating new infrastructure funds to create access to long-term capital in the region?
RAZAK: ASEAN has massive infrastructure needs so we should welcome more funds to intermediate Asia’s high savings pool for ASEAN’s infrastructure needs. It is high time that Asian capital markets fund Asia’s infrastructure needs instead of depending on Western markets.