ASEAN Integration: Framework for considering benefits and Costs

© Oliver Wyman Group

ASEAN Integration: Framework for considering benefits and costs

7 May 2014

Dr. Jeremy Lim

MBBS, MPH, MRCS (Edin), MMed (Surg), FAMS

Head of Health and Life Sciences, Asia Pacific

CONFIDENTIALITY

Our clients’ industries are extremely competitive. The confidentiality of companies' plans and data is obviously critical. Oliver

Wyman Group will protect the confidentiality of all such client information.

Similarly, management consulting is a competitive business. We view our approaches and insights as proprietary and therefore

look to our clients to protect Oliver Wyman Group's interests in our presentations, methodologies and analytical techniques.

Under no circumstances should this material be shared with any third party without the written consent of Oliver Wyman Group.

Copyright © Oliver Wyman Group

2 2 © Oliver Wyman Group

Brand Strategy

Consulting

Economic

Consulting

HR and

Investment

Consulting

Risk and

Insurance

Risk and

Reinsurance

Strategic

consulting

Oliver Wyman is a member of Marsh & McLennan Companies group, a US$11 BN company with more than 54,000 staff in over 100 countries

Strategy

consulting


Oliver Wyman office

Americas

Atlanta

Bermuda

Boston

Calgary

Chicago

Columbus

Dallas

Detroit

Houston

Lisle

Los Angeles

Melville

Mexico City

MMC Group office (not exhaustive)

Significant Oliver Wyman case work

Milwaukee

Montréal

New York

Ottawa

Philadelphia

Pittsburgh

Portland

Princeton

Reston

San Francisco

São Paulo

Toronto

Washington

Europe, Middle

East, and Africa

Barcelona

Dubai

Dusseldorf

Frankfurt

Hamburg

Istanbul

Leatherhead

London

Madrid

Milan

Moscow

Munich

Paris

Stockholm

Wilmslow

Zurich

Asia-Pacific

Beijing

Hong Kong

New Delhi

Seoul

Shanghai

Singapore

Sydney

Oliver Wyman has over 40 branches in the major cities of the world


Greetings from Singapore!

http://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=vcWsMI5MkhkMoM&tbnid=oJdGK0Nu0gp22M:&ved=0CAUQjRw&url=http://www.futurestage.com.sg/gallery/singapore/singapore_botanic_gardens&ei=4WS-UYvIGs7arAfngYGYCQ&bvm=bv.47883778,d.bmk&psig=AFQjCNFy-jBB5UGnu1putZAVjwFBG5aiXg&ust=1371518541283821


EVOLUTION OF AEC

ASEAN Vision 2020 “a stable, prosperous, and highly competitive region with equitable economic development, and reduced poverty and

socio-economic disparities”.

Year Key Milestones

1997 ASEAN Vision 2020

2003 Declaration of the ASEAN Concord II (Bali)

2007 Jan Accelerate establishment of AEC to 2015

2007 Nov AEC Blueprint

2013 “I think (ASEAN) have come to the realization that

we are not going to be as ready as we might have

thought in 2003 by the end of 2015" Gita Wirjawan,

Indonesian Minister of Trade


“Member states of the Association of Southeast Asian Nations (ASEAN) are struggling to get ready for full economic

integration by 2015, and most of their 600 million people are unaware of the changes

that will take place.” Reuters 6 June 2013

ASEAN people unaware of 2015 economic integration


External pressures (such as the formation of the European Union Single Market and the North American Free Trade Area) pressured ASEAN to form a free trade area (FTA) in 1992… The AEC Blueprint outlines actions and measures and time lines for completion by the 2015 deadline. However, by end-2011 only an implementation rate of 67.5% had been achieved. While tariff elimination had largely been on schedule, there were difficulties with removal of non-tariff barriers (NTBs) and services and investment liberalization.


“It is highly unlikely that ASEAN would be able to meet all its integration goals by the year

2015. On the other hand, one needs to

see the ASEAN economic integration as an ongoing process

for which the leaders have laid down the initial foundation”-

Sanchita Basu Das, Institute of Southeast Asian Studies

https://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=LmTRqxmTK6PM_M&tbnid=mvggyaoibzx-LM:&ved=0CAUQjRw&url=https://bookshop.iseas.edu.sg/publication/1856&ei=upe7UajGBIjMrQeetYGICQ&bvm=bv.47883778,d.bmk&psig=AFQjCNFlTSFuHhA9tF5vitxuC4K001mamw&ust=1371334965936085


ASEAN ECONOMIC COMMUNITY 2015: HEALTHCARE

Core

Element

Principal Considerations

Free flow of goods Zero tariff and removal of Non-tariff Barriers; Single licensing

with harmonization of standards; Differential pricing of

pharmaceuticals and medical devices across ASEAN nations

Free flow of services Legal status of Cross-border health services; information flow;

issues related to mutual recognition

Free flow of

investment; Free

flow of capital

Impact of private investment on public healthcare services-

manpower egress, ‘demonstration effect’; consequences of

consolidation and ‘mega-healthcare services groups’;

acceptability of healthcare services providers under foreign

ownership

Free flow of skilled

labor (including

Mutual Recognition

Agreements)

Impact of manpower flows; Harmonization of Standards


Key Stakeholders

Stakeholder General Position

Policy Maker/

Politician

Deeply entrenched local interest groups to pay attention to;

Intellectually aware of arguments for and imperative of

AEC

Payer Lowest defensible price, highest perceived value

Provider-

Institutional (Service

and Products)

Maintain market ‘protection’ and position; Some see

economic opportunities in expansion

Provider-

Professional Group

Largely insular and localized perspectives; Sees itself as

protector of public interest and professional standards

Provider- Individual Heterogeneous but generally localized perspective

Patient Good value for money

Public Good value for money until economic impact felt- jobs,

earnings

11 © Oliver Wyman Group 11

Discussion Issue 1- Investments within and across ASEAN

• ASEAN losing FDI share (both stock and flow) o Never recovered since Asian financial crisis o Competition from China and India


Investments within and across ASEAN

• Bite-sized regional integration demonstrating synergies and benefits

– Iskandar Project

– Greater Mekong Subregion

• Increased physical connectivity

– Planned high speed rail between Singapore and KL

• “Strong country factors in each ASEAN nation complemented by solid ASEAN agreements

could make the ASEAN region an FDI magnet again”- Manu Bhaskaran, Centennial Asian

Advisors


Investments within and across ASEAN

Stakeholder Position

Policy Maker Encourage private investment to ‘offload’ government

financing; concerns over cannibalization of public sector

and uncontrolled private sector expansion

Payers Lowest price, highest value; politically defensible

Providers- Services New funding to expand/ improve services; economies of

scale and synergy regionally; fear of competition

Providers- Products New funding to expand/ improve services; economies of

scale and synergy regionally; fear of competition and

pricing pressures

Professionals Potentially higher remuneration; Competition for power and

influence

Patients Lowest price, highest value

Public Lowest price, highest value; some nationalistic sentiments


Discussion Issue 2- Mutual Recognition Agreements and “free flow of skilled labor”

• Why?

– Encourage Foreign Direct Investment (FDI)

– Meet short-term skill shortages

– Facilitate upgrading of local population

– Meet international commitments under GATS/ FTA

• But

– “Recognition of qualifications is not enough to ensure market access in ASEAN”-

Chia SY, Singapore Institute of International Affairs 2012

– Policies and regulatory frameworks affecting mobility


“Free flow of skilled labor”

Stakeholder Position

Policy Maker (Health) Overcome skills gap, reduce wage costs; concerns

over uncontrolled private sector expansion, quality

standards, protection of local enterprises

Payers Lowest price, highest value; politically defensible

Providers- Services New labor source to expand/ improve services;

economies of scale and synergy regionally; increased

competition for labor

Providers- Products Perhaps easier operations

Professionals Potentially higher remuneration (South to North); fear

of competition and pricing pressures (North to South)

Patients Lowest price, highest value

Public Lowest price, highest value; some nationalistic

sentiments


"Please do not expect a big bang event in 2015 where everything is going to happen overnight when the ASEAN Economic Community comes into being. We've made progress in some areas and unfortunately regressed in some areas. But over time and following the ASEAN pace, gradually the ASEAN Economic Community will come to be and by the end of the decade, whatever the vision was, if it's not done by 2015 it will be done by 2020." Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy

The Greater Mekong Sub-Region designates a development project formed by the Asian Development Bank in 1992 that brought together the six states of the Mekong River basin, namely Cambodia, Laos, Myanmar, Thailand, Vietnam, and Yunnan Province, China. Regional Cooperation Operations Business Plan: 2012-2014: In December 2011, GMS leaders endorsed a strategic framework for 2012-2022 that calls for a range of new measures to strengthen regional cooperation.


What can be done to improve the odds of success for ASEAN integration?


The Diversity of ASEAN


Conflict Resolution within ASEAN


ASEAN Business Club

• “We have come together to form ASEAN Business Club at a critical

moment in economic history. A new global order is coming into being

centered around Asia, in our own backyard. This new order is

dominated by large economic entities. Individually, we are dwarfed by

these economies and have little more than a marginal role on the global

stage. Together, however, we are a market of 600 million and have a

GDP of over US$2 trillion.”

• “The governments have laid out ambitious plans for an ASEAN

Community as a “a single market and production base”. These plans

need the support and partnership of businesses.

• “Businesses need to provide this support and ensure that we are there to tap the value of

economic integration. We need to grow cross-border trade and investment, create more

ASEAN enterprises and build regional capability in our organizations.”


ASEAN University Network

• Established in November 1995

–Signing of Charter by the Ministers responsible for Higher Education from

ASEAN countries

–Signing of the Agreement on the Establishment of the AUN by the

presidents/rectors/vice-chancellors of participating universities

–Formation of AUN Board of Trustees and a Secretariat headed by an

Executive Director

• Strengthen the existing network of co-operation among leading universities

in ASEAN

–Promoting co-operation and solidarity among ASEAN scholars and

academicians, developing academic and professional human resource,

and promoting information dissemination among ASEAN academic

community.


A friendship founded on business is a good deal better than a business founded on friendship. ~John D. Rockefeller

[email protected]

mailto:[email protected]

mailto:[email protected]

QUALIFICATIONS,

ASSUMPTIONS AND LIMITING

CONDITIONS

This report is for the exclusive use of the Oliver Wyman Group client named herein. This report is not intended for general

circulation or publication, nor is it to be reproduced, quoted or distributed for any purpose without the prior written permission of

Oliver Wyman Group. There are no third party beneficiaries with respect to this report, and Oliver Wyman Group does not accept

any liability to any third party.

Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been

independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources

we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The

findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are

subject to inherent risks and uncertainties. Oliver Wyman Group accepts no responsibility for actual results or future events.

The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation

is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof.

All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole

responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness

of any transaction to any and all parties.

ASEAN Integration: Framework for considering benefits and Costs

Documents

Transcript of ASEAN Integration: Framework for considering benefits and Costs