Trade Secrets: ASEAN economic community. The last · PDF fileAll eyes are on the formation of...

Trade SecretsASEAN economic communityThe last mile toward 2015 and beyond

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All eyes are on the formation of the ASEAN Economic Community (AEC) as integration of the region’s economy, which commences at the end of 2015, draws near.

Our Trade Secrets: ASEAN economic community and inward investment, the voice of business report, which was released in 2014, revealed lukewarm sentiment among the business community toward the progress of the AEC. While there have been considerable and steady advances in applying key measures of the AEC Blueprint, our findings support a clarion call for a stronger drive by governments to solve a range of region-specific challenges, particularly in investment and trade.

A year on, more than 90% of the AEC’s high-priority measures have been achieved, with the remaining measures expected to be completed or in progress by the end of the year. The task of bringing about tangible achievements around financial integration, mobility of labor, infrastructure and supply chains remains arduous. However, success in doing so will clearly have a far-reaching and profound impact toward enabling the free flow of goods, services and talent in the region.

In this second part of the Trade Secrets series, we draw on our experience in serving some of the largest and most influential businesses and governments in ASEAN to offer insights into how policymakers can address specific gaps, even as such solutions may require more time to be implemented fully.

This is hardly surprising. The journey to full regional economic integration is highly complex and requires proactive and sound collaboration between the public and private sectors. The emergence of the AEC by end-2015 will be, without a doubt, one of many milestones of a long-term journey.

What’s next, then, after 2015?

Much remains to be done in the years ahead. In this vein, it will be crucial to accelerate the momentum of integration through a spirit of dialogue, steady pragmatism in implementation and continued respect of fundamental collective interests to maximize the potential of this burgeoning region and its 630 million citizens.

We hope you find this report an interesting read, and we welcome your feedback.

Sincerely,

Foreword

Mildred TanGovernment & Public Sector Leader, Asean [email protected]

Tan Bin Eng Government & Public Sector Tax Leader, [email protected]

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Contents

Introduction 4 Toward strengthened 8

infrastructure developmentToward an integrated 14 ASEAN financial system

1 2 3

Trade SecretsASEAN economic community: The last mile toward 2015 and beyond

3Trade Secrets The last mile toward 2015 and beyond |

Toward intra-ASEAN 20 labor mobility

Toward a streamlined 24 ASEAN supply chain

Powering ahead to 2025 30

4 5 6

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Introduction1

The progress made with the AEC Blueprint provides optimism that the AEC, when formed, will be a key driving force to power growth and opportunities in the region.


In 2007, the Association of Southeast Asian Nations (ASEAN) conceived the ASEAN Economic Community (AEC) Blueprint,

which envisioned an integrated economic region by 2015 marked by the free flow of goods, services and labor between member countries. To achieve this ambition, the AEC identified four key pillars that would be the basis of all associated measures:• A single market and production base• A competitive economic region• A region of equitable economic development• A globally integrated regional economy

In May 2015, the ASEAN Secretariat indicated that more than 90% of the AEC’s high-priority goals had been achieved. The ASEAN economic ministers are identifying, prioritizing and putting into action measures that would boost the implementation rate to 95% by the end of the year.

Although the progress of integration has been slower than expected, the overall momentum around policy changes and integration efforts — many of which have been highly challenging — has been encouraging and positive.

From a global economic perspective, the recent decade has seen its share of challenges. Despite the impact from the global financial crisis in 2008, the progress that has been made toward achieving the goals from the AEC Blueprint inspires optimism that the AEC, when formed, will be a key driving force to power future growth and opportunities in the region as well as for global trade.

Across Southeast Asia, rapid urbanization, growth of the middle class and the developments brought about by the AEC are expected to bring a level of economic integration that has not occurred before in such a large region with mainly developing countries. For businesses small and large in each country, the AEC opens doors to export to a much wider market beyond their own shores.

With small and medium enterprises (SMEs) generating around 90% of domestic employment and contributing up to half of local markets’ GDP, ASEAN will not only need to develop awareness around the new operating environment and its benefits but also encourage SMEs to play more active roles in the integration process. The ASEAN Strategic Action Plan for SMEs, which is expected to be ready at the 27th ASEAN Summit in November, will focus on the importance of SMEs to the development of ASEAN countries and the need for capability strengthening to boost competitiveness. A robust framework that enables governments and the private sector to support and help local businesses will be critical.

As much as it is important for ASEAN to celebrate the successes it has achieved so far, the journey ahead on the road to full economic integration remains a long and difficult one. With the relatively easier policy changes in the current AEC Blueprint already adopted, there are now other, more challenging, hurdles to be tackled.

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Introduction

For example, for the AEC to be vibrant, ASEAN needs to facilitate cross-border investment and provide an environment that is conducive for business start-ups. However, the ease of setting up businesses continues to vary across markets. Transparency issues and continued non-tariff barriers hamper progress in enabling freer and more efficient movements of goods across borders. In addition, the influence and reach of investment promotion bodies in the various countries differs widely. As these organizations focus primarily on sourcing and advocating for inbound investment to their respective countries, there remain huge and untapped opportunities for them to collaborate on strategies to increase trade across the region as a whole.

The AEC will need to strive for a more consistent set of operating rules across the region’s markets beyond tariff and non-tariff barriers and in areas such as standards harmonization, compliance, government procurement, mutual standards recognition, liberalization of foreign investment, intellectual property and labor mobility. These are clearly important gaps to address if ASEAN truly wants to achieve full economic integration.

Per capita GDP across ASEAN, 1997 vs. 2015

Exports as a percentage of GDP

2006 (%) 2014e (%)

Brunei 72 72

Combodia 69 57

Indonesia 30 24

Laos 23 21

Malaysia 104 74

Myanmar 0 19

Philippines 47 29

Singapore 230 188

Thailand 69 69

Vietnam 68 87

World Economic Forum’s global competitiveness ranking

2013-14 2014-15

Brunei 26 *

Combodia 88 95

Indonesia 38 34

Laos 81 93

Malaysia 24 20

Myanmar 139 134

Philippines 59 52

Singapore 2 2

Thailand 37 31

Vietnam 70 68

Source: Oxford Economics, accessed 25 June 2015

*Not ranked in 2014-15 report


Over the next chapters, we look at some of the opportunities that the public and private sectors can leverage to further connect markets, companies and people after 2015 and beyond the AEC’s current provisions. For example, we examine implementation challenges and possible solutions as they relate to streamlining banking integration, access to capital and payments and settlements systems. As the expansion of trade meets the reality of congested ports and inadequate infrastructure in a number of countries, we consider solutions to boost the performance, productivity and adaptability of supply chains and improve funding flows for infrastructure development. Finally, greater mobility of skilled labor will require a re-examination of whether the impending framework efficiently and confidently supports the ambitions of ASEAN-based professionals seeking opportunities across the region.

With the future for ASEAN looking bright, member countries will need to work together, continue to strengthen partnerships and strive for consensus across a range of complex and dynamic issues. Collaborative, forward-thinking solutions that complement and strengthen the AEC’s framework will serve to enhance its credibility, contribute to the region’s potential and improve the lives of its people. TS

90.5% of measures have been implemented as of May 2015

458 of 506 high-priority measures have been fully implemented across allASEAN countries

The ASEAN economic ministers’ goal is to achieve a 95% implementation rate by the end of 2015

ASEAN in the next decade• Southeast Asia may overtake China as the

world’s leading manufacturing center in the next 10-15 years1

• The median age in ASEAN will increase from 28.8 in 2014 to 32.2 by 20252

• Intra-ASEAN trade will exceed US$1t by 2025, while extra-ASEAN trade with the G4 economies will hit US$3.7t3

• Between 2015 and 2025, ASEAN’s population is forecast to grow by 63 million people — nearly the same population as the United Kingdom — to 695 million4

• By 2025, two-thirds of ASEAN’s urban population will reside in cities with 500,000 people or less. Urban areas of this size will account for most of the region’s population growth.5

• ASEAN will be among the main drivers of global energy demand by 2030.6

1 ANZ Banking Group2 World Bank/United Nations projections,

Oxford Economics3 ANZ Banking Group

4 Oxford Economics5 Nielsen6 International Energy Agency

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ASEAN will continue to be an attractive hotbed for infrastructure projects in the next decade. Governments recognize that economic growth must be underpinned by investments in infrastructure, and we believe this will drive greater momentum for change.

Toward strengthened infrastructure development2by Lynn Tho


The 10-member ASEAN bloc has an aggregate population of 630 million and is projected to grow to nearly 670 million people by 2020. While its combined GDP in 2013 was US$2.5t — making

it the seventh-largest economy in the world — the economic disparity among member countries is huge. This disproportion also extends to other areas, such as the quality of infrastructure and the distribution of natural resources.

In a 2013 World Economic Forum survey, which assessed the quality of infrastructure, Singapore and Malaysia were the only ASEAN economies that ranked within the top 50 out of the 148 countries evaluated. This underscores the urgency of infrastructure investments in the region. ASEAN nations are also imbalanced in their distribution of natural resources: hydropower potential is concentrated in Cambodia, Laos, Myanmar and Vietnam while fossil fuels (coal, oil and gas reserves) are found primarily in Malaysia and Indonesia. The uneven levels of economic development and infrastructure investments within the region further add to the challenges of effective resource utilization.

The infrastructure agendaAs part of an overall regional initiative to bridge the development divide and achieve better integration among member countries, the AEC Blueprint envisioned stronger regional trade and an integrated economic region by the end of 2015 characterized by the free flow of goods, services and people.

In building a competitive economic region, which was one of the four identified pillars in the Blueprint, infrastructure development is a crucial component. In this respect, the Blueprint has focused on efforts to achieve better connectivity in transport and energy by promoting multimodal transport infrastructure linkages and connectivity across regional borders, securing energy supplies through interconnected electricity grids and gas pipeline networks, and diversifying the fuel mix by augmenting power generation capacity using renewable and conventional fossil fuel sources.

According to estimates by the Asian Development Bank (ADB), ASEAN requires an annual infrastructure investment of US$60b to 2020, with more than 62% earmarked for the development of the transport and energy sectors. Separate research carried out by Goldman Sachs states that Indonesia, Malaysia, Thailand and the Philippines alone will require more than US$550b in infrastructure investments during the same period.

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Toward strengthened infrastructure development

Challenges A study by the Institute of Southeast Asian Studies indicates that while the AEC has substantially achieved its deliverable targets, not all AEC targets can be expected to be fully completed by the 2015 deadline. Several factors that challenge the delivery and implementation of the infrastructure agenda include differences between regional and national government priorities, a lack of access to private and development agency funding, domestic budgetary constraints, government bureaucracy, land acquisition issues, the absence of well-structured public-private partnership (PPP) regulatory frameworks and policies, and continued domestic political issues.

While various ASEAN governments have demonstrated commitment in their collective and individual capacities to resolve some of the above implementation challenges, further steps are needed.

In the past several years, there have been a number of important successes that address these implementation challenges. In 2010, as a key step toward realizing the AEC targets, the ASEAN Secretariat adopted the Master Plan on ASEAN Connectivity (MPAC). It recommended, for example, the possible establishment of an ASEAN infrastructure fund to finance developments, the emergence of PPP frameworks and further development of local and regional capital markets. The MPAC also identified certain priority projects, such as the Singapore-Kunming Rail Link project and the ASEAN Highway Network, which would significantly enhance regional connectivity.

As infrastructure developments in individual countries have historically been driven primarily by individual government priorities and constraints, better coordination among government agencies across markets is critical to achieving the regional agenda. To enable more efficient coordination

between individual agencies in implementing the MPAC’s objectives, the ASEAN Connectivity Coordination Committee (ACCC) was established in April 2011.

The results of the MPAC and related initiatives are evident in the progress achieved on some priority infrastructure projects to date. In the transport sector, the ASEAN Highway Network project, which aims to link Southeast Asia roads together by 2015, is largely on track to completion, with the exception of several missing links in Myanmar. In contrast, the Singapore-Kunming Rail Link project, the goal of which is to increase connectivity with southwest China, has made very little progress mainly due to a lack of funding. In the energy sector, the ASEAN Power Grid has also made progress, albeit at a slow pace. For example, there are currently 12 power grid interconnections, of which four are operational with the rest being constructed or under consideration. Several other major power generation projects are also in planning stages or actively seeking investment.

Infrastructure financing Most private financing of infrastructure projects in ASEAN have been bank-funded. For the most part, the independent power projects in Asia have been financed by a combination of domestic and international bank lenders (supported by export credit agencies to provide the political insurance coverage where required). We expect regional banks to take on greater roles as providers of funding for projects. Projects in Singapore, Philippines and Malaysia have largely been financed by domestic financing institutions — a reflection of increasing robust liquidity in the domestic markets and increasing appetite to lend to infrastructure projects.


While bank funding will likely remain the key source of private financing for infrastructure projects, given the longer-term capital constraints in the banking sector, the development of alternative funding sources, especially the debt capital markets, will be critical to provide the scale of long-term liquidity that is required to meet ambitious infrastructure investment targets within the ASEAN region.

Domestic bond markets have been growing in ASEAN, especially in Singapore, Malaysia, Indonesia and the Philippines. In the fourth quarter of 2014, the size of domestic issuances in Malaysia stood at US$316b (59% government borrowings), compared to US$123b in Indonesia and US$104b in the Philippines, of which the majority are government bond issuances. In comparison, during 2001, the size of the domestic bond markets aggregate of government and corporate issuances was US$76b (Malaysia), US$50b (Indonesia), and US$25b (the Philippines). In ASEAN to date, only Malaysia has been able to successfully develop its domestic bond markets to finance infrastructure projects through Islamic bond issuances.

Although both the size and activity volumes in the domestic corporate bond markets have increased, further development in the investment and legal frameworks, the disclosure requirements and opening up of markets to different issuers, will be required to develop the bond markets as a real alternative source of funding for infrastructure projects.

The Asian Bond Market Initiative (ABMI), which was endorsed in 2003, has been instrumental in leading the development of the local currency-denominated bond markets in the region. In 2008, the new ABMI roadmap was agreed with specific initiatives to further develop the regional bond market to be more accessible for investors and issuers.

The Credit Guarantee and Investment Facility (CGIF) was set up under the framework of Asian Bond Market Initiative to provide credit enhancement to investment grade companies in the ASEAN+3 countries to issue bonds in the local currency bond markets. The CGIF’s financial strength and high international ratings have enabled companies to diversify their funding sources and access international investors. In 2013, the CGIF issued its first guarantee for Indonesian rupiah corporate bonds placed with a Japanese investor.

In 2011, ASEAN member states and the ADB created the ASEAN Infrastructure Fund (AIF) — the largest ASEAN-led financial initiative in its history — to address the region’s critical infrastructure development needs by providing debt funding to infrastructure projects. The AIF comprises equity contributions from individual member countries and is co-financed by the ADB. The fund has made several loans to projects in Indonesia and Vietnam in the power sector and expects a total lending commitment of approximately US$4b through 2020.

Regional initiatives such as the AIF, CGIF and the ABMI have been instrumental in the development of the funding market toward meeting the region’s infrastructure financing requirements.

While the availability of regional funding support is critical, successful delivery of infrastructure is driven primarily by individual governments. As governments allocate a greater proportion of the public budget toward funding the infrastructure necessary for continued economic growth, given the scale of funding required, greater private sector investment and expertise is critical to successfully deliver on such projects.

On the whole, certain steps adopted by some ASEAN governments pertaining to the implementation of necessary regulatory frameworks and policies to attract private sector funding for infrastructure projects have been very positively received. This success needs to be replicated in less-developed ASEAN countries. Some of the key requirements to achieve infrastructure delivery success include the establishment of appropriate PPP regulation and frameworks and dedicated PPP units; the simplification (and centralization where appropriate) of government decision-making processes; and ongoing building of the public sector’s capacity to deliver and manage complex infrastructure projects.

Vietnam’s updated PPP decree released in early 2015 reflects positive steps toward attracting private sector investment, even though a

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Toward strengthened infrastructure development

“ As infrastructure developments in individual countries have historically been driven primarily by individual government priorities and constraints, better coordination among government agencies across markets is critical to achieving the regional agenda.”


number of areas, such as support on foreign exchange and use of standardized documentation, will require further clarification.

Indonesia’s recent decision to transfer nearly half of the 1,250 authorization categories from 18 different ministries to a central board and streamline local authorization processes in line with the central government is viewed as a constructive step toward more efficient decision-making.

In the Philippines, the government has tendered and closed nine PPP projects worth nearly US$3b between 2013 and 2014, and the country continues to work through a robust pipeline of similar initiatives on the back of a clear PPP framework and centralized procurement and decision-making procedures under the guidance of its dedicated PPP Center, which works closely with the key implementing agencies.

Significant progress madeThe implementation of the AEC goals, in the case of infrastructure delivery, has largely been possible and successful due to follow-on initiatives such as the MPAC and the ACCC. These are also strongly supported by ongoing regional initiatives to develop the domestic financial markets and widen funding sources.

In addition, further clarity on key areas including land acquisition and planning, procurement processes and procedures, and criteria for bankable projects will be key enablers in promoting infrastructure investment and delivery in the AEC.

As the success of infrastructure programs depends largely on national government priorities or policy and funding constraints, a number of ASEAN countries have taken important steps to establish the necessary frameworks and demonstrate the political commitment to push through reforms to overcome funding and non-funding bottlenecks. While countries such as Myanmar, Thailand and the Philippines may experience slight delays to future infrastructure delivery because of change in administration, others such as Indonesia

and Malaysia are well on track to fully carry out their infrastructure development plans.

The role of multilateral agencies such as the ADB and the World Bank will continue to remain critical, both in the creation of enabling environments (e.g., development of the domestic banking sector or procurement framework) as well as providing the necessary funding and risk coverage where needed. Professional services organizations like EY can also play an enabling role by applying insights around global best practices for PPPs and providing advice on related policies, capacity building, framework development issues, procurement processes and infrastructure transactions to attract greater private sector investment.

ASEAN will continue to be an attractive hotbed for infrastructure projects in the next decade. Governments recognize that economic growth must be underpinned by investments in infrastructure, and we believe this will drive greater momentum for change. TS

Lynn Tho is the Asean Infrastructure Advisory Leader at EY. With more than 15 years of experience as a project finance banker with several large international banks, advising and arranging and lending to infrastructure projects in Europe and in Asia, Lynn has extensive experience in advising both private and public sector clients to successfully structure and raise financing for projects in the power and utilities, transportation and the public-private partnerships and private finance initiatives sector.

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The AEC will need to promote a mechanism for financial sector development that is orderly, transparent and fair to all players across the private and public sector, so as to increase trust and ensure a smoother collaboration and implementation process.

Toward an integrated ASEAN financial system3by Liew Nam Soon

Photo credit: Singapore Tourism Board


Financial services liberalizationThis involves a progressive removal of restrictions to the provision of financial services by ASEAN financial service suppliers to ASEAN domestic markets as well as more transparent supervision of Qualified ASEAN Banks (QABs) .

In January 2007, ASEAN member countries affirmed their commitment to create the ASEAN Economic Community by the end of 2015 and transform the region to one where goods, services, investment, skilled labor and capital flow more freely.

The AEC is intended to be a smoothly functioning regional financial system, with more liberalized capital account regimes and interlinked capital markets that will facilitate greater trade and investment flows in the region.

Existing AEC literature asserts that financial integration in ASEAN should be accomplished through three broad imperatives:

Capital account liberalization This involves enabling the freer flow of capital across the region and developing the capital market through building capacity and infrastructure.

Harmonization of payments and settlements systemsThis involves the harmonization of domestic laws and regulations and linkage of systems.

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Due to the diversity in size, stage of development and industrial structure of each ASEAN member state, there are implementation challenges in each of these imperatives.

1. Financial services liberalization

To promote more active penetration of the regional banking market by ASEAN-based banks, the AEC recently signed the ASEAN Framework Agreement on Services (AFAS) as an umbrella agreement for the ASEAN Banking Integration Framework (ABIF). The region’s financial and banking authorities have also agreed in principle to start the process of banking integration in the region by the end of 2015.

Challenge

The process of banking integration means that ASEAN member states must start creating and strengthening their requisite regional institutions. However, beyond strengthening regional surveillance, there has been little discussion on the actual institutions that need to be established.

The European banking crisis has shown that a system of financial supervision based on the principles of home country control, minimum standards and mutual recognition does not work in a closely integrated financial market. A close collaboration of national supervisors does not suffice.

Recommendation

Two key actions are needed to move banking integration forward. First, clear and adequate provisions will be needed to ensure ASEAN-wide supervision of QABs that obtain a single passport to operate in any ASEAN country. Currently, eligible banks in Malaysia and Singapore have invested and are operating in the region. Member banks from Indonesia, Vietnam, Laos, Brunei, Cambodia and Philippines have yet to do so.

Second, ASEAN members need to be willing to transfer banking supervision powers to a regional body in order to move toward a single market. The monitoring of the progress of financial integration in ASEAN is also essential, and an agency should be established to provide assessments to regulatory authorities of member states such as the central bank or finance ministry. Possible bodies that can monitor progress include the ASEAN Secretariat; existing ASEAN mechanisms, such as a working group or committee; or a new organization that has yet to be specified.

For financial integration to succeed, ASEAN financial regulatory agencies must be adequately equipped with the relevant software and hardware. Software refers to the human resource capacity to monitor and manage domestic financial market reregulation under the new environment. Hardware refers to the legal, tax, and regulatory systems that are required to support financial market infrastructure.

Toward an integrated ASEAN financial system


2. Capital account liberalization

The freedom of capital to move across borders is a prerequisite for the creation of a single ASEAN market. The European Union, for example, has created enabling conditions for cross-border access where capital can move freely within the region, issuers are free to raise capital anywhere in the region, and investors can invest anywhere in the region. To support freer movement of the factors of production in ASEAN, substantial capital account liberalization needs to take place.

In this respect, various reports on the AEC suggest that current account and foreign direct investment (FDI)-related measures should be liberalized as quickly as is practical, and restrictions on capital inflows and outflows in member states should be removed.

Challenge

The Eurozone reveals a number of important lessons for ASEAN, in particular the trend toward unrestricted, large capital flows from Europe’s center to the periphery. This capital flow bonanza resulted in low interest rates with large inflows of capital fueling unsustainable developments in periphery countries such as Ireland, Spain and Greece.

Given the risk of excess flows of capital, ASEAN member states need to recognize that rapid capital account liberalization is not necessarily better, especially for smaller economies with less developed financial systems.

Additionally, macro-prudential policies are not comprehensive, fully integrated or even adopted in most BCLMV (Brunei, Cambodia, Laos, Myanmar and Vietnam) countries. Unlike their ASEAN 5 (Indonesia, Malaysia, Philippines, Singapore and Thailand) counterparts, BCLMV countries have not yet integrated crisis management in their macro-prudential frameworks. Further, none of the BCMLV countries have indicated that they have conducted macro-prudential stress tests or have policy measures in place as part of crisis mitigation. With the exception of Brunei, none of the BCLMV countries adopt risk-based premium rates.

Recommendation

While there is still a case for ASEAN capital account liberalization, the AEC should look to install the required capital controls and relevant macro-prudential regulations.

Policies around capital account liberalization should be consistent with member countries’ national agendas. The region should also put in place adequate safeguards against potential macroeconomic instability and systemic risks that may arise from the liberalization process and also ensure that all ASEAN countries benefit from liberalization.

“ The European banking crisis has shown that a system of financial supervision based on the principles of home country control, minimum standards and mutual recognition does not work in a closely integrated financial market.”

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3. Harmonization of payments and settlements systems

An efficient payments system is vital for strengthening links between ASEAN members and supporting integration objectives at the end of 2015 and beyond.

There are five areas identified for future enhancement and harmonization. All of these relate to improving the domestic payment infrastructure and promoting cross-border payment services.

These are:

(i) Cross-border trade settlement

(ii) Cross-border money remittance

(iii) Cross-border retail payment systems

(iv) Cross-border capital market settlement

(v) Standardization

Challenge

Currently, the correspondent banking mechanism is adequate to accommodate demand but does not maximize the efficiency of cross-border trade settlements. A possible solution is to reduce foreign exchange spread and bank charge and develop an integrated regional payment infrastructure to support faster availability of funds.

Many ASEAN members currently adopt varying standards, which might make a regional payment and settlement system non-interoperable and inter-linkage more costly.

Recommendation

Two key actions can be taken to drive harmonization. First, to facilitate efficient cross-border payment and settlement, there is a need to adopt common best practices and standards across systems, such as technical standards, market practices, or regulatory standards.

Second, payment and settlement systems in member countries are at different stages of development. Countries with less developed domestic systems should focus on improving their systems to meet economic needs. They should take the opportunity to standardize their systems to prepare better for regional integration over the long term.

ASEAN should eventually reach a state where common standards are in place and members’ payment and settlement systems are fairly developed. ASEAN countries can then seek to link their systems and even connect to international systems.

A recent study on standardization proposed the following solutions:

a) Greater transparency in the disclosure of bank charges, such as foreign exchange spreads and handling fees, for cross-border banking.

b) Central banks to facilitate the development of commonly used instruments under a regional scheme for retail payment systems, so as to increase efficiency and widen the use of payment instruments.

c) Introduction of risk-mitigating measures, such as delivery vs. payment and payment vs. payment settlement for capital market settlements, provided these are absent in certain domestic markets.

Toward an integrated ASEAN financial system


The ASEAN banking systemA research paper by the ADB and ASEAN had proposed that ASEAN needs to nurture globally competitive banks and the integration of ASEAN banking institutions to create an environment that is conducive to the emergence of such banks.

There are certainly good arguments for liberalizing cross-border banking services to improve efficiency and reduce the cost of banking throughout ASEAN. Liberalization comprises four modes of supply for the delivery of services in cross-border trade, namely cross-border supply, consumption abroad, commercial presence and presence of natural persons.

However, the level of commitment to liberalization among ASEAN countries continues to vary due to respect for national policy objectives and the level of economic and financial sector development of individual members.

There is also the risk of excessive deregulation contributing to the development of an overly complex banking system and the emergence of banking institutions that are too-big-to-fail or too-big-to-rescue. One of the major lessons from the global financial crisis is that large international active banks are complex and difficult to supervise.

With that in mind, ASEAN should focus on developing banking services that matter for the real economy — and not whether ASEAN banks will be able to become internationally leading banks. Ultimately, it is better to have banks with a strong regional foothold than globally

active super banks, whose activities can potentially pose a serious threat to financial stability.

Areas like transaction banking, especially for trade finance, will be particularly important for ASEAN. In wholesale banking, ASEAN banks can make important contributions to infrastructure finance, especially given the financing needs of the region’s emerging economies, estimated at around US$70b per year.

Looking ahead, capital account liberalization should proceed gradually and in incremental steps for the BCLMV countries, whose financial sectors are still at early stages of development.

Given differences in financial development across ASEAN, a double-track implementation of the banking integration plan would be sensible, where ASEAN 5 proceeds on a faster track compared to the BCLMV countries. Such a two-track approach reflects the reality that certain financial services liberalization measures should move forward while existing domestic financial institutions and systems in certain markets are developed and strengthened. This would create a group of regional champions and another group of institutions that mainly serve the interests of domestic customers.

A transparent and fair financial integration mechanismRelative to other areas of the regional economy, the impact of the AEC on the region’s financial system may be limited but still critical toward enabling robust capital, investment and trade flows across ASEAN.

Financial integration could, for example, provide tangible growth opportunities for well-capitalized banks and institutions, as they will be in a better position to offer a wider range of services at lower cost.

The challenges around strengthening of the regulatory and institutional environment, as well as caution on the part of member states, have slowed the integration process in the run up to the end of 2015. It is also likely that full integration may not be realized for several years given the likelihood that some government bodies may attempt to forgo or push back the liberalization of specific imperatives to protect domestic interests.

Thus, the AEC will need to promote a mechanism for financial sector development that is orderly, transparent and fair to all players across the private and public sector, so as to increase trust and ensure a smoother collaboration and implementation process. TS

Liew Nam Soon is Asean Managing Partner for Financial Services in EY. He has more than 23 years of consulting and industry experience, and has led projects in business transformation and set-up, risk management, shared services information technology and operations, design and implementation of target operating models, as well as managed cross-border IT and operations and outsourced portfolios across Greater China, Southeast Asia and India. He has worked in industries including retail, private and investment banking, asset management, corporate banking, life insurance and private equity.

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4 Policies to stimulate growth in ASEAN will bring numerous opportunities not just in terms of increased business investment but also rewarding employment opportunities for its people.

Toward intra-ASEAN labor mobility by Grahame Wright


With the free flow of skilled labor being a pivotal factor for the success of economic integration in ASEAN, the AEC Blueprint includes measures to facilitate mobility

for people and services as part of achieving the vision for a single market and production base in the region.

In addition to streamlining or relaxing rules around the issuance of visas and employment passes for professionals and skilled labor that are engaged in trade and investment, the AEC provisions target the development of core competencies and qualifications for occupations across service sectors, as well as the strengthening of labor market information and job placement networks across ASEAN member states.

While there has been measurable progress toward enabling the free flow of skilled labor, the number of Mutual Recognition Agreements (MRAs) that have been signed to date is fewer than expected. MRAs aim to ease the movement of professionals in certain sectors by ensuring their qualifications are recognized by other ASEAN members. A range of existing domestic regulations and labor laws continue to present obstacles that slow the full implementation of these agreements and hinder the mobility of high-skilled professionals around the region. Better-managed policies around labor mobility will thus be needed to complement other areas where significant headway toward regional integration have already been made, such as improvements in trade procedures, standards harmonization, and investment liberalization.

As the AEC Blueprint comes into play, its policies to stimulate growth in cross-border investment within ASEAN will bring numerous opportunities for its people to prosper, not just in terms of increased business investment but also rewarding employment opportunities.

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Growing businesses will need ready access to the best talent available, and talented people will want ready access to the best employment opportunities in the region. As the socioeconomic issues associated with total freedom of movement of people between nations are complex, this discussion focuses primarily on the mobility of professionals, managers and technical specialists, rather than the blue-collar and unskilled workforce.

A highly mobile labor force helps to encourage diversity of experience and thought leadership, as well as provides access to the best talent from a larger population, rather than from a limited pool in the local job market. For key positions, companies are increasingly casting the recruiting net wider to include international searches from within and beyond the region. However, after having identified a desirable foreign employee, the employer or employee will need to secure working rights for that individual, as well as residence rights for any accompanying family members.

When investing or expanding overseas, many companies will initially source talent from a mix of local resources and people from their existing organization. This approach helps to balance cost with control. Tapping the local workforce should typically be a cost-effective model, while the headquarters representation helps to cement the company’s processes and culture in the new business. This may reduce over time as the new location matures and confidence in the local workforce grows.

Companies seeking to invest overseas may also seek to hire talent from that target country to provide the local knowledge required for the investment to be successful. Such talent may be trained in the headquarters location with a view to returning to the new business in a leadership position, or will remain at headquarters with a role of providing cultural perspective for the new business.

Each of these scenarios involves movement of skilled labor. Impediments to the free movement of such labor will work against the goals of economic integration and growth of the AEC Blueprint. Although there are often similar technical requirements for work-related immigration procedures, the level of complexity involved and the nuances of the approval criteria vary widely across ASEAN member nations. It is also clear that some level of protectionism of the local workforce is applied in most countries, but again, that level varies and changes according to socioeconomic and other issues.

Complexity may also come in the form of uncertainty or inconsistencies between regional authorities within a country. For example, the documentation requirements for a visa may differ between government offices in different states as local departments are empowered to determine their own specific requirements within a general federal framework. Such scenarios create confusion and frustration for foreign applicants, as well as delays and possibly roadblocks for employers as they look to bring new employees onboard quickly and efficiently.

Although the AEC Blueprint seeks to improve the flow of talent within ASEAN, the focus is on recognizing professional qualifications. There is currently no formal framework where citizens of ASEAN member states are given priority or enjoy streamlined immigration process compared to citizens of non-ASEAN countries. Citizens of ASEAN member states may, in fact, find it easier to immigrate to countries outside the region, and citizens from non-ASEAN member states may also find it easier — relative to ASEAN citizens — to obtain working rights within ASEAN as their Western education qualifications may carry greater recognition or prestige. This scenario would arguably discourage intra-regional mobility, and encourage more extra-regional mobility.

Toward intra-ASEAN labor mobility


Preferential work-based immigration systemIs it appropriate, therefore, to implement a preferential work-based immigration system for citizens of fellow ASEAN member states, to encourage more regional mobility of its talent?

Advantages of such a system include a greater porousness of talent within the region, which will encourage ASEAN talent to remain within the region. It also offers employers access to a larger and more diverse local talent pool, which can be tapped into with minimal interference. ASEAN citizens also potentially gain access to more career opportunities, allowing them to achieve professional growth within a short distance from their country of origin.

However, such a preferential work-based immigration system may be perceived as creating an uneven playing field for extra-regional talent, and the possibility of discrimination against talent from outside the region. There is also the possibility that organizations may overlook the best person for a job who may originate from non-ASEAN member states, as it would be easier to secure an ASEAN-based candidate.

Further, developing member states may be faced with the risk of brain drain. At a time when developing member states will need access to talent, their home-grown talent may leave to pursue opportunities in higher-income locations. Pure freedom of movement could result in an uncontrolled influx of people seeking better opportunities in more developed member states, resulting in other social challenges.

While there are some advantages to increased freedom of movement of talent within the AEC, there remain some justified concerns. Tweaking immigration rules within the AEC must be done with great care so that policies around talent movement are liberalized in a way that also addresses the above concerns.

Greater consistency of process and less complexity across member states will, however, benefit companies operating in member states without creating undue social challenges. To support the goals of the AEC Blueprint, this would be a positive step in cutting red tape across the region and simplifying the business immigration environment. TS

Grahame Wright is Asean Market Leader for Human Capital at EY. He is responsible for overseeing the delivery of expatriate tax compliance and advisory services, business immigration and assignment services to clients in Asean. He has prior experience in leading a team of Global Mobility professionals through Asia-Pacific for a leading global business consulting firm. He has more than 19 years’ experience in expatriate tax compliance and advice, tax equalization and global mobility policy, business immigration and global stock plans.

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ASEAN’s heterogeneity in development levels can also be seen as an edge, as companies increasingly establish region-wide integrated supply chains.

Toward a streamlined ASEAN supply chainby Philip Chu


ASEAN, in recent years, has emerged as the third pillar of economic growth in Asia alongside China and India. The hard facts of its economic resurgence: 630 million people and rising, with a US$2.3t GDP, growth of 6% over the

last 15 years and a rising middle class demanding consumer comforts.

The AEC Blueprint is expected to drive ASEAN’s competitive advantage further by positioning ASEAN as a single investment destination for companies around the world, and through regulatory measures, enable organizations to capitalize on ASEAN’s already wide range of home-grown advantages.

An attractive manufacturing hub ASEAN, as an investment destination, benefits from having an increasingly affluent internal market, but the push to establish manufacturing arms within ASEAN is not purely due to its strong customer base.

As a region, it continues to benefit from low operational and labor costs in comparison to China, where there is a push to move manufacturing not just inland and away from the country’s wealthy coastal cities, but also abroad. Just as China becomes a less attractive place to situate industry in terms of cost, it is fast becoming a robust source of demand. By 2020, China is expected to be home to 600 million middle-class consumers, and ASEAN is well-positioned to serve the demands generated by the needs of this booming middle class.

ASEAN’s growing attractiveness as a manufacturing hub can be seen, albeit indirectly, through the increasing size of FDI flows to ASEAN countries, even as FDI inflows to major Asian economies such as China have been falling. In 2014, FDI flows to the ASEAN 5 increased by 7% year-on-year to US$128.4b, overtaking that of China, whose FDI inflows have fallen by 3% in the same period to US$117.6b.

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Regionally integrated supply chainASEAN’s heterogeneity in development levels can also be seen as an edge, as companies increasingly establish ASEAN-wide integrated supply chains. Differing levels of development, combined with differing industry specializations across different countries, allow for location complementarities. Without even considering the contribution of non-regional firms, countries such as Vietnam and Cambodia have long benefited from investment from Malaysian or Thai companies that are in need of an ample supply of low-cost labor. In another instance, land-constrained ASEAN nations encourage agricultural investors to set up operations in neighboring countries with abundant land.

Take, for example, a major American multinational consumer goods company that houses its regional headquarters and R&D center in Singapore. The Philippines hosts the firm’s business service center, while Thailand hosts its marketing hub for beauty, fabric and homecare products. Its operations in the region, with eight manufacturing sites and eight large distribution centers, cover the length of the company’s value chain.

Challenges to growthASEAN countries’ impressive and consistent growth over the last several years has made them more visible on the global map, especially for multinational corporations pursuing outsourcing and factory relocation decisions. ASEAN countries have achieved this success through hard work and the willingness of governments to respond to investor concerns. However, there are challenges that have hampered foreign investors and local companies with international market ambitions: growing demand and congested ports.

Trade and customs processes

The goal of the AEC has always been to promote higher levels of development and sustained prosperity through ever closer integration. The removal of tariff and non-tariff barriers, along with mechanisms to enable freer flows of investment, capital and skilled labor, will go some ways toward this goal. Yet, whether these measures can be successful depends highly on whether the cost of linking up exporters to the global supply chain exceeds the advantages of low production cost in ASEAN, as well the lead time for the movement of goods and services.

In 2014, FDI flows to the ASEAN 5 increased by 7% year-on-year to

US$128.4b

By 2020, China is expected to be home to 600 million middle-class consumers, and ASEAN is well-positioned to serve the demands generated by the needs of this booming middle class.

The AEC will bring about significant opportunities for intra-regional trade, which currently accounts for only

24% of total ASEAN trade.

Toward a streamlined ASEAN supply chain


As such, a number of initiatives were proposed in the AEC Blueprint with the intention to create a simpler and more efficient process for trade, and reduce customs processing times.

One such initiative is the ASEAN Single Window, where 10 National Single Windows would be integrated into a single ASEAN window, which will enable the single submission and processing of data and a single decision-making point for customs clearance. By allowing transmission of such information prior to consignment departure within a single ASEAN-wide time-frame, it will streamline the declaration of shipment information. Paperless, pre-arrival clearance promises to create a more predictable environment and fast processing for traders. Self-certification, which is another measure being piloted currently, will remove the need for exporters to apply for the controversial and onerous Form D.

These initiatives will help to shorten customs processing times and ease congestion to a certain extent, but there are other areas that need to be addressed in order to achieve faster post-customs clearance processing of containers and cargo and improve the efficiency of cargo handling for port operations.

Infrastructure

Many ports and airports in ASEAN countries are old or outdated. Only a few across the region have modern handling facilities and the equipment

to handle large shipments. Small, obsolete facilities, poor supporting services and other physical constraints inhibit efficient shipping operations.

For example, the maximum below-the-water depth for a boat at the Port of Yangon is only nine meters. Even at large seaports such as Jakarta’s Tanjung Priok, which handles 70% of Indonesia’s total imports, dwelling times (the length of waiting time of cargo in a terminal’s in-transit storage area) remain long due to poor cooperation or coordination between government institutions. Congestion at the Port of Manila has been a long-term challenge and is due, in large part, to the deficient state of roads across the metropolis, which hinders the ability to efficiently transport freight to and from the port.

These problems are exacerbated by red tape and the difficulties associated with obtaining the resources for further investment in port facilities. In many countries, port management systems are very diversified, which could potentially lead to situations where local authorities fight for a share of state funds that may be allocated across undersized ports in other provinces.

The lack of ports that meet international standards and the capacity to handle rising trade and a growing economy could hinder or limit the direct transport of goods to major market such as the US, the European Union, Hong Kong and Singapore.

Limited capacity also necessitates the additional handling of shipments, which drive up product costs. This also limits ASEAN’s comparable cost advantages relative to competitors such as China.

Information technology

Today, the use of information technology (IT) and electronic data interchange (EDI) in shipping and port operations and management are vital, as these systems make up the software or the information structure of any port or terminal.

However, in most ASEAN countries, warehousing and cargo consolidating systems are insufficient for accommodating containers and cargo, with some ports lacking Customs Information Systems in place. This results in manual work and greater inefficiencies in customs clearance and port handling. Not all ports are equally efficient, which means that vessel dwell time and the quantity of cargo that can be processed vary widely.

In order to catch up with regional competitors, it is important for ports to rapidly invest to automate their port operations. Such systems help to minimize human error, save time, simplify procedural documents and enhance overall efficiency by accurately relaying information and data. Moreover, IT and EDI also bring about the tangible advantage of laying the foundation for business in ports and terminals with emerging e-commerce.

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People

Port productivity varies across countries. In Vietnam, ports tend to be less productive, with efficiency being less than half of the regional average of 25 boxes per unit crane per net working hour. This can be attributed to the absence of specialized handling equipment such as ship-to-shore gantry cranes at some ports, poor yard planning and traffic flow, and a lack of international standard expertise. Handling productivity at the quay side is important since it directly relates to vessel turnaround time.

As cargo volumes grow rapidly, and technology and know-how in port operations and management advances, terminal staff members need relevant skills and knowledge to be effective in their duties.

In order to improve port services and enable smoother transfer of goods, shipping productivity and facilities utilization should be further enhanced. Ports should also improve on-time reliability for all port-related activities so they can operate around the clock. Port and terminal tariffs should be further standardized and simplified to enable greater transparency of shipment costs. IT and EDI should be intensively applied in operations and management to facilitate transactions between ports and related parties. A strong human resource function is also important to the efficient functioning of ports.

To facilitate greater investment in infrastructure, governments can seek to encourage more involvement from the private sector in port development and operations.

Given differences in productivity across the region, the sharing of best practices is also important. The AEC will bring about significant opportunities for intra-regional trade, which currently accounts for only 24% total ASEAN trade. This represents just about half of intra-regional trade in North America (40%) and slightly more than one-third in the European Union (59%). The AEC will help to stimulate greater opportunities for business. The explosion of digital and e-commerce — and more generally improvements in infrastructure and broadband access — has and will continue to open doors for companies and countries.

Dialogue is crucialFinally, barriers to trade will continue to exist despite the best efforts of any regulatory body as long as there is a lack of dialogue between parties. A deficit of trust, resulting from lack of dialogue, features heavily in a large number of ASEAN states’ customs administrations in their approach to the trading community.

Continual dialogue is thus essential in managing change, not just between customs and traders, but also between governments and the business community, which remains less than fully aware of the changes that will impact the way they conduct commerce. Until that level of dialogue is established, ASEAN will be some way to achieving full economic integration. TS

Philip Chu is an Advisory Partner at EY. He has extensive experience in supply chain strategy and operations, and has provided consulting on various supply chain optimization projects and initiatives on cost efficiency across numerous verticals, including financial services, health care, and manufacturing for high-tech sectors. He is also experienced in supply chain design and implementation, strategic sourcing, change management and business process re-engineering, and tender management.

Toward a streamlined ASEAN supply chain


“ Barriers to trade will continue to exist despite the best efforts of any regulatory body as long as there is a lack of dialogue between parties. A deficit of trust, resulting from lack of dialogue, features heavily in a large number of ASEAN states’ customs administrations in their approach to the trading community.”

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With ASEAN economies in radically different stages of economic development, the region clearly has more to benefit when it focuses on areas of complementarity rather than competition.

Powering ahead to 2025 by Tan Bin Eng


The formation of the AEC by the end of 2015 is highly anticipated. It is expected that the majority of the initiatives in the original AEC Blueprint will be achieved or in progress by then.

Yet, achieving full economic integration is complex. It is a journey, and the coming together of the AEC in 2015, while significant, is arguably only one of many milestones on the long road to full economic integration. What more needs to be done over the next decade?

Based on conversations with leaders in business and government, we recommend five priorities that the AEC could focus on to accelerate the momentum of change and growth in the region.

1 Relentless focus on effective implementation

From a policy perspective, governments and corporates need to ensure that the good work that has been accomplished so far translates to real benefits for businesses.

However, there continues to be a lack of awareness and knowledge in the business community, especially among SMEs, about how to leverage opportunities presented by AEC-specific measures to modernize, achieve greater efficiencies and tap into cross-border opportunities. This reflects, to a certain degree, that the implementation milestones have been more noise than action, with fewer of the stated accomplishments actually felt on the ground.

While the impact of the initiatives will be more tangible over the next several years and beyond, follow-through of the AEC’s key provisions will remain paramount. To ensure that the impact of measures are felt broadly, businesses will need to collaborate with each other, become more actively involved in discussions and decisions with governments around implementation steps, and proactively push for further improvements.

It will also be important to develop and implement a more systematic framework and approach to engage the private sector on potential future reforms.

2 Eradicate infrastructure bottlenecks

The delivery and implementation of the infrastructure agenda is one of the largest challenges that remains outstanding from the AEC. While progress has been made, national government priorities or policy and funding constraints continue to hamper the pace of change. There is also significant variance in the levels of preparedness among ASEAN economies in terms of the necessary regulatory frameworks, government decision-making processes, and the ability and capacity of the public sector to deliver and manage complex infrastructure projects.

In light of this, the role of multilateral agencies, such as the ADB and the World Bank, will remain critical in facilitating the creation of enabling environments, and ensure that funding and risk coverage are provided where necessary. The sharing of global best practices for PPP and frameworks and processes will also be beneficial to many ASEAN economies and help them attract greater private sector investment in infrastructure transactions going forward.

Without a doubt, despite the challenges, ASEAN will continue to be an attractive hotbed for infrastructure projects in the next decade, with the momentum continuing to accelerate in the years ahead.

Top five priorities

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Powering ahead to 2025

3 Improve labor mobility for professionals

The current lack of a coordinated framework within ASEAN, which has inadvertently led to citizens of non-ASEAN states being favored over those from ASEAN, discourages intra-regional mobility and could lead to ASEAN talent looking for jobs outside of the region.

The wide variation in immigration procedures across ASEAN, and even within countries, has created uncertainties and inefficiencies for foreign applicants and employers alike.

A preferential work-based immigration system for citizens of ASEAN states will enable greater porousness of talent in the region, allow employers to source from a larger talent pool in the region and enable professionals from ASEAN member states to select from a wider cross-section of opportunities that are closer to home.

4 Build tax into the AEC agenda

The global tax environment is undergoing an unprecedented level of change. With FDI continuing to be a much-needed engine of growth to power ASEAN into the next decade, the importance and impact of global tax changes cannot be underestimated.

It is critical for ASEAN to consider the inclusion of tax as part of the AEC agenda to explore how ASEAN can deliver a single voice on tax developments and ensure its views are seriously considered by the global community.

(Read page 33 for more)

5 Drive financial integration

Achieving financial integration in the region is arguably one of the most challenging goals. This needs to be accomplished through three broad imperatives.

First, more effort needs to be directed toward financial services liberalization. This involves a gradual removal of restrictions around the provision of financial services by ASEAN financial service suppliers to the region’s domestic markets, as well as more transparent supervision of Qualified ASEAN Banks (QABs). Second, efforts to develop the capacity and infrastructure of capital markets will be important, as will be the liberalization of capital accounts to enable the freer flow of capital across the region. Finally, to create harmonized payments and settlements systems, ASEAN will need to look into harmonizing domestic laws and regulations, as well as financial system linkages.

Each of these presents its own challenges and will require individual countries and ASEAN to collaborate and design unique solutions.

“ More than ever, policymakers and businesses across ASEAN need to work closely together and support and share best practices as implementation moves into full play across the region.”


TaxWith the AEC coming into effect in less than a year, the emergence of a single regional market has considerable long-term implications for businesses and investors across the region. To what extent should taxation be viewed as an important issue for the AEC, particularly as the region drives toward its economic integration goals?

With the global tax environment undergoing unprecedented shifts, driven primarily by the OECD Base Erosion and Profit Shifting (BEPS) initiative, tax has taken a more prominent place on the business agenda.

In July 2013, the OECD released the 15-point BEPS Action Plan. The plan set out the OECD’s view that gaps in the interaction of domestic tax rules of various countries, the application of bilateral tax treaties to multi-jurisdictional arrangements, and the rise of the digital economy with the resulting relocation of core business functions, have led to weaknesses in the international tax system.

The OECD is developing recommendations on possible coordinated actions to address these concerns. Meanwhile, it is clear that the global tax landscape will become increasingly challenging, with greater potential uncertainty for companies and investors.

Against this looming backdrop and in light of the AEC, the implications for ASEAN governments in terms of tax policies and growth ambitions are multifold.

AEC as a catalyst for FDIThe impact of global tax developments on the continued attractiveness of ASEAN as an investment destination should not be underestimated. If we accept that the ability to attract FDI will be an important driver of economic growth for the AEC, then governments will need to ensure that they are well equipped to attract inbound investors well into the next decade.

To that end, any improvements to regional tax policies and systems that can further enhance the operating environment, streamline and reduce the costs of doing business and increase the region’s attractiveness to multinational corporations and support domestic business growth will be crucial.

Given that tax increasingly matters to businesses, governments in the region can support the development of future AEC policies where additional areas of tax reform can be identified and addressed.

It is timely and perhaps even urgent to consider whether a specific tax agenda should be created as a key workstream for the AEC after 2015. Examining the various tax policies that are in place in each country will help bring to light and potentially address issues that investors are facing. It will also catalyze a concerted effort to push for initiatives that would benefit the region as a whole, especially around measures to attract inbound FDI.

Ultimately, a robust tax platform will be essential toward enabling ASEAN to exert, in a single voice, a collective and authoritative influence on current and future global tax discussions.

A taxing affair for ASEAN

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Powering ahead to 2025

Collaborate for sustainable progressMore than ever, policymakers and businesses across ASEAN need to work closely together and support and share best practices as implementation moves into full play across the region. With member economies in radically different stages of economic development, the region clearly has more to benefit when it focuses on areas of complementarity rather than competition.

There are risks that could derail ASEAN from the path of economic integration it has embarked upon. The constant changes and legislation which will be needed to address more challenging obstacles could create fatigue among ASEAN member states. This may potentially dampen the momentum that has been built up thus far, or worse, result in a rollback of policy initiatives.

Looking beyond 2015, there is no doubt that investors — whether international or within ASEAN — will need to keep a sharp eye on the progress of the region’s full economic integration and the opportunities it will uncover. TS

Tan Bin Eng is the Asean Leader for Business Incentives Advisory and the Asean Tax Leader for Government & Public Sector at EY. She leads a team dedicated to assisting clients on their incentive planning and negotiations with authorities in Singapore and the region. Prior to joining EY, she has more than 12 years of experience in the Singapore civil services sector, dealing in areas relating to taxation. She is a veteran in policy-making and incentive negotiations with the Singapore Government.

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EY ASEAN Business Services NetworkThe EY ASEAN Business Services Network is a globally integrated team of professionals located in key geographies, focusing on building and bridging business opportunities between ASEAN and the rest of the world. Our teams are culturally aligned and equipped with local market knowledge and language skills to proactively serve the needs of the ASEAN markets. By providing skills and insights that are aligned with the investment profiles and risk appetites of our clients, we help them identify and select investment opportunities with pace and precision, avoid pitfalls and mitigate risks while meeting their business growth objectives.

EY Government & Public Sector Leaders

EY ASEAN Business Services Network

ContactAsean leaderMildred Tan+65 6309 [email protected]

Country leaders Brunei and SingaporeMildred Tan+65 6309 [email protected]

Indonesia Danil S Handaya+62 21 5289 [email protected]

Malaysia Mazlan Kamaruddin+603 7495 8752 [email protected]

Myanmar U Tin Win+95 137 [email protected]

Philippines Cirilo P Noel+63 2891 [email protected]

J Carlitos G Cruz+63 2891 [email protected]

ThailandPhuphun Charoensuk+662 264 [email protected]

Vietnam, Cambodia and Lao PDRCuong Dinh Tran+84 4 38315100 Ext. [email protected]

Eng Chuan ChooPartner Asean Markets+65 6309 [email protected]

Fabian WongPartner Europe, Middle East, India and Africa Markets+44 20 7958 [email protected]

Service line leadersAssuranceDanil S Handaya+62 21 5289 [email protected]

AdvisoryMazlan Kamaruddin+603 7495 8752 [email protected]

TaxTan Bin Eng+65 6309 [email protected]

TransactionsLynn Tho+65 6309 [email protected]

Accounts leaderZaqy Mohamad+65 6309 [email protected]

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