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Regional connectivity and local development
The dream to have one community by 2015 as a solid bond for the people of the countries comprising the Association of Southeast Asian Nations is on its way to be realized
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T
he dream to have one community by 2015 as a solid bond for the people of the countries comprising the Association of Southeast Asian Nations is on its way to be realized.
One significant step towards that dream is implementing ASEAN connectivity, a concept which was accepted at the 15th ASEAN Summit in Hua Hin, Thailand, on Oct. 24, 2009.
National leaders observed that ASEAN’s strategic location gives it the potential to physically anchor itself as transportation, tourism, and information and communication technology hubs.
Developing intra-regional connectivity for ASEAN members is expected to enhance trade, investment, tourism, and development, to narrow development gaps and to facilitate people-to-people contacts.
ASEAN connectivity is often viewed within the context of infrastructure in Southeast Asia and how parts of the region are connected. Transport, energy and telecommunications infrastructure are essential for the establishment of such connectivity.
Infrastructure development plays a key role in reducing poverty, promoting investment and facilitating economic growth.
From an economic point of view, it is about levels of expenditure, stocks of infrastructure assets, access to infrastructure services and infrastructure competitiveness.
It should be noted, however, that high levels of investment in infrastructure do not necessarily mean efficient investment. Infrastructure availability must be coupled with a good investment climate so that “doing business” can be done in the most efficient way.
Regional connectivity should support efforts for narrowing disparities between ASEAN members and for reducing pockets of poverty, particularly in countries with high levels of poverty.
In fact, there are locations in the region that are still somewhat isolated, economically and geographically — and the potential of such locations remain untapped. Therefore, it is important that ASEAN members improve domestic connectivity as an important part of regional connectivity.
With the development of technology, particularly information communication technology (ICT), the concept of regional connectivity should also share equal attention to virtual connectivity.
Virtual connectivity dramatically removes geographical, chronological, economic and organizational barriers and will change the way people do business.
With this connectivity all parties, producers, suppliers, customers and other trading partners have the opportunity to collaborate and interact. As a result, products and services can be tailor-made for customers and this will change the way each product is made, stored, and delivered — as well as how each company buys, sells, and promotes its products and services.
One of the goals of ASEAN connectivity is to narrow development gaps. If the regional economies are built without coordinated efforts to include local economies, the goal of narrowing development gaps will not be fulfilled.
To narrow disparities in Southeast Asia, local economies need to be empowered. The inter-regional flows of labor and capital open opportunities for lagging areas in reducing disparities with advanced areas.
With connectivity, the flow of labor and capital will be smooth across different areas. This will in turn generate local as well as regional economic growth.
Connectivity has another dimension: to promote more equitable growth. The disparity between urban and rural development is high in Southeast Asia.
It is estimated that two-thirds of the population of Southeast Asia live in rural areas. Many are poor and live in subsistence situations. The disparity in living conditions between urban and rural areas leads to high urbanization in Southeast Asian cities.
Rural and urban economies depend upon each other. Urban economies demand human capital and
agricultural products from rural areas, while rural economies depend on markets, financial capital, and employment opportunities from urban areas.
When the livelihood of rural people is improved, they will contribute to the quality of goods and services in urban areas. Rural connectivity, if it is done properly, will not only benefit rural people but urban dwellers as well.
Rural connectivity can be established through better transport services and information and communication technology. But the
cost of delivering rural transportation to sparsely populated areas is sometimes higher than in urban areas.
Furthermore, creating a balance between urban and rural areas is somewhat difficult. Provision of cost-effective rural connectivity is one of the key challenges that needs further attention. This can be done by determining appropriate technology and setting a proper service standard.
It should be noted that when connectivity is put into effect, some implications might occur, both negative and positive impacts. Connectivity could create an accelerated positive effect after a period when initial resistance has faded and acceptance by the wider public has been gained.
However, in the beginning of the connectivity, some negative effects may occur; for example, it is possible that the larger economies will crowd out the smaller economies. The negative effects could be diminished, when the smaller economies reorganize themselves around their larger counterparts.
The master plan of connectivity is being developed to outline scenarios in establishing a real network to strengthen the relationship among the Southeast Asia nations.
From a point of view of trade and investment, the master plan must be able to facilitate Southeast Asia business companies to be the “winners” in a new globally business environment.
Therefore, policies within the connectivity master plan should facilitate companies into a new way of doing business.
In doing so, not only the private sector but also small and medium enterprises (SMEs) deserve more attention.
With connectivity, for example, a prospective small batik business or a small coffee farmer can have better business opportunities even though they are located in rural areas.
Through improved connectivity, the market could be expanded, and when it does, there will be ample opportunities to do business.
To be specific, it is possible that the market may invent new products to be sold in a new expanding market.
These new types of demand will nurture innovation, and innovation will increase productivity.
In an effort to build physical connectivity in ASEAN, the region needs a US$600 billion investment in infrastructure development.
The governments of the member countries cannot fulfill this investment need from their state budgets alone.
Meeting the financial requirements of infrastructure investment will certainly require greater coordination between the public and private sectors.
Therefore, the use of innovative infrastructure financing mechanisms, such as public-private partnerships (PPP) and official development assistance (ODA) in infrastructure development needs to be encouraged.
The master plan of connectivity must be able to facilitate citizen of Southeast Asia to have a better life. Investing in connectivity elements should be an important part of a broader strategy for both poverty reduction and economic growth.
A targeted and customized development strategy, derived from the master plan, should be developed to measure the potential impacts of connectivity elements to both local and regional economy.
The writer is vice minister of transportation and an eminent person of Indonesia in the High Level Task Force of ASEAN Connectivity Master Plan.
